The last couple of months haven't been kind to last year's star money manager. Ark Invest's Cathie Wood is seeing her high-octane exchange-traded funds (ETFs) get hit as investors rotate out of last year's darling growth stocks.
Wood isn't ready to give up the fight. She added to some of her hardest hit investments on Wednesday, picking up more shares of DraftKings (NASDAQ:DKNG), Coinbase (NASDAQ:COIN), and Zoom Video Communications (NASDAQ:ZM). Let's see why she may be on to something with all three stocks.
Image source: Getty Images.
DraftKings
If you watch live sports on TV, it's hard to avoid DraftKings. The provider of fantasy sports wagering has broadened its offerings and expanded its brand's reach. It has struck exclusivity deals with sports leagues, broadcasters, and even a few actual teams to make sure it's alive in the hearts and sight lines of sports fans.
Growth is bonkers. Revenue soared 90% last year, and more than tripled -- up 253% -- through the first three months of this year. DraftKings also boosted its guidance, now expecting to generate $1.05 billion to $1.15 billion in revenue this year.
DraftKings is now a full-fledged operator of an online sportsbook and it has been acquiring content to help make its own luck. Wood has made DraftKings an investment in three of Ark's five ETFs, and on Tuesday and Wednesday it added some of the disruptive gaming specialist to its most popular fund.
Coinbase
The leading cryptocurrency marketplace has been public for less than a month, but it's already vaulted to become Wood's eighth-largest holding across her universe of Ark ETFs. It's a natural fit given Wood's bullishness of digital currencies, and Coinbase is a rare exchange-traded play on the entire crypto market.
Coinbase hit the market as a direct listing at a reference price of $250, and despite the recent sell-off it's still not a broken IPO. Revenue soared 144% to $1.3 billion in 2020, accelerating into the second half of the year. Elon Musk torched the crypto market after Wednesday's market close, so that does make Coinbase vulnerable in the near term. Knowing Wood it will probably mean picking up more Coinbase at lower prices if the crypto market extends its slide.
Zoom Video Communications
Finally, we have Wood adding to one of the original pandemic plays. Zoom took off in the springtime of last year when it became clear that we were going to be hunkered down for a long time. As a fast-growing videoconferencing platform, Zoom Video was there to keep business meetings, classes, live performances, and family gatherings alive.
Zoom was a rocket, up 765% last year when it peaked in October. Sentiment turned as viable COVID-19-tackling vaccines became viable, and now Zoom has shed more than half of its peak value. The rub here is that Zoom isn't half the company that it was in October. In fact, growth has accelerated for four consecutive quarters. The 369% growth it posted for its fiscal fourth quarter ending in January is a new record for Zoom. Most schools and many businesses have returned to in-person operation, but Zoom is still finding ways to monetize its perpetually widening audience. Zoom is here to stay.
Remember when Zoom was being blasted by value investors because it was trading at a triple-digit revenue multiple to its enterprise value? The stock's retreat -- but more importantly its ridiculous growth -- finds it fetching just 32 times trailing revenue (and just 22 times this year's target). Wood has made Zoom the 10th-largest holding across her funds, and she made another call for more Zoom stock on Wednesday.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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May 13, 2021 at 07:35PM
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