Momentum is back for the growth-investing style that Cathie Wood has championed as the founder, CEO, and ace stock picker at Ark Invest. Her firm's exchange-traded funds (ETFs) are beating the market early in 2023, just as they did in 2020 when Wood became a market celebrity. Things didn't go so well in 2021 and 2022, but can the turnaround stick this time?
Ark Invest provides daily updates on transactions. Some of the names that Wood bought on Wednesday include Roku (ROKU -10.29%), Tesla (TSLA -1.11%), and Coinbase Global (COIN 5.68%). They were already some of her largest positions, but she's adding to those stakes. Let's take a closer look at her Wednesday shopping haul.
1. Roku
Your living room is the new movie theater, and you're spending a lot of time streaming movies and TV shows from the comfort of your couch. Roku pioneered the medium, and it's the undisputed top dog in this niche.
The company had 65.4 million active accounts at the end of September, and those viewers streamed 21.9 billion hours of content through the platform. Work the math, and the average Roku user was streaming more than 3.6 hours of content a day.
Image source: Getty Images.
Roku is free to use, and if your TV doesn't come with its operating system, the streamer is willing to take a hit by selling you a dongle below cost. In good times, it's able to more than make up the difference by collecting ad revenue from sponsors and the thousands of apps on its platform. Average annual revenue per user was $44.25 at last check.
Despite continuing to grow in popularity (Roku announced earlier this month that it topped 70 million active accounts), the stock remains out of favor. Shares have fallen 90% since peaking two summers ago.
Profits have turned to losses, and guidance for the quarter that recently ended implies that the streak of perpetually rising average revenue per user has hit a reversal point. Wood naturally feels that this is a buying opportunity. Growth may be hitting a speed bump with advertisers paring back their marketing budgets, but streaming video on TV is an undeniable trend, with Roku as a category leader.
2. Tesla
Speaking of speed bumps, Tesla has taken a pretty big hit since Elon Musk took over Twitter. The stock is down 45% since Musk officially became the leader of the social media platform on Oct. 27. The market is actually up 4% in that time. Stretch the stock chart all the way to its peak in late 2021 and Tesla shares are down 70%.
Investors were disappointed by the weaker-than-expected deliveries for the fourth quarter, but the good news here is that Tesla continues to gobble up market share. Last year was challenging for automakers, but Tesla still saw a 40% surge in vehicle deliveries in 2022.
Throw in aggressive rebates to move cars late last month and a price cut in China earlier this year, and it's easy to see why investors are concerned. The shares have finally started to move higher -- climbing in three of the last four trading days -- but this only takes them back to where they were at the start of 2023.
Tesla is once again losing to a slightly higher market year to date. The recent bounce is still a welcome sight. If market sentiment is truly starting to turn positive and more forgiving, the shares could shift out of reverse despite the imperfect operating climate for big-ticket purchases.
3. Coinbase
Speaking of market sentiment turning positive and more forgiving despite a tricky climate, Coinbase is up 24% in 2023. The stock took a beating when investors bailed on cryptocurrency as Coinbase rivals faltered financially, but there are signs of stability here.
The leading digital currencies have actually moved higher over the past month, and the shakeout of exchanges and platforms that were taking too many risks could help the long-term health of the industry.
Coinbase isn't the same market darling it was when it went public two years ago. The stock is still down 88% since sharing its all-time high in November 2021 with the peak of cryptocurrencies. Like Roku, profits have turned to losses. Unlike Roku and Tesla, Coinbase has seen it revenue plunge sharply as trading volume thins out.
The opportunity for Coinbase here stems from a healthy cash-rich balance sheet that should help it ride out the storm. Several crypto platforms filing for bankruptcy -- and taking investor accounts with them -- is a huge short-term problem, but it will ultimately lead to more market share for the sector's top dog.
