5 Cathie Wood Stocks To Buy and Hold

Cathie Wood Stocks To Buy and Hold: The aura of invincibility surrounding Cathie Wood’s investment strategy slipped a little recently after her flagship ARK Innovation ETF (ARKK) hit new yearly lows. The “disruptive innovation” fund dipped below its previous bottom of $109.24, knocking 35% off AARK’s February high of $159.70.

But it would be naïve to think these short-term market shifts would spook Cathie Wood too much; her philosophy has always been to invest in quality stock over the long-term.

With that in mind, let’s take a look at a few of ARK’s top investments; ones that are worth buying – and holding on to.

[#5] Zoom Video Communications, Inc.

Zoom is a good example of one of Cathie Wood’s “disruptive” companies, as she believes the video conferencing firm will eventually make the old legacy telecommunications infrastructure redundant.

The company probably needs little-to-no introduction after the year it had in 2020 – and as one of the best performing stocks during the COVID-19 era, the firm shot to public attention at the start of lock-down and hasn’t receded since. But despite its high-profile rise, investors might wonder whether it still has any growth potential winds in its sails.

It wouldn’t be wrong to inspect Zoom’s fundamentals either; the market appears to have spoken, and the company has recently fallen out of the top-20 of its cloud software companies. In fact, Zoom now trades at levels not seen since before its big run-up.

Why is this? Perhaps it’s just the phenomenon of reversion to the mean: Zoom was so intimately associated with the change in habits stemming from the coronavirus outbreak, that now that things appear to be returning to normal investors are speculating that the brand’s moment in the sun is over.

But this would be a mistake. Zoom isn’t a fly-by-night company, nor is it a one-trick pony. The business is far more than just an online conferencing app – it is actually an industry leader, innovating a wide range of solutions in telecoms sector, with products such as its Zoom Rooms and OnZoom, and a potentially huge revenue generator through its Zoom Apps virtual marketplace.

Cathie Wood takes a contrarian position in thinking that Zoom is currently undervalued – and those who stick with the company, like her, may well be proved right.

[#4] Shopify Inc.

Could Shopify one day be as big as Amazon (AMZN)? 

Cathie Wood seems to think so, and she’s betting big on her prediction. ARK Invest continues to add Shopify stock to its portfolio, and you can see why. This year the company turned profitable for the first time in its history, and it saw good margins and a return on expenditure too.

In its first quarter 2021 results, Shopify reported it took in $988 million in revenue – a massive 110% year-on-year – and is on course for a 5-year CAGR of 70%.

The company definitely reaped the rewards of the pandemic tailwinds, but Cathie Wood sees a lot more in the firm than just a bump from online sales. As more and more customers use social media platforms like Twitter (TWTR) and Instagram to make purchases, Shopify’s unique business model is poised to capitalize. And looking at the way current trends are going it looks like a good call.

[#3] Square, Inc.

Jack Dorsey had the foresight back in 2009 to understand the importance of remote and mobile money transfers to the new millennium’s cashless payments economy. He’d have to wait over a decade to realize just how right he was, but his digital payments processor, Square, now sits pretty much at the top of the new tech-commerce ecosystem.

Through its software and hardware solutions, the company has streamlined the process for vendors to start and grow their own digitally enabled businesses.

Square’s Point of Sale application lets sellers take payments from customers in person using a variety of methods, and give them access post-sale to a raft of analytics and processing options, including digital receipts, chargeback protection and payment dispute tools.

Square’s presence in the financial services sector was also helped along by the company’s early adoption of crypto-currency as a vehicle for online payments. The recent and ongoing rally of leading crypto-token Bitcoin has meant the rise in popularity of its Cash App product, enabling users to trade the currency while using its many other features as well.

The company’s recent revenue figures were encouraging, seeing 267% growth year-on year and an earnings per share (EPS) of $0.41 – having beat analyst expectations by a margin of $0.25. However, a slump in crypto-wide prices over the last week meant Square’s share price took a tumble, along with other crypto-related stocks, falling over 5% from local highs.

The firm’s exposure to Bitcoin volatility through its own investment in the currency is a double-edged sword, and indeed, Cathie Wood has seen fit to offload some of her stake in the company lately, although Square still remains one of her favorite holdings making up 4.2% of her total capital under management.

[#2] Sea Limited

Another stock that Cathie Wood can’t seem to stop buying is Sea Limited. The company is another fintech play in the mould of Square, but this time the advantage is that the firm operates its digital retail arm, Shopee, in the high-growth Southeast Asia market.

Having started as a digital wallet solution, Sea Limited has grown into a major e-Commerce outfit, and is even now making its presence felt in the Digital Entertainment space with its hugely successful Garena wing.

The company isn’t making a net profit yet, but it is growing revenues at a very healthy rate. Cathie Wood added more Sea Limited stock to her stable after a recent price drop, and you shouldn’t expect her to stop buying any more just yet.

[#1] Coinbase Global, Inc.

ARK’s support for blockchain technology is the stuff of legend. Cathie Wood first made a play with Bitcoin back in 2015, and she’s been singing its praises ever since. Not scared of drumming up its price potential, she reckons the cryptocurrency could one day hit $500,000.

So it’s no surprise that she’s also bullish on the prospects of Coinbase, the largest crypto-asset exchange platform in the US. 

Coinbase only went public in April 2021, so it’s a little too early to gauge what the market might have in store for it going forward. But early price movements have been pretty erratic, with the stock already trading in a range between $250 to $430 in a time frame of just under a month.

But with institutional investment in blockchain on the rise, and the adoption of cryptocurrencies taking off among the general public, Cathie Wood believes the halcyon days on Bitcoin – and hopefully Coinbase – are yet to come.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.