Best stocks to buy now
In the beginning of this year, Cathie Wood’s Ark Invest funds fell because investors were attracted to value stocks. However, in the last week, these funds mounted a recovery. This might be the beginning of an upward trend for innovation funds.
Wood rose to prominence following a stellar 2020 in which ARK Innovation returned nearly 150 percent and became the largest actively managed ETF. According to FactSet, ARKK has received more than $6.7 billion in fund flows in 2021 and more than $14 billion in the previous 12 months.
This is because as interest rates rise, the present value of cash flows for growth companies – specifically, technology stocks – falls.
Wood, on the other hand, stated last Tuesday that the “rotation back to growth is probably close at hand.”
Wood never doubted that the shift back to innovation would occur.
“We have capitalized on this volatility by selling names that have performed better than others and moving into names… that we have a high degree of conviction in and those that are more opportunistic,” she said last week during an ARK webinar.
A new top ten
Wood’s top ten holdings have changed since the beginning of the year, which he attributes to consolidation into Ark’s highest conviction plays.
Tesla has long been ARK Innovation’s top holding, accounting for nearly 10% of the ETF’s weight. Teladoc Health, Roku, and Square have also been fund bellwethers since 2020, remaining in their top ten positions from the previous year.
Last week, Teladoc Health increased by 5.6 percent, while Roku increased by nearly 6.1 percent. Since Monday, Square has risen 2.6 percent.
In the meantime, Zoom Video, Shopify, Spotify Technology, Unity Software, Coinbase Global, and Twilio have all entered the top ten in 2021, displacing Invitae, CRISPR Therapeutics, Proto Labs, 2U, Slack, and Lending Tree.
Zoom Video gained nearly 9.1% last week. Spotify and Shopify both gained approximately 3.2 percent and 3.4 percent, respectively. Last week, Unity Software gained 4.6 percent. Twilio has gained approximately 7.4 percent since Monday. Last week, Coinbase fell 2.1 percent.
Coinbase rose quickly through the ranks, breaking into the top ten just weeks after its public debut in April. The company, which was founded in 2012 to make purchasing bitcoin easier, is the world’s largest cryptocurrency exchange. As the price of bitcoin fell, so did the value of Coinbase’s stock.
Wood, a long-time supporter of bitcoin, told Bloomberg TV in May that she still believes the digital asset will reach $500,000. She did, however, say that a drop in bitcoin’s price could help the prospects for an Ark bitcoin ETF.
Wood has long claimed that being an active manager allows her to be nimble and capitalize on the volatility inherent in innovation names.
“I believe that any company that is on the right side of these five platforms will enjoy exponential growth opportunities like we have never seen before, with the exception of perhaps Amazon over the last 2025 years being the poster child,” Wood said last month.
According to financial company Canaccord Genuity, there are likely hitches in Tesla’s battery development that have decreased the ceiling for the stock.
Lowering his price goal from $974 to $812 per share, Dorsheimer decreased his price goal.
“Prior to the delayed launch, Tesla canceled the top-tier Model S Plaid Plus, which was rumored to be the first to use the new 4680 cell design. This indicates to us that the new cell format is not yet ready for production, and cell production capacity constraints for energy storage products such as the Powerwall remain,” the note stated.
Even with the lower price target, Canaccord predicts a 33 percent gain for Tesla. Dorsheimer rates the stock as a buy.
Other automakers, including Ford, are investing heavily in electric vehicles, but Canaccord says Tesla is still the industry’s innovator.
“Tesla also revealed that they designed and built a machine that can wind the copper rotors at much higher tension, allowing for a more efficient electromagnetic field and tighter gaps at higher rpm. “We anticipate that this will lead to industry-wide improvements in motor design,” the note stated.
Tesla’s stock has struggled in 2020, dropping more than 13%.
Many large investment companies are of the opinion that the beginning of Squarespace’s initial public offering (IPO) is not over.
Goldman Sachs issued the most positive prediction, estimating that the business would see sales growth of more than 20% next year.
“We believe that in today’s economy, web design tools are lowering the barriers to entry for new business formation. While there are many competitors in this $150 billion end market, we believe Squarespace has historically differentiated itself through high quality product design and ease of use,” Goldman wrote in a client note.
The firm set a price target of $90 for the stock, which is 50% higher than where Squarespace closed on Friday.
Citi also initiated coverage with a buy rating, claiming that the company’s emphasis on e-commerce makes it more appealing than competitors.
“The company’s disciplined investment approach has produced a differentiated financial profile versus the peer group, and we see little risk of deterioration given the company’s more focused approach to the eCommerce ecosystem portends less ‘aspirational’ levels of investment taken by peers,” according to the Citi note.
Piper Sandler, on the other hand, was less enthusiastic about the stock, assigning it a neutral rating and citing valuation concerns following the stock’s hot start.
The following are the analyst ratings and price targets for the most recent initiations.
Goldman Sachs recommends a buy with a target price of $90.
JPMorgan: Overweight, target price of $70
Citi recommends a buy with a target price of $75.
Piper Sandler is neutral with a target price of $62.