In an industry known for hedge fund managers who focus on unique strategies, including quantitative trading and value stocks, Cathie Wood and her hedge fund ARK Investment Management set themselves apart by purely focused on buying shares in emerging, innovative companies in fields such as AI, Blockchain Technology, Multi-Omics, Space Exploration, and Energy Storage. The fund saw one of its best years since its launch in 2017, with an impressive 87.4% gain driven by a 1300% increase in Grayscale Bitcoin Trust. This performance occurred while the price of Bitcoin hit a record high of $20,000.
Although her funds have gained recognition for their strategies, they have also had a range of outcomes, with some analysts describing them as rollercoaster rides. While creative, market analysts highlight a significant issue with the hedge fund manager's approach: most companies she supports are fairly volatile and come with highly correlated returns. In addition, Wood's portfolio is extremely concentrated, posing a significant risk as gains and losses are magnified. As an illustration, Wood's flagship ARK Innovation ETF, with $6.27 billion under management marked a three-year annualized return of -15.64% and a five-year return of 3.05%. The S&P 500, by contrast, raked in annualized returns of 9.98% over three years and 14.65% over five. According to Morningstar Financial, the ARK Innovation ETF lost 29.9% of its value by the end of the first quarter of 2022. The slide came after the flagship fund saw a 24% drop in 2021, highlighting the risk associated with Wood's full-on growth strategy.
Unwavering Confidence in Bitcoin
In an interview with Bloomberg Markets, Wood predicted that Bitcoin would surpass the $1 million mark by the end of the decade. She ascribed the cryptocurrency's increasing value to both growing institutional and its limited supply of only 21 million coins. According to the ARK's manager, BTC has already crossed $108,000 in 2024 and is expected to rise further in the upcoming years. She also highlighted that, in contrast to more conventional assets like gold, Bitcoin is resistant to inflationary pressures. Moreover, Wood emphasized that institutional adoption—especially via Bitcoin ETFs—is increasing the allure of BTC and promoting a wider understanding of its place within the international financial system.
Additionally, Wood has predicted a surge in startup merger & acquisitions (M&A) under the new Trump administration, which has already taken a number of pro-crypto steps. She cited the expected changes to the Federal Trade Commision (FTC) regulations that may lower regulatory barriers and foster an environment of that is more welcome to private sector transactions. According to Wood:
“Regulatory barriers have been a significant obstacle for M&A activity, but that is likely to change.”
She went on to say that these changes might open up new liquidity opportunities for venture-backed companies. As companies regain the ability to make acquisitions without stringent regulation, Wood added, there may be a spike in market activity. For startups looking towards growth or exit opportunities in an economic environment, this would be crucial.
In any case, Cathie Wood is one of the most interesting hedge fund managers to observe in the industry, and much like her peers, she has made significant moves in the third quarter of 2024. For now, however, we will look at the stocks that she has chosen to part ways with.
Our Methodology
We scanned Cathie Wood’s ARK portfolio for Q3 2024 and selected the technology stocks where she discarded her stake by at least 30% or more. We have arranged the list in ascending order of the percentage of stake discarded.
For these stocks, we also mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Twilio Inc. (TWLO): Analyst Predicts Growth Ahead of Key AI and CPaaS Updates
A software developer in front of a monitor, coding to build the latest internet content & information.
Percentage of stake sold by ARK Invest in Q3: 100%
ARK Investment Management's Q3 Stake Value: $0
Number of Hedge Fund Holders: 52
Headquartered in San Francisco, California, Twilio Inc. (NYSE:TWLO) is a prominent American communication technology company that offers programmable communication tools via web service APIs. Offering a wide variety of services through its cloud-based platform, the company provides voice, messaging, video, email, and more.
Analysts at Wolfe Research showed confidence in Twilio Inc. (NYSE:TWLO) on January 16, increasing the price target for the company's shares from $140 to $150 while maintaining an Outperform rating on the stock. Wolfe cited a number of reasons for the positive assessment, including what the firm calls a "rare convergence of long-term secular tailwinds, positive quarterly checks, and an attractive financial set-up." Moreover, the firm's channel checks point to a very successful fourth quarter for Twilio Inc. (NYSE:TWLO), with strong results in core communications services, and more recent offerings like Branded Calling.
Twilio's Q3 2024 revenue increased by 10% year-over-year to $1.13 billion, with its Communications segment accounting for a sizable $1.06 billion of that total. Additionally, the company's non-GAAP income from operations rose to a record $182 million. In an effort to increase customer engagement, Twilio Inc. (NYSE:TWLO) has also launched a public beta release of Linked Audiences for Amazon Redshift. This led to Twilio's segment in the AWS Marketplace to increase 35% year-over-year.
Overall TWLO ranks 2nd on our list of the stocks to sell now according to Cathie Wood. While we acknowledge the potential of TWLO as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TWLO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
