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Cathie Wood Is Loading Up On These 5 Stocks — Should You?

Cathie Wood Is Loading Up On These 5 Stocks — Should You?

Posted On September 27, 2022 1:30 pm
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The stock market has witnessed heightened volatility since the beginning of 2022. Moreover, the Federal Reserve recently raised benchmark interest rates by 75 basis points and indicated that it would maintain its hawkish stance to fight rampant inflation. Many economists expect the persistent monetary tightening to push the economy into a recession.

Renowned investor Cathie Wood’s ARK Invest ETFs have been hit hard this year amid the intense market rout. The ARK Innovation ETF (ARKK) has plunged 44.2% over the past months and 68% over the past year. Wood has been receiving backlash due to a lack of diversification in her flagship fund. This has now become the key factor for the fund’s underperformance.

As of August, the fund was concentrated on tech growth and science stocks. Ark’s latest 13F filing shows that tech stocks made up nearly 34% of the portfolio. Furthermore, earlier this year, citing the poor risk management and wretched performance, Morningstar analysts downgraded its stance on Wood’s flagship ARKK from ‘Neutral’ to ‘Negative.’

Since the stock market is expected to remain under pressure in the near term, we think it could be wise to stay away from fundamentally weak stocks Roblox Corporation (RBLX), DraftKings Inc. (DKNG), Teladoc Health, Inc. (TDOC), Intellia Therapeutics, Inc. (NTLA), and Verve Therapeutics, Inc. (VERV) that Wood is loading.

Roblox Corporation (RBLX)

RBLX operates an online entertainment platform. The company provides Roblox Studio, a free toolset for developers and creators to build, publish, and manage 3D content; Roblox Client, an application that allows exploring the 3D digital world; Roblox Cloud, which provides cloud-based services and infrastructure; and Roblox Education for learning experiences. The stock has nearly 1.36% ARK ownership.

In the fiscal 2022 second quarter ended June 30, RBLX’s total cost and expenses increased 27.5% year-over-year to $761.47 million. Its loss from operations widened 19.1% year-over-year to $170.27 million. The company reported adjusted EBITDA of $54.64 million, down 69.7% from the prior-year period.

In addition, net loss and loss per share attributable to common stockholders came in at $176.44 million and $0.30, worsening 25.9% and 20% year-over-year, respectively. Its free cash outflow was $57.32 million, compared to an inflow of $168.02 million in the year-ago quarter.

TOP 10 STOCKS FOR THE YEAR AHEAD

The consensus loss per share estimate of $0.31 for the fiscal 2022 third quarter ending September 2022 indicates a widening of 136.1% year-over-year. Also, analysts expect the company’s loss per share for the fiscal 2022 and 2023 to worsen by 24.1% and 11.2% year-over-year to $1.20 and $1.34, respectively.

The stock has declined 64% year-to-date and 55.6% over the past year to close the last trading session at $35.55.

RBLX’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

RBLX has an F grade for Stability and a D grade for Growth, Value, Momentum, and Sentiment. Within the 22-stock Entertainment – Toys & Video Games industry, it is ranked the last. To see additional POWR Ratings (Quality) for RBLX, click here.

DraftKings Inc. (DKNG)

DKNG is a digital sports entertainment and gaming company that operates in the United States and internationally. The company operates through two segments: Business-to-Consumer; and Business-to-Business. DKNG provides online consumer products with fantasy sports, sports betting, and iGaming opportunities. DKNG has about 4.9% ARK ownership.

For the fiscal 2022 second quarter ended June 30, 2022, DKNG’s adjusted operating expenses increased 48.6% year-over-year to $584 million. The company’s loss from operations amounted to $308.92 million for the quarter. Its adjusted EBITDA was negative $118.13 million, widening 234% year-over-year. Also…

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