Cathie Wood has established herself as an influential institutional investor of today. She expects her funds to have stable long-term growth based on her innovation firm, Ark Invest’s investment strategies. Last week, Wood shed the stocks of Tesla (TSLA), Pinduoduo (PDD), Takeda Pharmaceutical (TAK), and Twitter (TWTR).
Cathie Wood has risen in the ranks of institutional investors, thanks to the stellar performance of her investment firm Ark Invest’s ETFs. Her strategy of investing in ‘disruptive innovations’ has led to high returns over the pandemic period. Her investment firm’s flagship fund ARK Innovation ETF (ARKK), has $23 billion in assets and has returned an average of nearly 45% annually over the past five years.
Moreover, Wood has forecasted that her firm’s strategies could deliver a 30-40% compound annual rate of return over the next five years. “Critical to investment success will be moving to the right side of change, avoiding industries and companies caught in the crosshairs of ‘creative destruction’ and embracing those on the leading edge of ‘disruptive innovation,” Wood stated earlier.
Tesla, Inc. (TSLA)
This EV manufacturing behemoth does not need any introduction. TSLA sells EVs, electric generation systems, and storage systems globally. The company operates through the segments Automotive; and Energy Generation and Storage.
In September, Rosen Law Firm, a global investor rights law firm, encouraged shareholders of TSLA to join a class-action lawsuit regarding the formal investigation underway about the company’s Advanced Driver Assistance System (ADAS). The investigation was formally announced on August 16 by the National Highway Traffic Safety Administration (NHTSA), following collisions with parked emergency vehicles. The company is also under investigation by several other law firms like Pomerantz LLP, the Schall Law Firm, and Glancy Prongay, and Murray LLP.
For the fiscal third quarter ended September 30, TSLA’s total cost of revenues increased 50.5% year-over-year to $10.10 billion. Total operating expenses rose 32.1% from the prior-year quarter to $1.66 billion. For the nine months ended September 30, the company’s net cash provided by financing activities decreased 154.2% from the same period prior year to a negative $3.95 billion.
Street EPS estimate of $8.76 for the fiscal year 2022 indicates an increase of 39.9% from the prior year.
The stock has declined 7.9% over the past five days to close yesterday’s trading session at $1,058.12.
Pinduoduo Inc. (PDD)
PDD is an e-commerce platform operator headquartered in Shanghai, China. The company operates Pinduoduo, a mobile platform that offers products such as apparel, mother and child care products, fresh produce, electronic appliances, and furniture and household goods.
On November 26, PDD announced its plan to increase its research & development (R&D) and agricultural technology investment. The investment is expected to result in substantial cash outflow and might take some time before benefits can be materialized from the spending.
PDD’s revenue increased 51.3% year-over-year to $3.34 billion in the fiscal third quarter ended September 30. However, its total operating expenses also went up 4.6% from the same period prior year to $1.99 billion. Net cash used in investing activities rose 2,924.9% from the prior-year quarter to $2.14 billion.
The consensus revenue estimate of $4.82 billion for the fourth fiscal quarter indicates a 17% year-over-year rise.
Over the past year, the stock has declined 68.5% to close yesterday’s trading session at $56.99. It has declined 48.7% over the past six months.
Takeda Pharmaceutical Company Limited (TAK)
TAK researches, develops, manufactures, markets, and out-licenses pharmaceutical products worldwide. The company offers its products in gastroenterology, oncology, neuroscience, and rare diseases. It is headquartered in Tokyo, Japan.
On January 10, TAK announced that it would exercise its option to acquire Adaptate Biotherapeutics, an antibody-based therapeutics company. The acquisition might take some time before adding substantially to the company’s revenue stream.
For the six months ended September 30, TAK’s cost of sales increased 6% year-over-year to $4.64 billion. Net cash used in financial activities rose 57.4% from the prior-year six months to $5.91 billion. The company’s cash and cash equivalent balance stood at $5.45 billion, down 3.6% from the same period the prior year.
The street revenue estimate for the fiscal third quarter of $7.43 billion reflects a decrease of 6.3% from the prior-year quarter.
TAK’s shares have declined 22% over the past year and 14.9% over the past six months to close yesterday’s trading session at $14.24.
Twitter, Inc. (TWTR)
TWTR is a popular platform for public self-expression and real-time conversation. The company offers Twitter, a social media platform that allows users to consume, create, and distribute content.
On January 3, TWTR announced that on January 1, the company closed the sale of MoPub to AppLovin Corporation (APP). However, the company does not expect to recoup the total revenue loss of around $200 and $250 million associated with the sale of MoPub in 2022.
TWTR’s total costs and expenses increased 130.2% year-over-year to $2.03 billion in the fiscal third quarter ended September 30. Net income decreased 1,972.9% from the prior-year quarter to a negative $536.76 million, while net income per share came in at a negative $0.67, down 1,775% from the same period the prior year.
Although analysts expect TWTR’s revenue to increase 22.5% year-over-year to $1.58 billion for the fiscal fourth quarter, its EPS is expected to decrease 7.9% from the prior-year quarter to $0.35 for the same period.
The stock has declined 22.4% over the past year and 42.1% over the past six months to close yesterday’s trading session at $39.97.
TSLA shares were trading at $1,062.92 per share on Tuesday afternoon, up $4.80 (+0.45%). Year-to-date, TSLA has gained 0.58%, versus a -1.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.