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In the last year, ARK Invest’s CEO and CIO Cathie Wood has risen in popularity. ARK Invest is known for its thematic ETFs (exchange-traded funds) that have generated market-thumping returns since the pandemic-induced bear market witnessed in early 2020. Cathie Wood can be considered Wall Street royalty given her ability to identify companies that have the potential to generate multifold gains for investors.
Let’s take a look at a few of the stocks Wood is buying right now!
Shopify
Cathie Wood is bullish on Shopify (NYSE: SHOP) which is also Canada’s largest company in terms of market cap. Shopify is a stock that has crushed the broader market ever since it went public back in 2015. Since its IPO, Shopify has returned an astonishing 4,120%. For example, $1,000 invested in Shopify stock soon after it went public would have been worth close to $42,000 today.
Despite its staggering returns, there is enough room for Shopify to derive outsized gains in 2021 and beyond. The COVID-19 pandemic acted as a tailwind for e-commerce companies as people were forced to shop online. This also meant that Shopify increased its merchant base in the last year as small and medium enterprises had to innovate to avoid closures.
Shopify’s sales soared by 86% year over year in 2020 to $2.9 billion. The company’s merchant solutions sales were up 117% year over year while subscription revenue also soared 53% last year. This allowed the e-commerce heavyweight to report a net income of $320 million in 2020, compared to a loss of $125 million in 2019.
While top-line growth is forecast to decelerate in 2021, it will still grow by a healthy 39.6% to $4.1 billion and by 31% to $5.36 billion in 2022. Shopify stock is currently trading 25% below its record high giving investors an opportunity to buy a quality growth at a lower multiple.
Coinbase
Unless you have been living under a rock in the last year, you would have heard about the breathtaking returns generated by Bitcoin and several other digital currencies. One way to gain exposure to the highly disruptive cryptocurrency market is by investing in shares of the largest crypto exchange in the world-Coinbase (NASDAQ: COIN).
Ark Invest purchased close to 750,000 shares of Coinbase soon after it went public and added another 340,273 shares a few days back.
Coinbase is a company that you should add to your growth portfolio especially if you are bullish on the crypto space in the long term. This company has an 11% market share in the crypto exchange vertical. Like any other exchange, Coinbase generates a majority of its revenue from transaction fees that accounted for 96% of total sales in 2020. So, its revenue is directly related to the volume of trading on its platform.
In the first quarter of 2021, Coinbase reported revenue of $1.8 billion. Comparatively, its revenue in 2020 and 2019 stood at $1.3 billion and $533.7 million respectively. It also expects an adjusted EBITDA of $1.1 billion in the March quarter compared to an EBITDA of $527 million in the whole of 2020.
Sea Limited
Another stock that Ark Invest has been purchasing in 2021 is Sea Limited (NYSE: SE) which is one of the leading e-commerce platforms in Southeast Asia. Sea Limited was initially a communication platform for gamers and it then started distributing games developed by China’s Tencent for its audience base in Southeast Asia. It then published its own in-house game called Free Fire which took the gaming world by storm.
Sea Limited has since expanded into e-commerce with Shopee and also launched SeaMoney which is it's fin-tech vertical. Sea Limited stock soared 385% in 2020 and is up approximately 1,500% since its IPO in late 2017.
In the last quarter, the company’s sales more than doubled driven by a 178% growth in e-commerce and a 72% increase in its online entertainment business. The company is now expanding in other growth regions including Latin America which is a much bigger market compared to Southeast Asia. We can see why Ark Invest is betting on this little-known stock that is already valued at a market cap of $126 billion.
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