Much has been written and discussed about the incredible success and then failure of Cathie Wood’s phenomenal ARK Innovation exchange-traded fund, which exploded in 2020 only to implode in the fall of 2021 and trade sideways most of 2022. The huge parabolic move in 2020 and 2021 saw this ETF rise a stunning 313% between March 15, 2020, and February 7, 2021. Investors that were late to the party then saw the fund crash and burn, from a $156.58 all-time high to a $30.97 closing low on December 19, 2022, a massive round-trip decline.
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So the question for investors is whether Cathie Wood’s investing style is all show and no real place for anybody to invest, or is her desire to own companies that will excel and prosper in the future the right place to be, especially now with the price of the ARK fund still sitting just $12 above the low printed last December? While some would say no, for investors with a long-term outlook and big-time risk tolerance, the time may indeed be now.
For those not wanting to own the entire basket of stocks in the fund, we screened the holding looking for the five companies that are almost guaranteed winners now and in the future. These stocks are all rated Buy across Wall Street, but it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
We listed each stock by the size of its weighting in the ARK Innovation portfolio.
Tesla
Elon Musk has captured lightning in a bottle more than once and this is his biggest success. Tesla Inc. (NASDAQ: TSLA) designs, develops, manufactures, leases and sells electric vehicles and energy generation and storage systems in the United States, China and elsewhere.
Its Automotive segment offers electric vehicles, as well as sells automotive regulatory credits. It offers non-warranty after-sales vehicles, used vehicles, retail merchandise and vehicle insurance services. This segment also provides sedans and sport utility vehicles through direct and used vehicle sales, a network of Tesla Superchargers, and in-app upgrades; purchase financing and leasing services; services for electric vehicles through its company-owned service locations and Tesla mobile service technicians; and vehicle limited warranties and extended service plans.
The Energy Generation and Storage segment engages in the design, manufacture, installation, sale and leasing of solar energy generation and energy storage products and related services to residential, commercial and industrial customers and utilities through its website, stores and galleries, as well as through a network of channel partners. It offers provision of service and repairs to its energy product customers, including under warranty, as well as various financing options to its solar customers.
Tesla is the ETF’s top holding, with a whopping 10.51% weighting, despite Wood recently trimming some of her position. Wedbush’s $350 target price on Tesla stock is a Wall Street high. The consensus target is just $239.82, and Wednesday’s final trade was for $236.86 a share.
Block
This is the company Jack Dorsey left his post at Twitter for, and it has huge long-term potential. Block Inc. (NYSE: SQ) creates tools that enable sellers to accept card payments and provides reporting and analytics, as well as next-day settlement.
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The company provides the following hardware products:
- Square Register combines its hardware, point-of-sale software and payments technology.
- Square Terminal is a payments device and receipt printer to replace traditional keypad terminals, as it accepts tap, dip and swipe payments.
- Square Stand enables an iPad to be used as a payment terminal or full point-of-sale solution.
- Square Reader for contactless and chip accepts EMV chip cards and NFC payments, enabling acceptance through Apple Pay, Google Pay and other mobile wallets.
- Square Reader for magstripe enables swiped transactions of magnetic-stripe cards by connecting with an iOS or Android smartphone or tablet through the headphone jack or Lightning connector.
The company’s commerce products include Square for Restaurants, Square Appointments, Square for Retail, Square Point of Sale, Square Online, Square Online Checkout, Square Invoices and Square Virtual Terminal, Risk Manager and Order Manager. It offers payment application programming interfaces (APIs) and commerce APIs, as well as Cash App, an ecosystem of financial products and services that enables customers to store, send, receive, spend or invest their money.
Block stock has a 5.57% weighting in the Ark Innovation fund. Credit Suisse has a $100 target price. The consensus target is $85.44, and Wednesday’s close was at $57.22.
Exact Sciences
Anybody who has gone through a colonoscopy can certainly appreciate the products this company makes. Exact Sciences Corp. (NASDAQ: EXAS) provides cancer screening and diagnostic test products globally. Its Cologuard is a non-invasive stool-based DNA screening test to detect DNA and hemoglobin biomarkers associated with colorectal cancer and pre-cancer.
Exact Sciences also provides Oncotype DX Breast Recurrence Score Test; Oncotype DX Breast DCIS Score Test; Oncotype DX Colon Recurrence Score Test; OncoExTra Test for tumor profiling for patients with advanced, metastatic, refractory, relapsed or recurrent cancer; and COVID-19 testing services.
The company’s pipeline products focus on enhancing the Cologuard test’s performance characteristics and developing blood and other fluid-based tests. It has license agreements with the MAYO Foundation for Medical Education and Research and with Hologic.
The company has a 4.07% weighting in the ARK fund. The $130 Citigroup target price is well above the consensus target of $108.36. Exact Sciences stock closed on Wednesday at $84.59.
Shopify
This company is helping to revolutionize the retail commerce world. Shopify Inc. (NASDAQ: SHOP) provides a commerce platform and services in North America, Europe, the Middle East and elsewhere.
Shopify’s platform enables merchants to display, manage, market and sell products through various sales channels, including web and mobile storefronts, physical retail locations, pop-up shops, social media storefronts, native mobile apps, buy buttons and marketplaces. It enables them to manage products and inventory; process orders and payments; fulfill and ship orders; find new buyers and build customer relationships; source products; leverage analytics and reporting; manage cash, payments and transactions; and access financing.
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The company also sells custom themes and apps, registration of domain names and merchant solutions, such as accepting payments, shipping and fulfillment, and securing working capital. The company was formerly known as Jaded Pixel Technologies changed its name in November 2011.
Shopify has a 3.7% weighting in the Ark Fund. Oppenheimer has an Outperform rating and earlier this summer lifted their target price on the shares to $80 from $70. The consensus target is set at $66.51. The final trade on Wednesday was filled at $56.73 up over 5%.
DraftKings
Once the Pandora’s box of ubiquitous gambling was opened, there clearly would be winners and losers, and this company looks like one of the long-term winners. DraftKings Inc. (NASDAQ: DKNG) operates as a digital sports entertainment and gaming company. It offers multichannel sports betting and gaming technologies, powering sports and gaming entertainment for operators in 17 countries.
24/7 Wall St.The company operates iGaming through its DraftKings brand in five states, as well as operates Golden Nugget Online Gaming, an iGaming product and gaming brand, in three states. Its Sportsbook is live with mobile and/or retail betting operations in the United States pursuant to regulations in 18 states.
Its daily fantasy sports product is available in six countries with 15 distinct sports categories. In addition, it offers DraftKings Marketplace, a digital collectibles ecosystem designed for mainstream accessibility that offers curated NFT drops and supports secondary-market transactions, as well as owns Vegas Sports Information Network, a multiplatform broadcast and content company.
Its weighting in the ARK fund is 4.17%. The Truist Financial target price is $44, a Wall Street high. DraftKings stock has a consensus target of $35.70, and shares closed at $27.81 on Wednesday.
These stocks are clearly for aggressive growth investors with a ton of risk tolerance and a long-term time horizon. With those caveats in place, all these top companies could be poised for mega growth in the coming years. Just remember though that these stocks are extremely volatile, have all rallied big and likely still will have wild price swings. If investors can tolerate that, they could be in for some massive gains in the coming years.
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