Asset management company Ark Invest has a fairly aggressive strategy compared to its peers. Founder Cathie Wood takes a thematic approach that concentrates strictly on investing in disruptive innovation. The firm actively manages six exchange-traded funds with focuses that range from general innovative technology to space exploration and autonomy and robotics.
One thing that all six have in common is that Wood and her team share the details of their buying and selling moves publicly. Ark holds the three stocks being discussed below in its ARK Next Generation Internet ETF, ARK Space Exploration & Innovation ETF, and flagship ARK Innovation ETF fund, respectively. Ark Invest has recently made trades involving each company, and they could be bargains to add to your portfolio, too.
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1. Wood hasn't Peloton sold this year
Because she takes such an active approach, it's not unusual for Wood to sell portions of her stakes opportunistically, even if she still believes in the company. But one stock she hasn't sold at all since December is connected fitness leader Peloton Interactive (PTON +1.49%). In fact, in the last month, she added to her Peloton position in the Ark Next Generation Internet fund, where it represented 2.8% of the portfolio as of Oct. 15.
That may be because Peloton shares are down 44% year to date, including an almost 20% drop over the past month. The business itself is on the rebound from issues that have hampered its sales, including a treadmill recall and delivery delays. But its updated treadmill is now available again, and after investing in supply chain and logistics, the company has tightened its delivery times back to what they were prior to the pandemic. The company also plans to have its first U.S. factory producing Peloton equipment in 2023, in addition to the facilities it acquired when it bought commercial fitness equipment maker Precor. All told, the company is putting its international supply chain problems behind it.
Peloton ended its fiscal 2021 on June 30, and management anticipates a 34% revenue increase in its fiscal 2022, thanks in part to new avenues of growth. It announced a new private label apparel line last month, and the Precor acquisition will have the company looking to move its equipment into gyms, hotels, and corporate fitness facilities.
The drop in the share price has left the stock trading at more reasonable levels. Based on its fiscal 2022 revenue guidance, the stock is trading at a price-to-sales ratio under 5. That's down from approximately 18 at the start of 2021, making this growth story look like a bargain today.
Garmin's Autoland provides autonomous safety-enhancing technology. Image source: Garmin.
2. Wood just boosted her Garmin stake
In early October, Wood increased her holdings in outdoor fitness device maker Garmin (GRMN +1.16%) by almost a third, making it the 26th largest holding in the Ark Space Exploration & Innovation fund. It may have been the 53% year-over-year revenue growth in the company's record second quarter that caught her eye.
The relative size of that growth was due in large part due to the fact that it's a comparison to a pandemic-impacted period of 2020. But overall revenues hit a new high for the company in 2020, up 11% from the prior year. And the company expects another record year in 2021, forecasting a sales jump of 17%.
Notably, all of Garmin's reportable segments are growing this year. In the last several years, its fitness, outdoor, marine, and aviation products have delivered strong results. But the company also expects its automotive segment to grow by 15% in 2021. That would be the first time in more than five years that this segment delivers year-over-year growth.
Those expectations, along with strong momentum in all of its categories, help explain why Garmin shares have outpaced the market in 2021, with a 31% gain year to date. But since Sept. 1, shares have retreated by more than 11% from their peak. That may be why Wood has been taking the opportunity to increase her ownership of Garmin shares at a discount.
3. Proto Labs is coming off a record quarter
Most recently, Wood has been a seller of machining, injection molding, and 3D printing company Proto Labs (PRLB +3.95%) from her flagship Ark Innovation fund. But that may be related to the fact that its shares have jumped more than 9% in the past two weeks.
In the broader picture, Proto Labs shares are down by more than 50% year to date, even as its revenue is hitting new records.
The company has forecast another record revenue result for its third quarter, guiding for sequential growth of 4% at the midpoint of its estimated range. During its second-quarter investor conference call, management said it continues to see "very high" demand for its injection molding business. The company's CNC machining and 3D printing segments also put up record sales in Q2.
Wood is well-known for buying and selling portions of her stock positions as she and her team look for the best places to put funds. While she has cut her stake in Proto Labs by about half since Ark's last purchase in mid-September, investors shouldn't be surprised if she reverses course again as the company's sales continue to hit new records and its stock becomes a better bargain.
