Renowned investor and founder of the largest actively traded ETF company, Ark Investment Management LLC, Cathie Wood has made a large portion of her fortune by betting on Tesla, Inc. (TSLA). Wood has been buying shares of TSLA since 2019 when a majority of hedge funds were shorting the stock. TSLA’s unprecedented share price gains even amid the pandemic have allowed Ark to become one of the most profitable ETF companies worldwide. Ark Investment’s total assets under management rose 101.3% over the past year to $34.50 billion.
Ark Innovation ETF (ARKK) has gained 154% over the past year, while Ark Autonomous Technology and Robotics ETF (ARKQ) and Ark Next Generation ETF (ARKW) have gained 151.1% and 164.4%, respectively, over this period. While Wood continues to retain her position in TSLA, Ark’s ETFs are now venturing out into tech stocks. Wood appears to be capitalizing on the market’s sector rotation out of tech stocks earlier this month by investing at a discount in some of the biggest tech companies that have explosive growth potential. With the Nasdaq Composite down 3.9% over the past month, Wood has been expanding her portfolio to include some of the industry’s market movers that have been overshadowed by the trillion-dollar names.
Wood has an extensive stake in Chinese conglomerate Baidu, Inc. (BIDU), the largest internet search provider in the country with exposure in 5G and autonomous driving segments. Also, Wood’s highly anticipated space exploration ETF, Ark Space Exploration and Innovation ETF, is set to begin trading today, comprising 39 holdings initially. ARKX is reported to have invested in Trimble Navigation (TRMB) and Deere & Company (DE), making it the third Ark ETF to bet on these companies.
Wood is credited as being one of the most influential and farsighted investors, known for taking on huge bets on companies against the markets to deliver strong ROI. Thus, we think her bets on some of the industry-disruptive tech giants warrant a closer look.
Baidu, Inc. (BIDU)
Often known as China’s Google, BIDU is the biggest internet search provider and artificial intelligence (AI) platform in China. While its internet services account for most of its revenues, the company also offers a suite of products, including Mobile Ecosystem, Baidu AI Cloud, and Intelligent Driving & Other Growth Initiatives. Its iQIYI segment focuses on online entertainment in China. With most mainstream technology and entertainment platforms, such as Alphabet, Inc. (GOOGL) and Netflix, Inc. (NFLX), banned in China, BIDU is one of the country’s biggest companies and encompasses immense growth opportunities.
Ark Investment Management obtained 483,137 shares of BIDU on Friday. Of the total holdings, 100,777 shares were allocated to Ark Next Generation ETF (ARKW), 323,410 shares to Ark Innovation ETF (ARKK), and 55950 shares for Ark Autonomous Technology and Robotics ETF (ARKQ). BIDU stock represents approximately 0.28% of shares in ETFs ARKW and ARKK, and 0.32% of shares in ARKQ ETF.
Wood is currently betting on the digitization of China in the aftermath of the COVID-19 pandemic because the number of internet users in the country spiked in 2020. According to China Internet Network Information Center, China had 989 million internet users as of 2020, up 8.6% within nine months since March 2020. For perspective, the proportion of China’s population that uses the internet is nearly triple the United States’ total population.
BIDU’s revenues have risen 5% year-over-year to $4.64 billion in the fourth quarter ended December 31. The company’s non-GAAP operating income was $763 million, representing a 7% rise from its year-ago value. Its adjusted ebitda has increased 5% from the same period last year to $1.31 billion. Shares of BIDU have gained 109.7% over the past year, and 70% over the past six months.
Furthermore, with Wood’s keen interest in the clean energy and electric vehicles (EV) industry, as evidenced by her hefty investments in TSLA stock, BIDU’s extensive stake in the autonomous driving and intelligent energy sector has appealed to her. Baidu Apollo, the company’s autonomous driving segment, has topped local industry peers in every category for the third consecutive year, according to the 2020 Beijing Autonomous Vehicles Road Test Report. The company also launched the world’s first multi-modal autonomous driving Mobility-as-a-Service (MaaS) platform two months ago and is currently constructing a 5G Intelligent Driving project. Also, BIDU has been ranked #1 in China’s AI public cloud market for the third consecutive year, as per the latest IDC report for 1H 2020.
Analysts expect BIDU’s EPS to rise 31.7% in the current quarter (ending March 2021), 5.5% in fiscal 2021, and 20.6% next year. The company has an impressive earnings history; it beat the Street’s EPS estimates in each of the trailing four quarters. A consensus revenue estimate indicates a 28.9% improvement in the current quarter, an 18.6% increase in the current year, and a 13.9% rise in fiscal 2022.
BIDU has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
BIDU has a B grade for Growth and Value. Of the 83 stocks in the China group, BIDU is currently ranked #9. In addition to the grades we’ve highlighted, one can check out additional BIDU Ratings for Momentum, Stability, Sentiment, and Quality here.
Click here to view the top-rated stocks in the China group.
Trimble Inc. (TRMB)
TRMB is a software development company that provides next-generation software solutions for the following industries: Buildings & Infrastructure, Geospatial, Resources and Utilities, and Transportation. TRMB’s diversified operations sit well with Wood’s investment strategy. Along with the company’s significant stake in autonomous vehicle research, it also specializes in 5G network synchronization and Intelligent Automation.
TRMB has a unique software portfolio that caters to the infrastructure and construction industry, as well as a suite of satellite-enabled water technology software to facilitate irrigation in the United States. TRMB products have widespread application in the commercial space industry and the company is expected to be included in the upcoming Ark space ETF. As one of the leading disruptive technology innovators in the U.S. , TRMB is constantly launching new software or upgrading existing software through internal research and development or through collaborative efforts.
Ark Investment Management had a combined holding of 2.75 million shares of TRMB as of March 29, amounting to a 0.46% weighting in the portfolio. In addition, Wood’s has a 1.1% stake in TRMB. Ark has allocated TRMB across two of its portfolios–3D Printing ETF (PRNT) and ARKQ. PRNT holds approximately 336,315 shares of TRMB, representing 4.59% of the portfolio, while ARKQ holds 2.42 million shares of the company, representing a 5.57% weighting in the ETF. TRMB has a weighted rank of #62 in Ark.
TRMB’s annualized recurring revenue increased 9% year-over-year to $1.30 billion in the fourth quarter, ended December 31, 2020. Its operating income for the quarter was $121.90 million, up 38.2% from the prior-year quarter. The company exited 2020 with a cash balance of $237.70 million, reflecting a 25.6% rise from the same period last year.
A consensus EPS estimate of $0.55 for the current quarter, ending March 2021, indicates a 12.2% rise year-over-year. The company’s EPS is expected to improve by 5.8% in the current year, and 12.3% next year. Like BIDU, TRMB surpassed the consensus EPS estimates in each of the trailing four quarters. The Street expects TRMB’s revenues to rise 4% in the fiscal first quarter, 7.5% in the current fiscal year, and 7.4% in 2022. TRMB has gained 152.2% over the past year, and 12.8% year-to-date.
It’s no surprise that TRMB has an overall B rating , which equates to Buy in our proprietary ratings system. The stock has a B grade for Growth, Value, Stability, and Sentiment. It is currently ranked #18 of 42 stocks in the B-rated Technology – Electronics industry.
Beyond what we’ve stated above, we’ve also graded TRMB for Momentum and Stability. Click here to see them.
There are 20 other stocks in the Technology – Electronics industry with an overall rating of A or B. Click here to view them.
Deere & Company (DE)
Equipment manufacturer DE is a relatively new holding in Ark. The firm first bought DE’s shares last December. The company mainly manufactures machinery for agriculture, forestry, and construction industries, offering financing services for the high-cost equipment. ARKQ ETF currently holds 350715 shares of DE, which comprises 4.03% of the total portfolio.
DE is focused on transitioning to a sustainable company by reducing its carbon footprint and selling relatively environment-friendly equipment. Furthermore, it is one of the pioneer companies involved in the digitization of manufacturing; it won five FCC licenses for 5G deployment in manufacturing last November. With Wood’s deep-rooted interest in technological advancement and AI, DE’s integral role in the digitization of U.S. manufacturing should allow the company to multiply its revenues in the near term, thereby boosting Ark ETFs’ returns. In addition to the U.S. markets, DE maintains an influential position in the Brazilian sugarcane business by virtue of its acquisition of aftermarket service parts producer Unimil.
DE’s total revenues have increased 19% year-over-year to $9.11 billion in its fiscal first quarter ended January 2021. This can be attributed to a 23% rise in equipment operation sales over this period, contributing $8.05 billion to total revenues. The company’s net income attributable to Deere & Company rose 137% from its year-ago value to $1.22 billion, while its quarterly EPS rose by the same margin to $3.87.
The Street expects DE’s EPS to rise 107.6% in the current quarter ending April 2021, 80.9% in fiscal 2021, and 15.9% next year. Furthermore, the company beat consensus EPS estimates in each of the trailing four quarters. Analysts expect the company’s revenues to rise 33.6% year-over-year to hit $10.67 billion in the current quarter. DE’s annual revenues are expected to improve by 20.5% in 2021, and 11.2% in 2022. DE has gained 172.4% over the past year, and 36.8% year-to-date.
DE’s strong fundamentals are reflected in its POWR Ratings. The company has an overall B rating, which translates to Buy. It has an A grade for Sentiment. Of the 88 stocks in the A-rated Industrial – Machinery industry, DE is ranked #47.
In total, we rate DE on eight different levels. Beyond what we’ve stated above, we have also given DE grades for Value, Growth, Momentum, Quality, and Stability. Click here to get all DE Ratings.
You can view the top-rated stocks in the Industrial – Machinery industry here.
The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
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BIDU shares were trading at $218.62 per share on Tuesday afternoon, up $13.92 (+6.80%). Year-to-date, BIDU has gained 1.10%, versus a 6.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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