Cathie Wood had a rough 2021, and 2022 isn’t proving any better. However, the CEO, co-founder, and chief investment officer of Ark Invest’s family of exchange-traded funds (ETFs) clobbered the market in 2020. She has a great comeback seat for when investors rotate back into dynamic growth stocks.
I think some of her investments are ready to recover. I really like Deere & Company (DE -1.05%), DraftKings (DKNG 5.12%), and Grayscale Bitcoin Trust (GBTC 6.25%) at this point. Let’s see why I believe these three very different companies within Wood’s portfolios can beat the market at this point.
Deere & Company
Cathie Wood ETFs are loaded with next-gen and disruptive growth stocks. You don’t expect the old-school industrials giant behind John Deere to be a core Ark Invest holding, but you can be sure that Wood is grateful for the inclusion. Deere stock is down just 17% from its recent all-time high, while some of her stocks are down more than 70%.
Deere isn’t necessarily a stodgy behemoth. Sure, it’s the company behind agricultural, commercial, and construction equipment, but there’s more to the story than just that. The same 180-year-old company that makes the tractors help farms reap their seasonal harvests is also a leader in tech, automation, and even artificial intelligence.
It’s not your prototypical Wood stock. It even pays a small dividend. However, the current climate is ripe for Deere. There’s a world to feed and developing markets to develop. Deere also comes as a potential value stock with some growth appeal. It’s trading for 16 times this year’s projected earnings, but analysts see revenue growing 20% this year.
Wood is betting big on DraftKings, even if it seems a bit like an underdog these days. The same online gambling and fantasy sports specialist that more than quadrupled in 2020 has given back nearly all of those gains.
DraftKings isn’t fading away anytime soon. Revenue rose 34% in its latest quarter, just ahead of Wall Street expectations. Its quarterly loss widened, but it was better than the market was forecasting. DraftKings also boosted its full-year outlook for revenue and adjusted EBITDA. The market didn’t applaud the “beat and raise” performance, but it does mean that the company’s fundamentals are moving up even as the stock is moving down. There are regulatory hurdles to clear and acquisitions to digest, but our love for sports and confidence in sporting-related wagering has only strengthened through the pandemic. DraftKings is down, but it’s not the long shot that the stock chart suggests it should be in sizing up today’s odds.
Grayscale Bitcoin Trust
Crypto has been hit hard. The entire market for digital currencies has shed $1 trillion in value over the past month, and that’s a pretty big deal with Bitcoin‘s (BTC 4.67%) valuation down to $560 million. Bitcoin’s 28% slide over the past month is actually holding up better than the overall cryptocurrency market, and I think it will stay that way when bullish sentiment returns. There will be a flight to quality, and Bitcoin will continue to be a leader.
It’s never been easier to buy Bitcoin directly, but Wood’s approach over the past couple of years has been to buy into Grayscale Bitcoin Trust. It’s the largest exchange-traded trust with direct ownership in crypto. Grayscale operates a family of trusts that play nice under the current regulatory environment by operating as trusts. Grayscale Bitcoin Trust has $18.7 billion in cold-stored Bitcoin under management.
These exchange-traded trusts more closely resemble closed-end funds than traditional ETFs, and they sometimes trade at significant premiums or discounts to their net asset value (NAV). The discount right now is as wide as I’ve seen given investor sentiment for crypto. Grayscale Bitcoin Trust had $27.04 in Bitcoin per share as of Wednesday’s market close, but the shares — at $18.56 — are trading at a 31% discount to NAV.
The downside here is that Grayscale Bitcoin Trust charges a stiff 2% annual management fee, whittled away through the year in the form of transferring out Bitcoin to pay for the trust expenses. However, at the current discount, you’d have to hold it for more than a decade before the fees eat into the value of the underlying Bitcoin.