Cathie Wood is well known to invest in stocks that are focused on technological advancements. The CEO of ARK Invest came to the limelight when Cathie Wood stocks skyrocketed in 2020. During that year, the flagship ARK Innovation ETF returned 150% as compared to 16% returns for the S&P 500 index.
It goes without saying that the big out-performance resulted in a huge fan following for Cathie Wood. However, the correction in growth stocks in the last two quarters has changed things significantly. Cathie Wood ETF’s have been under-performers as her stock picks plunge.
There are articles talking about Cathie Wood being a superstar investor or just lucky?
I believe that Cathie Wood stocks are indeed worth considering from the perspective of innovation. One can question or debate Cathie Wood’s timing for buying or selling stocks. However, there is no doubt that there are several potential value creators among Cathie Wood stocks.
This column focuses on five Cathie Wood stocks that can deliver value in the long-term. These stocks have seen a deep correction in the last two quarters. I believe that this correction presents a good buying opportunity.
| TSLA | Tesla | $672.06 |
| SQ | Block | $63.12 |
| KTOS | Kratos Defense & Security | $13.79 |
| XPEV | Xpeng | $30.26 |
| COIN | Coinbase | $48.28 |
Tesla (TSLA)
Tesla (NASDAQ:TSLA) stock has been in a correction mode and is lower by 44% from 52-week highs. It’s among the best Cathie Wood stocks to consider in the market downturn.
The electric vehicle industry might be facing near-term headwinds. However, the long-term outlook looks positive. Tesla has manufacturing presence in all big markets globally. The company is possibly exploring a Southeast Asia Gigafactory with Indonesia as the potential location.
With the innovation factor, the company is likely to maintain leadership market share. I also believe that deliveries growth for Tesla will remain healthy in the next few years. The company has an attractive line-up that includes Cybertruck, Roadster and Tesla Semi.
It’s also worth noting that Tesla reported operating cash flow of $4 billion for Q1 2022. The OCF potential is likely to increase in the coming years as deliveries growth sustains. The company will therefore have ample financial flexibility to invest in product development.
Block (SQ)
Financial technology stocks have also witnessed a sharp correction in the last few quarters. From this segment, Block (NYSE:SQ) stock looks attractive after a 60% correction in six-months.
In terms of specific growth triggers, I believe that the company’s Cash App will continue to create value. For Q1 2022, Cash App generated $2.46 billion in revenue and $624 million in gross profit. With rising adoption of Cash App and growth in subscription revenue, the segment is likely to support cash flow upside.
Block also reported $6.9 billion in liquidity as of Q1 2022. This is important to mention as the company has been pursuing inorganic growth. Given the financial flexibility, acquisitions will help in accelerating the company’s global expansion plans.
It’s also worth mentioning that Cash App generated $1.73 billion in Bitcoin (BTC-USD) revenue for Q1 2022. While cryptocurrencies are in a bear-market, Block is focused on long-term adoption of crypto and blockchain technology. I see value creation on this front in the coming years.
Kratos Defense & Security (KTOS)
Among the best Cathie Wood stocks to buy, it makes sense to look at defense sector. With rising geo-political tensions, defense spending will accelerate. For year-to-date 2022, Kratos Defense & Security (NASDAQ:KTOS) has declined by 28%. I see this as a good accumulation opportunity.
In the near-term, Kratos faces challenges that include inflation and supply-chain issues. However, once these headwinds wane, the outlook seems positive. As of Q1 2022, the company reported an order backlog of $980 million. This provides revenue visibility through 2022.
Recently, Kratos also acquired the engineering division of Southern Research for $80 million. This will add to the company’s capabilities in the hypersonic, ballistic missile, space and ISR areas. Acquisitions are likely to help in accelerating top-line growth.
Last month, Truist Securities upgraded KTOS share to “buy” with a price target of $20. This implies an upside potential of 43% from current levels of $14.
XPeng
XPeng (NYSE:XPEV) stock is another name among Cathie Wood stocks that’s worth adding to the portfolio. The Chinese electric vehicle company is worth holding in the long-term portfolio.
In the last one-month, XPEV stock has surged by 40%. The rally from oversold levels has been supported by favorable policies from China to support the adoption of electric vehicles.
I believe that rally is likely to sustain with XPeng positioned to report healthy deliveries growth. XPeng launched P5 sedan with deliveries in October 2021. Further, the company will be launching G9 in Q4 2022. With new model launches, deliveries growth will be supported.
Additionally, the company has aggressive expansion plans in Europe. That’s another catalyst for long-term growth. As of Q1 2022, XPeng reported cash and equivalents of $6.6 billion. Therefore, there is ample financial flexibility to support marketing and product development.
XPeng reported vehicle margin of 10.1% for Q1 2022. Once inflationary headwinds wane, vehicle margin expansion is also likely to sustain with operating leverage. Overall, XPEV stock seems attractive even after the recent rally. I believe that over the next five-years, the stock has the potential to deliver multi-fold returns.
Coinbase
With the crash in Bitcoin and other cryptocurrencies, Coinbase (NASDAQ:COIN) stock has plunged. While the near-term outlook remains bearish for cryptocurrencies, COIN stock looks attractive at $48.
I believe that a lot of coins will perish in the current bear market. However, the blockchain technology will survive and strong projects will grow in the long-term.
Coinbase seems to be focused on product development even during the downturn. Coinbase wallet has seen wider adoption and the company has also launched the beta version of Coinbase NFT. At the same time, Coinbase is focused on increasing the number of assets on the platform.
This will boost trading volumes once market sentiments improve. I also expect the company’s subscription and services revenue to trend higher in the coming years. This will have a positive impact on cash flows.
Cathie Wood has been increasing stake in Coinbase through the correction. From current levels, I would not be surprised if COIN stock doubles in the next 12 months-24 months.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.