Few institutional investors have made a bigger splash than Cathie Wood over the past 1 1/2 years. The founder of the ARK Invest family of exchange-traded funds vaulted into notoriety in 2020, as funds like her ARK Innovation ETF (NYSEMKT: ARKK) posted huge returns by taking advantage of favorable trends for the growth-heavy stocks Wood favors.
So far in 2021, however, Wood has run into more challenges. The hit that growth stocks took earlier in the year sent ARK Invest ETF share prices lower, and even after a rebound, ARK Innovation is just barely in the green year to date. High-profile picks like Tesla and Teladoc Health, which produced amazing returns in 2020, are lower so far this year.
Yet many of Cathie Wood’s top picks have continued to perform well. Below, we’ll highlight three of 2021’s best stock picks from ARK Invest and what their prospects look like going forward.
Sea Limited (NYSE: SE) combines several different businesses under one corporate roof, and that’s why it’s a holding among three Cathie Wood ETFs. ARK Innovation, ARK Next Generation Internet ETF (NYSEMKT: ARKW), and ARK Fintech Innovation (NYSEMKT: ARKF) are all holders of Sea shares, combining for holdings worth roughly $725 million. The stock is up 43% so far in 2021.
Sea’s appeal comes from its exposure to the fast-growing Southeast Asian region and the company’s success in expanding beyond its initial focus areas. Sea is best known for its Garena mobile gaming and esports platform, which helped vault it into the collective consciousness among investors.
Sea’s Free Fire has become incredibly popular in 130 countries across the globe, extending its reach far beyond its home region. In addition, Sea has built up an impressive e-commerce marketplace with its Shopee offering, and it’s also diversified into fintech with its SeaMoney digital-payments platform.
Sea has put up strong growth numbers, with revenue soaring almost 150% in the first quarter of 2021, compared to year-earlier levels. With growth in digital entertainment, e-commerce, and financial services, Sea has the potential to keep producing big wins on multiple fronts. That kind of growth impresses Wood, and it’s a big part of why Sea Limited is a big part of her portfolios.
10x Genomics (NASDAQ: TXG) has taken investors on a roller-coaster ride in 2021, with big gains evaporating on two separate occasions before the genomics equipment-manufacturer’s stock recovered to a 42% year-to-date rise. 10x Genomics is a top-15 pick for Wood, with both ARK Innovation and the ARK Genomic Revolution ETF (NYSEMKT: ARKG) sporting positions that add up to more than $760 million.
Genomics has been an extremely popular sector of the stock market recently, and 10x Genomics’ equipment is designed to make research in the area easier. First-quarter sales jumped 47% year over year, with revenue coming not just from equipment sales, but also from the consumable products that owners need in order to conduct ongoing research.
10x Genomics didn’t make money, but it cut its losses by roughly half, compared to the previous-year’s period. Moreover, the company expects full-year sales to jump as much as 67% from 2020 levels, with the potential to hit the $500 million mark.
The company’s stock has a relatively expensive valuation, but it also has a ton of growth potential. Investors willing to take on heightened risk have to be pleased to see Wood investing alongside them.
Lastly, Shopify (NYSE: SHOP) has long been a favorite of Wood and ARK Invest. As a top five holding of ARK Innovation, ARK Next Generation Internet, and ARK Fintech Innovation, the e-commerce platform provider makes up $1.66 billion in assets across the ARK family of ETFs. The stock is up 33% year to date.
Shopify got a big boost from the need for businesses to build an online presence during the pandemic in 2020, but the company has defied skeptics by keeping up its momentum. Revenue more than doubled in the first quarter of 2021, approaching the $1 billion mark. The company’s Shopify Payments digital-processing tool saw gross merchandise volume soar 135%, and Shopify reported more than 1 billion shopping sessions daily for those using its platform.
Further innovation is coming, as well. Shopify is even getting into augmented reality, with the hope of bringing immersive shopping experiences to users. That attitude has made Shopify a leader in e-commerce, and Wood sees plenty of potential for further growth.
Cathie Wood might not be able to duplicate last year’s 100%+ returns for her ETFs in 2021. However, that doesn’t mean she’s lost her stock-picking edge. Winners like Shopify, 10x Genomics, and Sea Limited are still going strong, and they have attractive features that point toward future success, as well.
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Dan Caplinger owns shares of Shopify and Teladoc Health. The Motley Fool owns shares of and recommends 10x Genomics Inc, Sea Limited, Shopify, Teladoc Health, and Tesla. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.