Key Points
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Cathie Wood bought shares in Nvidia, SoFi, and Scribe Therapeutics on Monday.
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Nvidia stock took a hit on Monday after a spy scandal broke, but Wood is always spying for a buying opportunity.
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All three stocks have been trading lower over the past year.
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With stocks on the rise, Cathie Wood didn’t have to do a lot of buying. As the founder and CEO of Ark Invest, she has a family of ETFs that is already deeply invested in many of the market’s high-beta growth stocks.
This doesn’t mean she didn’t find buying opportunities in an otherwise buoyant day of trading. Ark added to existing positions in Nvidia (NASDAQ:NVDA), SoFi Technologies (NASDAQ:SOFI), and Scribe Therapeutics (NASDAQ:SCTX) on Monday. That was all the buying she did to kick off this market week. Let’s take a closer look at all three of the stocks that Wood felt were worth buying during Monday’s ascent.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
Cathie Wood. Image source: Getty Images.
Nvidia
The world’s second most valuable company by market cap made headlines for all the wrong reasons over the weekend. Stories broke claiming that Nvidia CEO Jensen Huang had an inappropriate relationship with an alleged Chinese spy.
This is problematic for many different reasons, as the board investigates the matter. There are plenty of questions left to answer. Will Huang step down, forcing the board into an earlier succession strategy for one of the market’s most prominent company leaders? Will Nvidia’s chummy relationship with the White House come to an end, potentially slowing the government’s cheerleading for AI adoption? If a Chinese spy gathered information about Nvidia and its business, would that make it more challenging to retain its customers?
Nvidia stock declined only 4% on Monday, a surprisingly mild reaction to some heavy news. The shares have fallen 27% since hitting an all-time high just last month, so there’s that working in its favor. It also helps that its forward valuation is the lowest it’s been in a long time. You can now buy Nvidia for a mere 11.2 times next fiscal year’s profit target. Nvidia’s stock has declined 5% over the past year. This is a stark contrast to a business with accelerating revenue and earnings growth.
The ceiling and floor remain high with Nvidia. On paper, it’s too cheap for a company expecting revenue and earnings growth of roughly 90% when it reports its fiscal third-quarter results next week. In reality, Nvidia’s wide margins don’t seem sustainable in the long run. Any obstacle in the AI revolution — and Huang will have some questions to answer next week — can make Nvidia’s forward financials look mortal.
SoFi Technologies
The good news for SoFi investors is that the digital branchless bank operator rose on Monday. The bad news — and it more than offsets the good news — is that SoFi stock has plummeted 41% over the past year.
This should be SoFi’s time to shine. Member growth has risen 35% to 17.1 million over the past year. Revenue rose 44% in its latest quarter. It’s obviously encouraging to see the top line outpacing its user growth, a testament to SoFi’s monetization efforts. That’s not the end of the bullish case for SoFi. The bottom line is growing even faster, and it just raised its guidance when it posted fresh financials two weeks ago.
SoFi is trading at a reasonable year-ahead earnings multiple in the high teens. Rising rates may slow its personal, student, and home loan business. The bullish counterargument is that rising rates drive income investors to demand higher yields than conventional banks can offer. SoFi is currently offering up to 4.4% interest on savings accounts. It should continue to grow its audience at the expense of older institutions, but risks remain.
Scribe Therapeutics
The biggest winner among the three stocks Woods was buying on Monday was Scribe Therapeutics. It rose 6%, but it’s down 22% over the past year. Scribe is one of the many gene-editing stocks in Ark’s portfolio. Its proprietary ELXR platform uses epigenetic silencing to suppress disease-causing genes without altering the actual DNA.
This is a long game, but its balance sheet is built to last. Scribe recently said it has enough cash to fund operations through early 2029. Time is on its side, as investors see if Scribe’s science is also on its side.
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Rick Munarriz has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
