Cathie Wood Goes Bargain Hunting in the Market Sell-Off: 2 Top Stocks She Just Bought
Top investor Cathie Wood didn’t let the global sell-off scare her away from the markets. As the S&P 500 and the Dow Jones Industrial Average headed for their biggest declines in almost two years, the chief executive officer of Ark Invest loaded up on technology stocks — some of the players that were the most heavily hit by this movement to sell.
Wood is known for betting on future winners early on, even scooping up shares of these players when everyone else is avoiding them. She favors innovation and companies that have a vision — and the expertise to reach their goals over the long term.
Speaking of long term, that’s another key part of Wood’s strategy. She doesn’t worry about declines in a particular stock today if the company’s prospects are bright. That’s because she plans on accompanying it through its growth story and benefiting over time.
As a result, Ark Invest completed more than 40 buys during the Aug. 5 sell-off and about 30 sells, according to the fund manager’s daily trade report. Some of these transactions are for the same stock, being bought or sold for more than one fund. This shows that, during the sell-off, Cathie Wood was more of a buyer than a seller. Here are two top stocks she just bought.
1. Amazon
Cathie Wood added shares of Amazon (NASDAQ: AMZN) to five of her funds, including the flagship Ark Innovation ETF. The stock dropped 13% over the past two sessions, leaving them trading for about 34 times forward earnings estimates, down from more than 40x just a few weeks ago.
Here’s why this is a fantastic deal, and one the innovation-loving Wood couldn’t pass up. Amazon already is a leader in two high-growth industries: e-commerce and cloud computing. This has generated billions of dollars in earnings, and the recent revamp of its cost structure should boost earning power in the quarters and years to come.
On top of this, the company has put a big focus on artificial intelligence (AI) in the early days of its high-growth story. It directly benefits from AI, with certain tools lowering its costs, for example. Even more importantly, Amazon Web Services (AWS) sells a wide range of AI products and services to its cloud customers, and this already has boosted growth.
“We’re optimistic that much of this world-changing AI will be built on top of AWS,” CEO Andy Jassy wrote in the recent letter to shareholders. AWS is supporting this idea, having already reached a $105 billion annual revenue run rate thanks to AI.
All of this makes Amazon a top bargain now with the potential over time as e-commerce, the cloud, and AI gather even more momentum.
2. Meta Platforms
Wood added Meta Platforms (NASDAQ: META) to two of her funds after the top tech stock, which already was reasonably priced, got even cheaper. Meta shares slipped about 2.6% during the Aug. 5 session, and today they trade for 22 times forward earnings estimates, down from more than 25 just a month ago.
Meta is another stock that’s on the path to winning in AI, and like Amazon, it has already built a successful and highly profitable business. You probably know Meta well if you use Facebook, Messenger, WhatsApp, or Instagram, the company’s social media apps. More than 3.2 billion people use at least one of these apps every day.
Advertisers know this, so they flock to Meta to reach us, their target audience. This is how it generates the lion’s share of its revenue, and the company has become so profitable that it even decided earlier this year to launch its first dividend.
Now, Meta’s focus on AI could lead us to spend even more time on the company’s platforms, and that could lead advertisers to spend even more money there. Management aims to develop AI across its apps to help users with everything from leisure activities to business, and the company is well on its way. It’s readying to train the fourth version of its large language model, Llama, which provides the knowledge that Meta’s current and future AI applications need to operate.
Meta is already delivering growth, but its investment in AI could generate a new era of growth down the road. And that’s why now could be the perfect moment to follow star investor Wood into this top tech stock.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Meta Platforms. The Motley Fool has a disclosure policy.
Cathie Wood Goes Bargain Hunting in the Market Sell-Off: 2 Top Stocks She Just Bought was originally published by The Motley Fool
