Cathie Wood’s Top Growth Stocks to Watch

Cathie Wood, the founder of Ark Invest, remains a significant figure in the world of growth investing despite her flagship Ark Innovation ETF (NYSEMKT: ARKK) declining nearly 6% over the past five years, even as the S&P 500 surged 85%.

Wood maintains that her strategy, focused on long-term secular trends, will ultimately benefit patient investors. Here’s a look at three of her recent investments: Roku, Roblox, and PagerDuty.

Roku

Cathie Wood recently acquired 245,896 shares of Roku, worth around $15 million, for the Ark Innovation ETF. This brings the ETF’s total investment in Roku to $562 million, making it the fund’s second-largest holding after Tesla. However, Roku’s stock has dropped 34% over the past five years as its growth has slowed and competition has intensified in the streaming market. Despite this, Roku is gaining more active accounts and streaming hours, which could boost its higher-margin platform business. Additionally, Roku’s adjusted EBITDA turned positive in 2023, with projections suggesting significant growth in the coming years.

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Roblox

Wood also purchased 1.53 million shares of Roblox, now valued at $57 million, making it the fourth-largest holding in the Ark Innovation ETF. Roblox’s platform allows users to create and monetize their own video games, which gained popularity during the pandemic. However, its growth slowed as children returned to school, causing its stock to decline over 40% since its direct listing debut. Despite this, Roblox’s bookings grew by 23% in 2023, and analysts expect continued growth in the coming years, making its stock appear reasonably valued.

PagerDuty

Lastly, Wood added 815,239 shares of PagerDuty to the Ark Innovation ETF, now worth nearly $18 million. PagerDuty’s platform helps IT professionals manage infrastructure issues efficiently. The company’s revenue grew at a CAGR of 30% from fiscal 2020 to fiscal 2023 but slowed in fiscal 2024 due to macroeconomic headwinds and competition from platforms like Cisco’s Splunk and ServiceNow. Despite the challenges, analysts project continued growth in PagerDuty’s revenue and adjusted EBITDA, making its stock appear undervalued at 15 times next year’s adjusted EBITDA. However, some might argue that investing in larger, faster-growing companies like ServiceNow could be a safer bet.

Alexander Stefanov