We recently compiled a list of the ARK Invest Stock Portfolio: Top 10 Stock Picks for 2024. In this article, we are going to take a look at where Robinhood Markets, Inc. (NASDAQ:HOOD) stands against ARK Invest’s top stock picks for 2024.
ARK Investment Management LLC, more commonly known as ARK Invest, is an American investment management firm headquartered in St. Petersburg, Florida, that oversees several actively managed ETFs. It was registered in 2014 by Catherine Wood, who is known for making big bets on disruptive technology like self-driving carse and genomics. The investment fund has around $6.7 billion in assets under management.
READ ALSO: Cathie Wood’s 11 Favorite AI Stocks and Jim Cramer November Portfolio: Top 10 Stocks.
Wood’s flagship fund has faced pressures for the third straight year, with outflows at nearly $1.8 billion during the first six months of 2024, which was close to triple the outflows seen in 2023. Its closing price of $57.85 on November 11 was down 60% from the highs of early 2021. In a letter posted to investors in July, she acknowledged that the fund’s performance was challenged by certain stock picks and the overall macroeconomic environment, but added that ‘our conviction in and commitment to investing in disruptive innovation have not wavered’.
The ARK Invest CEO argued that the fund’s holdings were set to benefit once the Fed rate cuts begin and that she anticipates another period of strong returns, reminiscent of the gains witnessed during the initial days of the pandemic. In August this year, in the hope of buying the dip, Wood piled into several tech stocks whose shares had tumbled in the months prior. Since the announcement of interest rate cuts in September, ARK’s flagship ETF has grown 25%, with a major upward spike in the week running up to and following the presidential elections, which Donald Trump won on November 5.
In a post-election message released to investors, Wood likened the country’s current economic situation to the Reagan era in the early 1980s, when the interest rate and tax cuts resulted in robust economic growth, eventually helping the United States grow out of deficit and into a surplus in the Clinton era.
Cathie Wood predicts a bright future and has stated that Trump’s policies will ‘turbocharge’ the American economy more powerfully than the Reagan Revolution did. She expects the newly elected president to slash regulations and cut tax rates, as he did during his first term.
Trump during his election campaign vowed to reduce the corporate tax rate to 15%, after having already cut the rate from 35% to 21% in his presidency between 2017 and 2021. Having said that, Wood believes that businesses will put investments on hold until the promised cuts are delivered, which means the positive anticipated impact on the economy will be delayed.
Methodology
We scanned the ARK Investment Management portfolio, as of September 30, 2024, and picked the top 10 stocks according to their stake value. The figures were sourced from the Insider Monkey Database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Robinhood Markets, Inc. (NASDAQ:HOOD)
Stake Value as of Q3 2024: $420,959,150
Robinhood Markets, Inc. (NASDAQ:HOOD) is an American financial services company that provides an electronic trading platform to facilitate the trading of stocks, ETFs, cryptocurrency, and other equities and securities.
In October this year, Cathie Wood’s ARK Invest divested around $36 million worth of Robinhood Markets, Inc. (NASDAQ:HOOD) shares from its three funds. The decision coincided with the surge in the stock’s share price, because of which ARK had to sell a portion of its stake under Rule 12d3-1, which prohibits funds from acquiring more than 5% of an issuer’s total assets.
Robinhood’s share price has gained 140% year-to-date as of November 8, driven by a robust financial performance this year, involving not only an increase in revenue but also significant growth in assets under custody. Q3 2024 was another impressive quarter for the company, with net deposits posted at $10 billion or more for the third successive quarter as Robinhood continues to increase wallet share. Net deposits are now valued at $34 billion for the year, which is well above the record of $31 billion set in 2020.
Customer assets under custody have grown to a record $152 billion. Option contracts were up 47% year-over-year in Q3, bringing the year-to-date total to $1.2 billion, surpassing the high set in 2021. Total net revenue was posted at $637 million, which is the second-highest quarterly revenue in the company’s history and up 36% from last year. The year-to-date revenue is close to $2 billion, which has broken last year’s record of $1.9 billion.
Cryptocurrency revenue has surged and grown 165% year-over-year to $61 million. In June, Robinhood Markets, Inc. (NASDAQ:HOOD) agreed to acquire the global crypto exchange, Bitstamp, which has offices in the UK, US, Luxembourg, Slovenia, and Singapore. The acquisition will likely add further revenue streams for Robinhood in stablecoins, staking, and derivatives.
Wall Street analysts have a consensus BUY rating on the stock. It is among the top picks from the ARK Invest stock portfolio, representing 3.84% of its portfolio, with investments valued at over $420 million.
Overall HOOD ranks 6th among the ARK Invest’s top Stock Picks for 2024. While we acknowledge the potential of HOOD as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HOOD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.