Cathie Wood is trying to get back on track since blowout returns in 2020 that made her one of the most widely followed growth stock investors in the country. It hasn't been easy for the co-founder, CEO, and investor at Ark Invest. Her exchange-traded funds have trailed the market badly in two of the past three years, and she's falling well short in 2024.
Her most popular fund is trading 16% lower year to date, but she's not going down without a fight. She kicked off the new trading week with several portfolio moves on Monday. She added to existing positions in Amazon.com(NASDAQ: AMZN), Palantir(NYSE: PLTR), and PagerDuty (NYSE: PD) this week. Let's take a closer look.
1. Amazon
The leading online retailer isn't the torrid growth story it was through most of its first two dozen years of public trading. It has posted positive net sales every year since going public in 1997, but the 9% growth it posted in 2022 and the 12% top-line gain it mustered last year are the weakest two years of its 27 years on the market.
Amazon CEO Andy Jassy is trying to make the most of this phase of the e-commerce company's life cycle. He's improving Amazon's efficiency by cutting costs and trying to find ways to use AI to drive engagement. It's working. Net sales rose a modest 13% in the first quarter of this year, but the bottom line more than tripled.
Image source: Getty Images.
Amazon is still a beast even in this low-growth environment. It drummed up $48.8 billion in free cash flow over the past four quarters. However, it's not ready to return some of that money to its shareholders in the form of distributions. It's the country largest company by market cap that doesn't currently have a dividend policy in place.
But investors will be fine. They're here for capital appreciation, and the shares are up 47% over the past year.
There are challenges for Amazon to stand out in a more competitive marketplace than in the past. Brick-and-mortar chains are getting better about nailing digital sales. There has also been a surge in popularity of Chinese e-commerce platforms offering ridiculously low prices. Net product sales rose just 7% in the first quarter. It was strength in its Amazon Web Services (AWS) cloud-hosting juggernaut and other services lifting results to double-digit growth.
Amazon is one of Ark Invest's smallest holdings, and that's a shame. The stock is beating the market this year, and it could've helped move the needle if Wood had a larger stake in the popular e-tailer.
2. Palantir
Not all of Ark Invest's largest holdings are in the red. Palantir, one of Wood's 10 largest combined holdings, is beating the market this year. The provider of software tools for the intelligence community has also nearly quadrupled since the start of last year.
The market is still catching up to Palantir's potential. The stock soared 6% on Monday after Argus analyst Joseph Bonner initiated coverage with a buy rating. He thinks Palantir's push into the commercial sector beyond its roots serving the public sector is expanding the company's upside. Commercial revenue rose 40% in its latest quarter, roughly double the 21% increase in total revenue for the period.
Bonner thinks Palantir's earnings power and cash flow will appreciate substantially this year, but it doesn't make the stock cheap. Palantir's is trading for 76 times the analyst's profit target for this year and a still rich multiple of 63 if we look out to next year.
3. PagerDuty
Finally we get to a name that is down this year. The provider of cloud-based enterprise analytics and uptime monitoring is trading 8% lower in 2024.
Revenue growth has decelerated for seven consecutive quarters, going from 34% to 8% in that time. But sentiment is starting to turn positive. The stock has risen nearly 20% since bottoming out last month, and it even collected an analyst upgrade last week. Yes, PagerDuty is still trading lower this year, but it was far worse a month ago. And analysts do see revenue growth accelerating for the balance of this year.
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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. Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, PagerDuty, and Palantir Technologies. The Motley Fool has a disclosure policy.
