Cathie Wood Goes Bargain Hunting: 3 Huge Stocks She Bought Last Week

Key Points

• Ark Invest added to existing positions in Tesla, SpaceX, and Meta last week.

• Tesla stock tumbled 18% last week, with most of the decline coming on Thursday after the company posted a sharp drop in profitability.

• SpaceX and Meta fell 7% to 8% for the week, despite very different valuation profiles.

• These 10 stocks could mint the next wave of millionaires ›

Cathie Wood doesn’t mind volatility. The founder, CEO, and chief investment officer of Ark Invest went shopping as many of her existing positions were sinking.

Ark bought more shares of Tesla (NASDAQ: TSLA), Space Exploration Technologies (NASDAQ: SPCX), and Meta Platforms (NASDAQ: META) last week. The stocks would go on to decline between 7% and 18% for the week. Let’s take a closer look at some of Wood’s most prolific trades from the past week, each one among the 10 largest companies by market cap.

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Image source: Getty Images.

1. Tesla

It’s been a bumpy road for the world’s largest automaker by market cap. Tesla stock has fallen 16% in the final two trading days of last week, after the company posted disappointing financial results. The pullback isn’t a fluke. Tesla has now fallen a humbling 37% since peaking seven months ago. Tesla entered this week just 5% away from taking out its 52-week low.

The second-quarter results were problematic. Total revenue rose 26% to $28.2 billion, but that was largely expected. Tesla had announced a 25% jump in vehicles delivered during the last three months three weeks ago. It’s commendable that Tesla is growing its flagship business, following back-to-back quarters of sequential declines after the end of federal tax credits for electric vehicles in the third quarter of last year. The report gets worse once you get past the top-line results.

Investors figured there would be challenges on the way down to the bottom line. There was heavy promotional activity to clear out its inventory stockpile, particularly in Europe, which accounted for the lion’s share of the quarter’s vehicle sales growth. There are investments to be made to build up the robotics business that CEO Elon Musk continues to play up as Tesla’s biggest product ever. The market wasn’t ready for how bad it would be.

Profitability was cut by more than half in the second quarter, performing considerably worse than analysts were targeting. Free cash flow turned negative. With its triple-digit earnings multiple standing out among the “Magnificent Seven” stocks, its very membership in that group is now open for debate. The original Magnificent Seven constituents were the seven most valuable U.S.-listed stocks by market cap. Tesla has since been passed up by three other names to command the tenth-largest market cap. The three companies that have overtaken Tesla’s market cap include Musk’s own SpaceX — so that’s the consolation prize — but SpaceX itself has been having issues lately. Ark Invest was a buyer of Tesla stock on Thursday, just as Wood added to her largest position three weeks earlier when it slipped on the delivery report.

2. SpaceX

Speaking of SpaceX stock, interest in the space exploration and connectivity giant that Musk took public last month has been scrubbed like some of the industry’s recent rocket launch attempts. The blazing debutante that traded as high as $225 on its third day of trading after going public at $135 is now a broken IPO. It closed just above $115 on Friday.

There is plenty of buzz about the game-changing Starship rocket, particularly its reusability, which should drive launch costs down substantially. This will also help its Starlink business, which provides satellite-based connectivity. Analysts see that business growing from a projected $15 billion to $20 billion this year to as high as $100 billion in four years. Even the more bearish analyst modeling $48 billion still represents strong growth for Starlink. Starship had another successful launch on Friday night, but now it’s a waiting game until the stock itself takes off again.

Wood got into SpaceX ahead of its IPO. She’s been a buyer again with the shares now trading below last month’s debut price. Ark Invest bought shares on Monday and Wednesday of last week.

3. Meta Platforms

Finally, we have Meta. Unlike Tesla and SpaceX, Facebook’s parent company is more reasonably priced by traditional valuation metrics. The company that also owns Instagram and WhatsApp is now trading for just 18 times this year’s projected earnings and 17 times next year’s bottom-line target.

It only helps the valuation argument that the shares have fallen 17% over the past year while its profitability keeps growing. This doesn’t mean that Meta is a bargain. With its capital expenditures expected to roughly double this year in the AI arms race, and its own Reality Labs metaverse initiatives losing money, a lot is riding on its three high-margin platforms to continue delivering results. Wood’s Ark Invest was a buyer of Meta on Monday.

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Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Tesla. The Motley Fool has a disclosure policy.