Cathie Wood’s ARK line of funds is in a major rut after the huge selloff of 2022. Unlike the broader S&P 500 or Nasdaq 100, however, the flagship ARK Innovation Fund (or ARKK ETF) is still off a country mile (around 77%) away from its all-time high. It seems doubtful that new highs will be met anytime soon, especially as the headwind of higher rates continues to weigh heavily on the disruptive growth companies.
Indeed, rates will not keep climbing for life. In due time, it will eventually stagnate and perhaps move lower. In any case, a few rate hikes due to a slowing economy could be enough of a tailwind to give the disruptive tech companies, like the ones in Cathie Wood’s ARK, a breath of new life.
For now, however, investors looking to scavenge the wreckage in disruptive tech should ensure they’ve got the patience and temperament. Further, one must also ensure they’re paying two or three quarters to get a full dollar, so to speak.
Indeed, after a sluggish year for the most disruptive of non-profitable tech firms, I see deep-value opportunities, especially in the names within the ARK funds. In this piece, we’ll check out three names that I think are worth a second look going into year’s end, well before the Fed or Bank of Canada have had a chance to even think about hitting that “rate cut” button.
Consider Canadian e-commerce darling Shopify (TSX: SHOP), video-game platform developer Roblox (NASDAQ:RBLX), and video-conferencing firm Zoom Video Communications (NASDAQ: ZM).
Shopify
Shopify is the e-commerce firm that Canadians all know and love. Cathie Wood seems to be a big fan of the firm, even as it’s hit with hard times and high rates. Moving ahead, I’d look for Shopify stock to keep doing what it does best: innovate.
As long as the firm can stay on the cutting edge of new tech, I think it’ll keep growing by leaps and bounds. For now, the stock looks like a diamond in the rough. At $69 and change per share, Shopify seems like an intriguing dip-buy amid the September-October stock sag.
Roblox
Roblox is another pandemic lockdown winner that’s in a bit of a rut right now. After losing around 76% of its value, Roblox stock is close to its lows. The $18.85 billion company may have been a tad early to the rise of the metaverse. And though its growth and profitability numbers aren’t enviable, I think it’s far better to be early than late. Indeed, the main question lies in when the metaverse will really start to take off. When it does, Roblox’s growth could be in a spot to surge.
For now, the business model seems sound. The firm has plenty of loyal users, and it continues to invest heavily in improving its platform. Sprinkle a bit of artificial intelligence (AI) on top, and I think Roblox is a deep-value play in Cathie Wood’s funds.
Zoom Video Communications
Zoom Video was an absolute darling during the pandemic lockdown days. Indeed, when workforces suddenly went remote around the world, it was Zoom that was in the right place at the right time. Nowadays, things have really turned, with various workforces heading back to work while new competitors enter the video-conferencing space.
Indeed, video calls (or Zooming) really do seem quite commoditized at this juncture. Although the firm has taken steps to add to its arsenal of enterprise productivity products, it’s clear that new highs are well out of sight for the once-cherished tech firm.
After shedding around 89% of its value from peak to trough, I see value if you believe in Zoom’s ability to embrace the rise of AI. I think it can.
