Cathie Wood is busy trying to get back on track. Most of the exchange-traded funds held by Ark Invest — where she is the co-founder, CEO, and investment manager — are underwater in the otherwise buoyant 2024. It’s not stopping her from taking big bets on disruptive companies. If she’s right, being out of favor now is a temporary condition.
Wood publishes all of Ark’s daily transactions, so we know what she is buying and selling. I like to focus on what she’s picking up. Three of her more interesting purchases on Monday are DraftKings (DKNG 0.57%), Shopify (SHOP -1.29%), and Tempus AI (TEM 7.40%). She was adding to existing positions on all three stocks.
Shares of DraftKings more than tripled last year, but it’s been marching in place as growth slows and the online sportsbook market grows more competitive. After four straight years of top-line gains of 63% or better, revenue decelerated to just a 26% increase in its latest quarter.
Sports fans willing to put some money on the line know about DraftKings. It has 8.4 million unique users over the past 12 months, a 35% increase over the past year. The 3.1 million monthly unique payers it serviced in the second quarter, which it reported earlier this month, was a whopping 50% higher than its base of live sports gamblers a year earlier. Unfortunately, revenue rose a slightly weaker-than-expected 26%, partly because average revenue per monthly unique payer clocked in 15% lower than it did during the prior year’s second quarter.
It’s a different story on the bottom line, as DraftKings surprised the market by turning a profit. After back-to-back misses on the bottom line, it’s refreshing to get back to outsmarting analysts in terms of earnings projections. Analysts see DraftKings posting its first full-year profit in 2025.
Despite its well-known brand and a welcome slide in customer acquisition costs, there’s no denying that this is a cutthroat market. DraftKings announced this summer that it would be rolling out a gaming tax surcharge in four high-tax states with multiple mobile sports betting operators. When its largest rival announced it would not be following suit with a player surcharge two weeks ago, DraftKings had no choice but to reverse course on the revenue-boosting move.
The U.S. online betting market is expected to continue growing, and DraftKings should continue to be a leader. With the shares essentially where they were at the start of the year, Wood doesn’t mind throwing more chips in the direction of the DraftKings. And she’s not alone. DraftKings is willing to bet on itself after announcing a $1 billion buyback earlier this month.
Image source: Getty Images.
2. Shopify
DraftKings is currently the second-largest holding across all of Wood’s funds at Ark. The pole position belongs to Shopify, and she added to the e-commerce platform on Monday.
Shopify has nearly clawed its way back since trading as much as 30% lower year to date after posting disappointing financial results three months ago. Investors were a lot happier with its second-quarter numbers earlier this month.
Revenue rose 21% to $2 billion, a 25% increase if you adjust for the logistics business it has unloaded over the past year. A 19% increase in its flagship merchant solutions segment was boosted by a 27% surge in its subscription solutions business, which now accounts for more than a quarter of the revenue mix. Margins widened, and Shopify’s free cash flow more than tripled. Shopify scored a beat on both ends of the income statement, rewarding Wood for making it her largest position.
3. Tempus AI
The only stock she purchased in more than one of her funds on Monday was Tempus. If it’s a new name for you, it’s because it went public at $37 just two months ago. After a better-than-expected quarterly report and a strategic investment in a promising biotech, the stock is trading nicely higher this month.
Living up to the AI in its name, Tempus is working on practical applications of artificial intelligence (AI) in healthcare. Nearly two-thirds of the country’s academic medical centers and half of oncologists are now connected to the platform that seeks to deliver intelligent diagnostics through generative AI.
Tempus posted its first financial update as a public company two weeks ago, and it was encouraging. Revenue rose 25% to $166 million, well ahead of the early analyst forecasts. Its adjusted loss was also half the red ink that the same Wall Street pros were targeting. The rising stock is a position that is working for Wood this summer, but she took advantage of the shares sliding 7% on Monday to add to her stake.