Last Updated on July 26, 2023 by Mathew Diekhake
Cathie Wood’s main Ark fund fell faster during the 2022 crash than any crash we’ve seen since the 1800s — it hurt a lot of us everyday retail investors immensely. Subsequently, many of us were bitter with Cathie for not warning us and instead suggesting she was undervalued when her fund dipped below $100. But I like the work she does in general: her thesis for investing in disruptive innovation is very innovative in itself. And as an investor, I appreciate all the work her firm puts in and openly shares with us retail investors.
Thanks to her research, I can see software stocks such as Zoom, Teladoc, and Twilio are screaming buys. All three are near their lows for this bear market and Zoom is rather miraculously at the same price it was when it first entered the New York Stock Exchange a full year before the pandemic hit. As I wrote on Mastodon, I as a tech expert, hadn’t heard of Zoom Video Communications until the pandemic started when it catapulted quickly to become one of the top tech companies in the world. And not everyone realizes, but technically the pandemic is still here. One thing most do realize is that the work-from-home narrative is also still here. We have both the pandemic and work-from-home and Zoom is priced exactly how it was a full 12 months before the pandemic started — how is that possible?
Cathie Wood says that Twilio is an AI stock and that software stocks are going to be the next boom that surrounds the AI narrative. In addition to Zoom and Twilio, Teladoc is also an AI stock. Teladoc is at its bear market low and yet the innovation in that company is what many companies went through when the internet began. One of the only things we are yet to have online is doctors — but it’s here. We have Family Practitioners online now thanks to sites like Teladoc.
It’s not easy to time the market, but thankfully if you patiently waited, now is the time to strike on these software stocks of the future. Many investors are fearful — including Cathie Wood herself — but as she stated recently, even if we see deflation and a hard landing, most of that is already priced in, making these three software stocks a good risk-reward bet.
Zoom:
Zoom has a forward P/E of 15.94 and a price-to-sales of 4.62. The short float is at 8.38%. It is a profitable company with 5.50 million in positive income.
Twilio:
Twilio has a price-to-sales of 2.86 and a short float of 3.86%. Twilio isn’t profitable (-1376.70M) which is one of the reasons it’s priced so low this year.
Teladoc:
Teladoc has a price-to-sales of 1.53 and a short float of 15.60%. Teladoc isn’t profitable (-7054.20M); however, nearly all of that debt is rapidly declining by the time we get to the beginning of 2024.
Note: Of all Ark Invest’s software stocks, it is UIPath that I like the most — I have called it the next Google, a tech company that dominates for a long time as an obvious good investment. And I plan on buying into it many times over the next 20 years, but today isn’t one of those times. I’m waiting for a slightly better price. The other three are buys right now.
July 26, 2023 @ 04:46
Also, I was listening to an asset manager on CNBC yesterday say that he is nearly fully invested in the stock market today because it doesn’t pay for him not to be. He doesn’t want to take money out of his stocks and then have to pay taxes on them, so he keeps his money in the market. Who was this investor? None other than Steve Eisman of “The Big Short.” As a side note, the host asked if he was tired of that introduction and he actually said yes, so we may not know him as the guy from The Big Short for much longer, though I think he should keep that name. It was a great movie and that’s your one claim to fame that you should hold onto for centuries — I would.
July 26, 2023 @ 04:51
Part of what annoyed me so much during the 2021-2022 bear market in Ark was how one of Cathie’s leading employees (Brett Winton) laughed at people losing their money and mocked them as people who have to go back to work now. He may not have realized that his boss had told the TV screen that she was undervalued and everything is going to be fine. That combination had me mad for a long time with Ark Invest. But it would be even sadder if I never made any of the money back that I lost in Ark, so I have rationally tried to assess where we are today. The main indices have rocketed up and they were extremely hard to predict. Thankfully it looks like the mid-cap/large-cap tech is easier to predict. So we should be able to make a good chunk of our money back now. Let’s see.
I didn’t like Brett Winton after that. But he may not have known Cathie was saying to her investors that she was undervalued. In hindsight, Brett may have been making a comment about how stocks don’t always go up rather than mocking investors who lost money in Ark.