As investors look forward to rate cuts in the second half and going into 2025, perhaps those riskier high-multiple technology companies, such as Cathie Wood stocks, that don’t stand to make huge profits until way into the future (if at all) will have their moment in the sun again.
Undoubtedly, Cathie Wood and the Ark Innovation Fund (NYSEARCA:ARKK) have struggled to keep pace with the Nasdaq 100 in recent years. As rates and inflation fall (Cathie Wood sees deflation ahead), the climate certainly seems a heck of a lot more hospitable to speculative innovators that have been long forgotten in this large-cap-favored era of the Magnificent Seven.
Only time will tell if lower rates cause the Ark funds to get going again. At this juncture, I think it’s unrealistic to expect 2020 lows in interest rates to return. That’s unless deflation is in the cards for the economy, as Wood believes.
Here are three of my favorite Cathie Wood stocks for investors looking to pick and choose their own disruptive innovators to take advantage of lower rates.
Tesla (TSLA)
Cathie Wood may not be as bullish on the Magnificent Seven heavyweights as most other big-name money managers out there. However, she does have a huge position in Tesla (NASDAQ:TSLA) stock for the flagship ARKK ETF.
Through the past two years of excess volatility, Wood has stood by Elon Musk and the top EV firm, at least for the most part. Of course, Wood sold some Tesla stock earlier this year, but the ETF remains very much overweight in the name.
As interest rates fall, perhaps Tesla won’t be as sensitive to inevitable drops in vehicle deliveries. For the most part, deliveries are the only thing that matters for investors who follow Tesla quarter to quarter.
That said, the longer-term growth story encompasses growth from AI, robotaxis, humanoid robots (Optimus), and energy storage. These projects do not come cheap, so any drop in borrowing costs should be viewed as a major plus.
At 63.7 times trailing price-to-earnings (P/E), TSLA stock looks fully valued after barely falling from its sharp June-July spike.
Roblox (RBLX)
Roblox (NASDAQ:RBLX) stock is another lagging holding within the ARKK ETF. Shares of the interactive gaming platform firm are down around 7% year to date, all while the S&P 500 and Nasdaq 100 surged by double digits.
With a growing number of brands advertising on Roblox, perhaps investors looking to play an early-form metaverse should punch their ticket into RBLX stock while it’s still down significantly from its all-time highs. Arguably, firms seeking to better resonate with younger consumers should be looking to explore new frontiers, like in Roblox, to market their products.
Recently, e.l.f. Beauty (NASDAQ:ELF) doubled down on its collaboration with Roblox to allow users to buy cosmetics via Roblox. Indeed, it seems strange to be buying makeup through a video game. Either way, I think the move will be a hit among young players. Perhaps transacting on Roblox could be a hint of what the future of the metaverse holds for marketers.
Uipath (PATH)
Finally, we have Uipath (NASDAQ:PATH), one of the lesser-known Ark holdings, but one that deserves the attention of growth investors seeking AI-driven growth at a reasonable price. Like many other Cathie Wood stocks, PATH shares have been on an abysmal run in the past few years.
PATH stock is still down over 84% from its peak, just shy of $80 per share, which hit all the way back in May 2021.
Given how things have been going, it looks like shares of the process automation software developer probably won’t be making new highs anytime this decade. The company recently announced it’s laying off 10% of staff (around 420 positions).
In any case, the $7.2 billion mid-cap Cathie Woodstock looks incredibly cheap at 5.3 times price-to-sales (P/S). With co-founder Daniel Dines re-appointed as CEO, it will be interesting to see how the firm can return on the right path.
On the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.