Cathie Wood, founder of asset management firm ARK Invest, has made some impressive calls and predictions in recent years when it comes to growth and tech stocks. While I don’t agree with all of her choices, there are definitely stocks in her exchange traded funds where I think she is ahead of the curve.
Let’s take a closer look at two stocks that Wood owns through ARK Invest that I have also invested in and that I like as we approach 2022.
1. Loan club
My favorite stock that Wood owns, which also happens to be the largest position in my portfolio, is Digital Market Bank. Loan Club (NYSE: LC). This fintech uses technology, data, and machine learning to streamline the online personal loan process. The stock has struggled in recent years, but management has worked hard to make the business more efficient in 2020. Then the company completed its acquisition of Radius Bank in early 2021, becoming one of the premier fintech companies. to acquire a banking charter.
The acquisition of Radius Bank proved to be transformational, giving LendingClub access to cheap deposits while reducing other expenses, such as the costs of origination of external loans. Following the acquisition, LendingClub also elected to hold 15-25% of the fixtures on its balance sheet rather than selling them to investors like the company previously did. Keeping these arrangements in-house is three times more profitable over the life of the loan. The transformation paid off faster than anyone could have imagined, allowing LendingClub to have profitable second and third quarters and completely catch the market by surprise.
Timber appeared to be ahead of the market, buying up shares in March before the market really noticed the model’s power. However, Wood sold around $ 33 million in shares in September after posting nice gains. Yet the ETF Innovation Fintech ARK (NYSEMKT: ARKF) held just under 2 million shares as of December 15, representing just over 2% of the ETF’s portfolio. I would definitely recommend owning LendingClub for a long time, not only because it is a fast growing fintech with a superior model, but also because it is undervalued when you compare it to several similar growing fintech companies. fast.
2. Silvergate Capital
Wood’s ARK Fintech Innovation ETF also owns nearly 440,000 shares of the crypto bank Silvergate Capital (NYSE: SI), which represented more than 2.5% of the ETF as of December 15. Silvergate was the first bank in the country – and still is one of the few – to create a real-time payment network where two parts of the network can transact with each other in real time that cleared instantly. The platform, called Silvergate Exchange Network (SEN), has grown rapidly to reach over 1,300 customers and has the first-mover advantage. SEN has enabled the bank to quickly bring in billions of interest-free deposits that are incredibly valuable, as well as many new customers to sell other banking products to and generate income from. commissions. Silvergate also issues lines of credit to customers which are guaranteed by Bitcoin.
Silvergate’s stock has increased significantly. Even after a recent pullback with other growth stocks, the stock is still up over 127% this year. Wood sold a significant portion of Silvergate in May, but I think it is still too early to sell Silvergate. The bank has another huge opportunity with stablecoins, which are digital assets tied to a currency or commodity. Earlier this year, Silvergate announced a partnership to be the exclusive issuer of Meta-platform Diem stablecoin backed by the US dollar. I hope that the bank will soon be able to launch a pilot project for this partnership. Additionally, as rates rise, Silvergate can benefit tremendously simply by deploying a large portion of its zero-cost deposits into higher yielding securities.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.