Cathie Wood has been busy in 2024. The list of daily transactions posted by the co-founder, CEO, and ace stock picker for the Ark Invest family of exchange-traded funds has been longer than usual. She added to nine of her existing positions on Wednesday.
What’s she buying now? Some of the more interesting names on her shopping list this time include Toast (TOST -3.27%), Unity Software (U -6.05%), and Nu (NU -1.76%). Let’s take a closer look at some of her Wednesday additions.
Toast
It’s hard to avoid a Toast point-of-sale reader if you like to dine out at restaurants or even drive over for some takeout. There are 99,000 eatery locations currently on the platform, a 34% jump over the past year alone.
Being greeted with a handheld device at the start or end of a meal may seem like a new tech contrast to one of the oldest industries — but it works. Diners can settle up quickly. Your waiter or waitress can close you out without having to go back and forth with your credit card. The restaurateur benefits from being able to turn tables over faster, raising the ceiling of potential daily traffic.
The stock did take a hit in November when it posted problematic guidance. Toast had flat growth in gross payment volume per location in the third quarter and warned that the metric was trending slightly negative in the current quarter.
Thankfully for investors, Toast can make it up in volume by growing its footprint. It also helps that Toast offers a growing suite of tools so it has more revenue channels than just settling up a tab at the table.
Image source: Getty Images.
Wood added to her position in Toast on Wednesday — and she’s not the only one warming up to the stock. Goldman Sachs upgraded the shares earlier this week, taking its rating from neutral to buy.
The firm gets that there’s a bearish narrative centering around payment volume trends but believes the market isn’t baking in the improving bottom line at Toast. The analyst argues that Toast could reach reported profitability as early as next year if it can keep its fixed costs in check.
With short interest approaching October’s all-time high, a squeeze is possible for the stock, which has been flat in an otherwise rising market over the past year. Investing appetites for Toast may seem weak, but Wood is still hungry for the next course.
Unity
Unity kicked off this week by announcing it would be laying off 1,800 employees, or 25% of its workforce. The market sometimes applauds pink slips as a show of a commitment to operational efficiency, but it didn’t play out that way for the game engine developer.
The Monday afternoon announcement resulted in an 8% drop in the shares on Tuesday. Wood bellied up to the bar to snap up the discarded stock on Wednesday.
It’s not the first time that a seemingly positive move has tripped up Unity. It announced a new fee for developers over the summer, typically viewed as a move of strength. (You don’t risk a price hike unless you think you have the elasticity to pull it off.)
Unity failed. An outcry from developers ended with the company reversing the decision just two weeks later.
The quick reversal ultimately led to Unity turning to a new CEO. Unity stock is down a blistering 82% since peaking in late 2021 but up a respectable 30% since the beginning of last year. Revenue growth is expected to decelerate sharply this year, but with Unity’s bottom line improving as it continues to deliver double-digit top-line gains, Wood is making a bigger bet on the stock.
Nu
There aren’t a lot of times when Wood and Warren Buffett will see eye-to-eye on an investment, but Nubank parent Nu Holdings is that rare common ground. Wood has been a buyer of the Brazilian neobank operator for more than two years; Berkshire Hathaway bought in before Nu had even gone public. It’s one of the nearly 50 holdings in Berkshire Hathaway’s portfolio of publicly traded investments.
Nubank launched just a decade ago but recently crossed an important milestone when it hit 84 million accounts in its home country. More than half of Brazil’s adult population now has an account with the fast-growing fintech company. Nu is expanding into other Latin American countries, but it’s not weighing on its profitability.
The company has reported positive net income for five straight quarters. A stock that just grew its revenue by 53% in its latest report and is trading for 15 times what analysts see it earning in 2025 makes it a growth and value stock. No wonder Buffett and Wood are on the same page.
Rick Munarriz has positions in Nu and Toast. The Motley Fool has positions in and recommends Berkshire Hathaway, Goldman Sachs Group, Toast, and Unity Software. The Motley Fool recommends Nu. The Motley Fool has a disclosure policy.
