Cathie Wood’s Next Big Bet: 3 Disruptive Innovations to Watch

Cathie Wood is a well-known though polarizing investor. As the founder and CEO of the investment management firm ARK Invest, she has an investment philosophy that focuses on innovative technologies and growth stocks. It’s a thesis that has led to boom and bust cycles for the exchange-traded funds (ETFs) her company manages.

It is also an approach that has won her legions of fans among retail investors and her fair share of critics on Wall Street. During the pandemic, Ark Invest’s flagship fund, the ARK Innovation ETF (NYSEARCA:ARKK), rose more than 300%. However, since peaking in February 2021, shares have lost more than three-quarters of their value. That said, ARKK is up around 20% year to date.

This kind of volatility is not surprising given that many of the ETFs holdings are startups or disruptive companies whose share prices fluctuate wildly. While companies like this carry a lot of risk, they also have immense potential. For her part, Wood remains undeterred and has continued buying shares of disruptors on dips.

Here is a look at three of Cathie Wood’s top picks that investors will want to keep an eye on.

Unity Software (U) — The Metaverse

Unity Software (NYSE:U) bills itself as the “world’s leading platform for creating and operating interactive, real-time 3D (RT3D) content.” As such, it is poised to benefit from the growth in the metaverse.

Wood began investing in U stock in the third quarter of 2020. Today, ARKK holds nearly 8.8 million shares worth more than $250 million, making it the fund’s 13th largest holding.

Shares are down 63% over the past year and 87% since topping out at $210 in November 2021. But Wood continues to believe in the stock. In the first quarter, she bought 154,387 shares for ARKK and tens of thousands more for some of the firm’s other funds.

Perhaps Wood sees promise in Unity Software’s recently completed merger with app developer ironSource, which “allows Unity to support developers through the entire development lifecycle as they build, run, and grow immersive, real-time games and 3D experiences into successful businesses,” the company said.

Or maybe she likes that management is forecasting 53% revenue growth at the midpoint of its guidance. Whatever the reason, Wood appears to be patient, and this patience could pay off handsomely.

Tesla (TSLA) — Electric Vehicles

Wood’s bullish stance on electric vehicle (EV) maker Tesla (NASDAQ:TSLA) is part of what put her on the map. She famously claimed in early 2020 that Tesla was worth more than $1 trillion. Less than two years later, her prediction came true.

TSLA is the No. 1 holding in ARKK with a 9.4% weighting worth more than $664 million. Wood recently added to her position in the EV maker, scooping up $42 million worth of the stock for ARKK and another one of the firm’s funds.  She also predicted that the company could see a more than $6 trillion valuation in the next four years.

Interestingly, this bullish call came just after Tesla released disappointing quarterly earnings, causing the stock to drop 10% in a single day. But what’s a 10% drop when you expect the stock to rise to $2,000 a share? To Wood, it’s a buying opportunity.

Wood said she sees a major catalyst ahead for Tesla in self-driving robotaxis. Whether that prediction proves true or not, Wood is a huge fan of TSLA stock. While some analysts have expressed concerns about shrinking margins and rising competition negatively impacting Tesla, Wood does not appear to share their concerns. And she’s proven the naysayers wrong before.

Exact Sciences (EXAS) — Diagnostic Medicine 

Another of Cathie Wood’s top picks is Exact Sciences (NASDAQ:EXAS). The molecular diagnostics company that specializes in the detection of early-stage cancers is ARKK’s sixth-largest holding with a 5.9% weighting worth nearly $419.5 million.

The stock has been a winner for Wood of late. Over the past six months, shares have more than doubled, including a 34% gain so far in 2023. Part of the recent strength in EXAS stock was due to the company annoucing preliminary Q4 results that showed strong sales and a surprise profit.

Perhaps best known for its colon cancer screening test Cologuard, Exact Sciences saw revenue increase 17% year over year to $553 million, while full-year revenue was up 18% to $2.1 billion. While not yet profitable, the company’s losses are narrowing.

Wood has sold some shares recently, but she continues to predict EXAS can more than double in price to $140 a share by 2027.

On the date of publication, Joel Baglole did not have (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.