Cathie Wood Goes Bargain Hunting: 3 Stocks She Just Bought

Cathie Wood, the founder of Ark Invest, is one of the market's most closely followed growth investors. But over the past five years, her flagship Ark Innovation ETF (NYSEMKT: ARKK) has declined nearly 6% as the S&P 500 rallied 85%.

Nevertheless, Wood contends that her focus on long-term secular trends will pay off for patient investors who can tune out the near-term noise. So let's look at three of her recent purchases -- Roku (NASDAQ: ROKU) , Roblox (NYSE: RBLX) , and PagerDuty (NYSE: PD) -- and see if they're worthwhile buys for growth investors.

Cathie Wood bought 245,896 shares of Roku, which currently have a market value of about $15 million, for the Ark Innovation ETF in June. Those purchases increase the ETF's total stake in Roku to $562 million, making it the fund's second largest holding after Tesla , with a total weight of 9.2%.

However, Roku's stock has declined 34% over the past five years. The bulls retreated as its growth cooled off and it faced tougher competitors in the streaming market.

Roku's revenue rose more than 50% in both 2020 and 2021 as the pandemic drove more consumers to buy its streaming video devices and consume more content, but its revenue grew only 13% in 2022 and just 11% in 2023 as those tailwinds dissipated. Analysts expect its revenue to grow at a compound annual growth rate (CAGR) of only 12% from 2023 to 2026.

Yet Roku is still gaining more active accounts as its streaming hours continue to rise. That expansion should drive the growth of its higher-margin platform business and offset the negative gross margin of its hardware player business.

Moreover, its adjusted earnings before interest, taxes, depreciation, and amortization ( EBITDA ) turned positive in 2023 as it aggressively cut costs, and analysts expect that figure to grow at a CAGR of 347% over the next three years. That's a decent outlook for a stock which trades at 29 times next year's adjusted EBITDA.

Wood scooped up 1.53 million shares for Roblox, which are worth $57 million today, for the Ark Innovation ETF in May and June. It now owns a $344 million stake in Roblox, making it the fund's the fourth largest holding, with a total weight of 5.6%.