2 Cathie Wood Stocks It Would Be Wise to Avoid This Fall

With the Fed seemingly yet to be done with aggressive rate hikes to control sky-high inflation, troubles for Cathie Wood’s fleet of ETFs seem far from over. Due to overexposure to disruptive, tech-oriented businesses and cash-guzzling businesses, her investments' near-term outlook appears bleak. Hence, fundamentally weak Cathie Wood holdings Ui Path (PATH) and Verve Therapeutics (VERV) are best avoided now. Read on…

Renowned investor Cathie Wood is the founder, CEO, and CIO of Ark Invest, an investment management firm. Its flagship fund, ARK Innovation ETF (ARKK), seeks to generate long-term capital appreciation by investing in businesses across the globe that seek to benefit from disruptive innovation.

Her unique approach to investing helped her funds deliver significant returns during the pandemic, with businesses growing with the help of easy access to capital.

However, amid aggressive interest rate hikes by the Fed, growing businesses have found it challenging to sustain and grow themselves due to a drought of cost-effective funding this year. Since the ETFs managed by Cathie Wood are overweight on high-growth companies, they have endured a rough year. Her flagship fund, ARKK, is down 63.5% year-to-date.

Moreover, the rising inflation and its consequences are expected to keep demand soft and margins under pressure. Since the stock market is expected to relapse into a fresh bout of volatility, ARK’s holdings are set to incur further losses.

Hence, it could be wise to avoid fundamentally weak Cathie Wood stocks UiPath Inc. (PATH) and Verve Therapeutics, Inc. (VERV).

UiPath Inc. (PATH)

PATH seeks to transform business operations by providing an end-to-end platform that offers a variety of robotic process automation (RPA) solutions. The company’s platform enables its software robots to interact with and automate processes across a company's existing enterprise stack. ARK owns 9.2% of PATH, and the stock comprises 4.02% of its combined holdings.

For the second quarter of the fiscal year 2023 ended July 31, 2022, PATH’s operating loss widened 22.9% year-over-year to $120.19 million. During the same period, the company reported a non-GAAP net loss of $11.41 million, compared to a non-GAAP net income of $4.19 million in the previous-year quarter.

In addition, PATH reported a non-GAAP net loss of $0.02 per share during the quarter, compared to a non-GAAP net income of $0.01 during the previous-year quarter.

Analysts expect PATH’s revenue for the fourth quarter of the fiscal year (ending January 2023) to decrease 4.7% year-over-year to $276.03 million. For the entire fiscal year, the company is expected to report a loss of $0.04 per share, compared to an EPS of $0.08 in the previous fiscal year.

The stock has plummeted 11.9% over the past month and 73.4% year-to-date to close the last trading session at $11.69.

PATH’s poor prospects are also reflected in its POWR Ratings. The stock has an overall D rating, which equates to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It also has grade D for Quality, Stability, and Momentum. PATH is ranked penultimate among 26 stocks in the F-rated Software - SAAS industry.

Click here to see the additional POWR Ratings for PATH’s Growth, Value, and Sentiment.

Verve Therapeutics, Inc. (VERV)

As a genetics medicines company, VERV seeks to transform the treatment of cardiovascular disease (CVD) from chronic management to single-course gene editing medicines. The company’s lead product candidate is VERVE-101 for treating heterozygous familial hypercholesterolemia. Also, it engages in developing the ANGPTL3 program, a key regulator of cholesterol and triglyceride metabolism.

ARK owns 5.39% of VERV, and the stock comprises 0.82% of its combined holdings.

During the second quarter of the fiscal year 2022 ended June 30, VERV’s loss from operations widened 148.7% year-over-year to $42.19 million. Its net loss stood at $40.95 million for the quarter, while its net loss per common share attributable to common stockholders came in at $0.84.

VERV’s total assets stood at $324.27 million as of June 30, 2022, compared to $384.12 million as of December 31, 2021.

Analysts expect VERV’s loss per share for the fourth quarter of the current fiscal (ending December 2022) to widen 15.4% year-over-year to $0.75. The stock has slumped 2.4% over the past month and 14.5% year-to-date to close the last trading session at $33.65.

VERV’s bleak outlook is reflected in its overall POWR Rating of D, which equates to a Sell in our proprietary rating system. It also has a D grade for Growth, Stability, Sentiment, and Quality.

VERV is ranked #359 among the 382 stocks in the F-rated Biotech industry.

To see additional POWR Ratings for Value and Momentum for VERV, click here.

PATH shares were trading at $12.37 per share on Tuesday afternoon, up $0.68 (+5.82%). Year-to-date, PATH has declined -71.32%, versus a -18.06% rise in the benchmark S&P 500 index during the same period.

About the Author: Santanu Roy

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.


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