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3 stocks she just bought

Cathie Wood is trying to get back on her feet since becoming one of the country’s most followed growth stock investors with her eye-popping returns in 2020. It hasn’t been easy for the Ark Invest co-founder, CEO and investor. Her exchange-traded funds have badly underperformed the market in two of the last three years, and she’s set to fall far short of expectations in 2024.

Her most popular fund is down 16% since the beginning of the year, but she is not giving up without a fight. She started the new trading week on Monday with several portfolio moves. She increased existing positions in (NASDAQ:AMZN), Palantir (NYSE:PLTR)And PagerDuty (NYSE:PD) this week. Let’s take a closer look.

1. Amazon

The leading online retailer is no longer the rapid growth story it was for the first two dozen years of its IPO. The company has posted positive net sales every year since its 1997 IPO, but the 9% growth in 2022 and the 12% increase in sales last year are the weakest two years of its 27 years on the market.

Amazon CEO Andy Jassy is trying to make the most of this phase in the e-commerce company’s life cycle. He’s improving Amazon’s efficiency by cutting costs and looking for ways to use AI to increase engagement. And it’s working. Net sales rose a modest 13% in the first quarter of this year, but profits have more than tripled.

A couple saves coins in a piggy bank.A couple saves coins in a piggy bank.

Image source: Getty Images.

Amazon is still a giant company even in this low-growth environment. Over the last four quarters, the company generated $48.8 billion in free cash flow. However, the company is not willing to give any of that money back to its shareholders in the form of distributions. It is the largest company in the country by market capitalization that currently does not have a dividend policy.

But investors will be fine. They’re here for capital gains, and shares are up 47% in the last year.

It’s a challenge for Amazon to stand out in a more competitive market than in the past. Brick-and-mortar chains are getting better at driving digital sales. Chinese e-commerce platforms with their ridiculously low prices are also growing in popularity. Net product sales rose just 7% in the first quarter. The strength of cloud hosting giant Amazon Web Services (AWS) and other services pushed results up to double-digit growth.

Amazon is one of Ark Invest’s smallest holdings, and that’s a shame. The stock has been beating the market this year, and it could have helped move the price if Wood had owned a larger stake in the popular online retailer.

2. Palantir

Not all of Ark Invest’s largest holdings are in the red. Palantir, one of Wood’s ten largest holdings, is outperforming the market this year. The provider of software tools for the intelligence community has also almost quadrupled in value since the beginning of last year.

The market is still trying to cover Palantir’s potential. The stock rose 6% on Monday after Argus analyst Joseph Bonner initiated coverage with a buy rating. He believes Palantir’s foray into the commercial sector beyond its public sector roots increases the company’s upside potential. Commercial revenue rose 40% last quarter, roughly double the 21% overall revenue increase for that period.

Bonner believes Palantir’s earnings power and cash flow will increase significantly this year, but that doesn’t make the stock cheap. Palantir trades at 76 times analysts’ earnings target for this year and still at a hefty multiple of 63 for next year.

3. PagerDuty

Finally, we come to a name that is in the red this year. The provider of cloud-based enterprise analytics and availability monitoring is trading 8% lower in 2024.

Revenue growth has slowed for seven consecutive quarters, falling from 34% to 8% during that time. But sentiment is starting to improve. The stock is up nearly 20% since its low point last month, and even received an analyst upgrade last week. Yes, PagerDuty is still trading lower this year, but it was much worse a month ago. And analysts expect revenue growth to accelerate for the rest of the year.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rick Munarriz does not own any of the stocks mentioned. The Motley Fool owns and recommends Amazon, PagerDuty, and Palantir Technologies. The Motley Fool has a disclosure policy.

Cathie Wood Goes Bargain Hunting: 3 Stocks She Just Bought was originally published by The Motley Fool

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