Cathie Wood’s portfolio hasn’t performed well in recent years. Ever since the post-pandemic boom ended, her performance has trailed the broader market. This has caused many investors to start taking a contrarian view of her bets. For example, the Tuttle Capital Short Innovation ETF (NASDAQ:SARK) exists, which is up almost 9% year-to-date during a market boom.
Thus, I think it makes sense to look into some stocks Cathie Wood is selling, even if you are a bull on her overall investing style. I’m personally bearish on some of these stocks in the near-term, despite thinking her long-term view may be correct. Indeed, it’s true that Wood has made plenty of solid investments in the past. That said, investors who’ve made outsized bets on up-and-coming high-growth startups have seen a lot of red across the baord, so Ms. Wood isn’t alone.
Coinbase (COIN)
Coinbase (NASDAQ:COIN) has faced significant headwinds in recent months, despite posting strong Q1 2024 earnings. The company’s stock dropped around 8% over a two-week period. That’s partly due to the fact that this stock heavily relies on crypto trading fees. Notably, these fees account for about 66% of its revenue. This vulnerability to cryptocurrency market volatility is concerning, especially given the recent corrections in the crypto sector over the past few months.
I believe Coinbase’s profitability in Q2 is at risk, especially due to the underperformance of spot Bitcoin (BTC-USD) ETFs. Moreover, Coinbase also lost “most of its motion” to dismiss the Securities and Exchange Commission’s lawsuit. While some analysts offer bullish long-term targets for the stock, I’m not so optimistic. Crypto-related stocks are to be bought when the market is trading at depressed levels, but now does not seem like the right time.
It’s worth noting that even “permabull” Cathie Wood has reduced her holdings in Coinbase by 48.6% since this position’s peak.
Teladoc (TDOC)
Teladoc (NYSE:TDOC) provides virtual healthcare services. The company’s stock has been sliding lately, tumbling 24% in just one week after a disappointing Q1 2024 earnings report. The decline has continued and is much worse as of writing.
Let’s start with the top line. Teladoc’s revenue growth continues to decelerate, with Q1 revenue coming in at just $646 million, barely edging out estimates. The company’s BetterHelp mental health division saw revenues actually decline 4% year-over-year. Ouch. While the company’s enterprise Integrated Care segment grew 8%, that’s hardly enough to offset the slowdown in Teladoc’s core business.
But the real red flag for me is profitability, or the lack thereof. Despite being founded in 2002, Teladoc still can’t seem to turn a profit. The company’s net loss widened to nearly $82 million in Q1. Margins are eroding, too, with sky-high SG&A expenses eating into the bottom line. Twenty-two years in and the company is still bleeding cash. That’s not a good look for long-term investors.
Meanwhile, competition in the telehealth space is only getting fiercer. Upstarts like Hims & Hers Health (NYSE:HIMS) look far more attractive in my view, with stronger growth and profitability. Teladoc’s longtime CEO recently jumped ship, too.
To be fair, it’s not all doom and gloom. Teladoc’s international revenues did climb 13% in Q1. But until this company can prove it has a profitable business model, I’m staying far away — and clearly, I’m not alone.
Cathie Wood slashed her stake in TDOC by 24%.
Robinhood Markets (HOOD)
Robinhood (NASDAQ:HOOD) provides commission-free stock, ETF, options, and cryptocurrency trading to retail investors through a user-friendly mobile app, though I doubt you need an introduction to this business.
In Q1, Robinhood posted revenues which surged 40% year-over-year to a record $618 million. The company also achieved profitability, posting a net income of $157 million and record GAAP earnings per share of 18 cents. These results were notably driven by crypto revenue, which skyrocketed 232%.
However, the SEC recently sent a Wells Notice alleging infractions related to the company’s crypto listings and custody practices. This could jeopardize Robinhood’s booming crypto business. And if this notice doesn’t jeopardize it, the current crypto correction might.
Importantly, Robinhood now generates 41% of its revenue from net interest income. These cash flows are lucrative in the current high-rate environment, but the company’s dependency on interest income could become problematic once the Federal Reserve starts to cut interest rates.
I believe Robinhood’s valuation looks stretched, with the stock trading at a lofty 46-times forward earnings.
Cathie Wood slashed her stake in HOOD stock by 25%.
On the date of publication, Omor Ibne Ehsan did not hold (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.