With investors banking on rate cuts in the second half of the year and into 2025, risky, high-multiple technology companies that aren't expected to make big profits until far into the future (if they ever do) like Cathie Wood's stocks may find themselves back in the spotlight.
Make no mistake, Cathie Wood and the Ark Innovation Fund (NYSEARCA:ARKK) have struggled to keep up with the Nasdaq 100 Index in recent years. As interest rates and inflation fall (Cathie Wood sees deflation coming), the environment arguably looks much more welcoming for speculative innovators long forgotten in this large-cap-favored era of the Magnificent Seven.
Only time will tell if lower interest rates will get the Ark fund moving again, but at this point, I think it's unrealistic to expect the low interest rates of 2020 to return — unless the economy becomes deflationary, as Wood believes it will.
For investors who want to pick unique disruptive innovators to benefit from low interest rates, here are three Cathie Wood stocks I recommend.
Tesla (TSLA)
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Cathie Wood may not be as bullish on the Magnificent Seven's biggest names as some of the other big money managers, but she does have a big position in Tesla (NASDAQ:TSLA) stock through her flagship ARKK ETF.
During the past two years of excessive volatility, Wood has, at least for the most part, been a supporter of Elon Musk and the top EV companies. Of course, Wood sold some Tesla shares earlier this year, but the ETF remains heavily biased toward the stock.
Lower interest rates could make Tesla less sensitive to the inevitable decline in vehicle deliveries, which for most investors who track Tesla quarter-to-quarter are the only thing that matters.
That said, the long term growth story includes growth in AI, robotaxis, humanoid robots (Optimus Prime) and energy storage – these projects are not cheap, so falling borrowing costs should be seen as a big positive.
TSLA stock appears well valued, with a price-to-earnings (P/E) ratio of 63.7 and little sign of decline since its June-July surge.
Roblox (RBLX)
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Roblox (NASDAQ:RBLX) stock is another struggling name within the ARKK ETF, as the interactive gaming platform company's shares are down about 7% year to date while the S&P 500 and Nasdaq 100 are posting double-digit gains.
With more brands advertising on Roblox, investors who want to play in the nascent metaverse might want to buy their ticket while RBLX stock is still down substantially from its all-time highs. Perhaps companies looking to resonate with younger consumers should explore new territories like Roblox to sell their products.
Recently, elf Beauty (NASDAQ:ELF) strengthened its collaboration with Roblox, allowing users to purchase cosmetics via Roblox. Admittedly, it seems odd to purchase cosmetics via a video game. Either way, I think this move will be a hit among younger players. Perhaps the Roblox deal could be a hint of what the future of the metaverse holds for marketers.
UI PATH
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Finally, Uipath (NASDAQ:PATH) is one of Ark's lesser known holdings, but one worthy of the attention of growth investors looking for AI-driven growth at the right price. Like many other Cathie Wood stocks, PATH stock has been on a terrible price roll over the past few years.
PATH shares are still down more than 84% from a high of just under $80 per share in May 2021.
Based on past performance, shares of the process automation software developer are unlikely to reach new highs this decade. The company recently announced it would lay off 10% of its workforce, or about 420 people.
Either way, Cathy Woodstock, a mid-cap stock with a market cap of $7.2 billion, looks very cheap at 5.3 times sales, and with co-founder Daniel Dines reappointed as CEO, it will be interesting to see how the company can get back on the right track.
As of the date of publication, Joey Frenette 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 author in accordance with InvestorPlace.com's Publishing Guidelines.
On the date of publication, the editor in charge did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Joey Frenette is an experienced investment writer specializing in technology and consumer stocks. A contributor to Motley Fool Canada, TipRanks, and Barchart, Joey excels at finding mispriced stocks with long-term growth potential in rapidly changing markets.