Cathie Wood only bought one stock yesterday — this is it

Cathie Wood is having a good time in the current market environment. Growth stocks are taking the market by storm again, and Ark Invest founders, CEOs and technology investors are getting rolling. Ark Invest’s largest exchange-traded fund hit an 18-month high on Thursday, soaring 68% so far in 2023. Wood said she appears to be back on track after several consecutive years of decline following her explosive 2020 performance.

Ark Invest publishes daily trades at the end of each trading day. As a major investor, Wood has been active in recent weeks with aggressive growth stocks leading the market rally. But she was particularly quiet on Thursday. She added just one existing position, one of her smallest positions by market capitalization. Arc Invest’s exclusive purchase is next door (kind 7.27%). yes, that next door. Let’s take a closer look.

What’s good about the neighborhood?

There’s a good chance you’re familiar with Nextdoor. We run a hyperlocal discussion board that groups members across 310,000 locations. It attracts 40.4 million weekly active users, or about a third of U.S. households. The platform’s user-oriented goal is a noble one: connecting people with their neighbors, businesses, and public services.

Our purpose is to create a kinder world where everyone has a neighbor they can rely on.

The stock’s ticker symbol, KIND, also stands for the kindness fostered on community-building platforms when people help each other and rely on trusted sources. Reality isn’t always kind. You might encounter a con artist, an aspiring local politician, getting into a heated argument, or a nosy neighbor venting his grievances. But it’s also the same “slice of life” approach to online forums that can help point out bad behavior.

Nextdoor was successful, but that doesn’t mean the business itself was successful as an investment. In a year that has seen major gains for many of Cathie Wood’s holdings, Nextdoor was down 9% this year through Thursday’s close. The stock price plunged 90% from the all-time high it hit on the day it was listed as a special purpose acquisition company (SPAC) at the end of 2021.

The lack of growth in the ad-supported model didn’t help. The year it hit the market, revenue soared 56%. We are currently experiencing consecutive quarters with sales growth of just 4%.

Net losses also widened in recent quarters, which is not a good look in today’s results-driven environment. Additionally, the stock took a hit after the company gave weak guidance in its third-quarter report last month and announced it would lay off 25% of its workforce. As Shakespeare’s Hamlet said – and Nick Lowe once sang – sometimes you have to be cruel to be kind.

Image source: Getty Images.

knock on wood

Wood’s addition of 74,783 shares to his existing stake in Nextdoor on Thursday isn’t a big deal considering the stock is trading for less than $2 per share. But she has now elevated the status of social platform operator for eight consecutive trading days.

With a market capitalization of $720 million, it’s one of her smallest assets, and that figure gets even smaller when you take into account her cash-rich balance sheet. Nextdoor is losing money, but it’s not going away anytime soon. It may have posted a record net loss of $38 million in its most recent quarter, but it also had a net cash position of $472 million, putting its enterprise value below $250 million.

Nextdoor has a lot to recover from beyond its widening losses. Weekly active users declined sequentially in successive reports. Average revenue per weekly active user of $1.39 in the third quarter was 2% lower than a year ago and down 14% since going public two years ago.

Changing your situation may not be as difficult as it seems. It’s not just that a cash-flush balance sheet puts a lot of sand in the hourglass. As the economy recovers in 2024, Nextdoor’s online advertising market will rebound, leading to declining margins, revenue per user, and profitability. You will need to use other means to increase the popularity of your platform, but as your financial situation improves, it will be easier to invest in user acquisition.

Will 2024 be the year Nextdoor finally lives up to its ticker symbol? Wood apparently thought so, making it her only stock purchase on Thursday.