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Aggressive growth fund manager Cathie Wood is among the most-watched investors in the game right now. Known for her big bets on innovation, Wood has transformed how many investors think about positioning portfolios. Accordingly, this year's incredible decline among some top Cathie Wood stocks has certainly shaken many in the growth investor bucket.
But not Cathie Wood. In typical form, Wood was in buying mode yesterday, during the single worst day in the stock market since the onset of the pandemic. What's more, Wood decided to significantly increase stakes in underperforming stocks, while trimming winners.
Roku (NASDAQ:ROKU), Zoom (NASDAQ:ZM), Butterfly Network (NYSE:BFLY), DraftKings (NASDAQ:DKNG) and UiPath (NYSE:PATH) were among Wood's key buys yesterday. These companies are all down meaningfully from their peaks as investors reposition their portfolios toward defensive names.
So, is now the time for retail investors to buy the dip? Let's discuss.
Is It Time to Double Down on Cathie Wood Stocks?
It's worth noting that Cathie Wood, along with many growth fund managers, used yesterday's selloff to beef up positions nearly across the board. The five aforementioned companies were part of a group of 27 growth stocks Wood added to. That's a significant vote of confidence in the long-term potential of these holdings.
Interestingly, Wood also took some cream off of winning positions yesterday, with about 1.6 million shares of Signify Health (NYSE:SGFY) sold to fund these purchases. Like other growth fund managers, Wood has seen some periodic outflows this year. She has often been forced to recalibrate buys with sells, from time to time.
For many growth investors, the big question around where valuations will settle still remains pertinent. Inflation is high and bond yields continue to rise. For those plugging in growth metrics into a discounted cash flow (DCF) model, higher interest rates explicitly require lower outputs for valuation for such growth companies. That's not good, particularly for investors looking to hold companies that may not be profitable for years to come.
In this environment, I think it's best to take a cautious approach. That said, the best time to buy is when everyone else is selling. Perhaps limping into a few Cathie Wood stocks (I happen to like Zoom right now) at these depressed valuations makes sense. However, like anything, being selective is key. Many high-growth stocks may have trouble navigating this cycle — a cycle that may last longer than many anticipate.
On the date of publication, Chris MacDonald 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.
Chris MacDonald's love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
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