3 Fintech stocks Cathie Wood bets on

It wasn’t long ago that Cathie Wood was one of Wall Street’s most famous investors. Wood is best known for investing in disruptive, innovative companies with high growth potential. From the start of 2020 to the peak in February 2021, Wood’s ARK Innovation ETF (SHEET -5.92%) increased over 230%.

Since then, the fund has fallen 70% as inflationary pressures and rising interest rates weigh on many growth stocks. Despite this, the fund continued to attract investors and raised $1.5 billion in investor funds in the first half of 2022. Included in this fund are three fintechs: Robinhood Markets (HOOD -8.95%), Coinbase Global (COIN -11.27%)and Block. (SQ -6.72%). Let’s find out a little more about these three fintechs that Cathie Wood’s investment company is betting on.

1. Robinhood Markets

Robinhood’s goal is to make investing accessible to everyone. The online trading platform was one of the first to introduce commission-free stock trading, which many others in the industry have since copied. However, the revenue model – called payment for order flow (PFOF) – has come under scrutiny by regulators.

Robinhood shares peaked shortly after going public last year, but have since fallen more than 80% as investor concerns about growth come into focus. Robinhood’s total revenue fell over 43% through six months this year, and it saw assets under custody (AUC) drop 31% in the second quarter, the lowest level since 2020. Not only that, but the New York State Department of Financial Services fined the company $30 million earlier this month after accusing Robinhood of violating anti-money laundering rules.

Wood’s Ark Innovation ETF owns over 20 million shares in Robinhood, making it the 19th largest investment representing 2.3% of the total portfolio fund as of August 18.

2. Coinbase Global

Coinbase Global provides customers with a cryptocurrency exchange to buy and sell cryptoassets and infrastructure for developers to build decentralized applications. The stock market benefited greatly in 2021 as cryptocurrency prices exploded, leading to trading frenzies in things like Bitcoin, Ethereumand Dogecoin.

This year has been a different story for cryptocurrencies. Bitcoin has fallen over 50% since the start of the year as risk assets are punished amid high inflation and rising interest rates. Despite 51% user growth from the first half of last year, Coinbase has seen trading volume on its platform drop by 34%. As a result, it swung from a net income of $2.4 billion through six months last year to a loss of $1.5 billion in the first half of this year.

Falling incomes are not the only concern. Coinbase has been caught in the regulatory crosshairs, with the Securities and Exchange Commission (SEC) announcing insider trading charges against former Coinbase employees, saying some of the cryptocurrencies involved should actually have been classified as securities.

On the positive side, the company recently announced an agreement with Black stonethe world’s largest asset manager, to give institutional clients access to its platform.

Wood cut her stake in Coinbase in late July by 1.3 million shares, but her Ark Innovation ETF still owns over 4.6 million shares in Coinbase, making it the eighth largest investment representing nearly 4.3% of the total portfolio fund in August. 18.

3. Blocks

Block, formerly Square, initially provided merchants with ways to accept credit card payments. Since then, it has expanded through its Cash App product, which helps users manage money and buy and sell Bitcoin, and has also added Afterpay, the buy now pay later (BNPL) platform.

Like Coinbase, Block rode the wave of active cryptocurrency markets and brought in $10 billion in Bitcoin revenue in 2021 – or 57% of total revenue for the year. This year, Bitcoin revenue has fallen by 44% over six months compared to last year’s period.

On a positive note, Block’s gross payment volume grew by 26% through the first half of the year, which helped to increase transaction-based revenue by 24%. It also saw subscription-based revenue grow by 65%, thanks to the BNPL platform and subscriptions through the Cash app. Block CFO Amrita Ahuja expects gross profit through the Cash App and Square sides of the business to grow in the second half of this year while scaling back on planned investments.

Block is Wood’s largest fintech holding and the fourth largest investment in the Ark Innovation ETF and represents approximately 4.7% of the total portfolio as of August 18.