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Cathie Wood is the founder, CEO, and Chief Investment Officer of ARK Invest. Wood’s Ark portfolio contains six actively-managed ETFs (Exchange Traded Funds), two index ETFs and one ETF venture fund.
The companies within these funds are carefully selected for their potential as growth stocks with disruptive technologies or innovations. Some could even be described as growth stocks on steroids, representing dynamic opportunities for investors seeking exposure to cutting-edge and transformative businesses.
Enter RC365
RC365 (LSE:RCGH) is the hottest London-listed stock right now. It’s up over 500% in six months and 700% exactly over a year. Its growth has been phenomenal. So, might this be a stock for Wood?
Well, let’s start my explaining what RC365 is. It’s an Asia-focused company providing payment gateway services.Recently, it has garnered attention due to its significant developments in the market. This included acquiring 100% of the issued share capital of Mr Meal Production Limited.
In addition, RC365 entered into a Memorandum of Understanding (MoU) with Hatcher Group. The MoU is for collaboration around advancing smart algorithm technology, a field with great potential for innovative solutions.
Additionally, it established an agreement with a financial services provider to feature its brand on Mastercard credit cards intended for Hong Kong residents. A similar agreement was recently made in Malaysia, further expanding the company’s collaborations in the region.
Investment criteria
Wood’s investment philosophy revolves around identifying companies that are at the forefront of disruptive technologies. This may include investing in artificial intelligence, genomics, blockchain, and renewable energy.
The investor believe that these disruptive innovations have the power to reshape industries, deliver vast productivity gains and have the potential to create significant growth.
Moreover, Wood is willing to invest in companies that may not show immediate profitability. She takes a medium-to-long-term outlook, and holds companies as they ideally go through a rapid growth phase.
A Wood-style stock?
At first glance, RC365 appears to possess some characteristics that Cathie Wood typically looks for in an investment. However, the current state of the company might not be compelling enough even for an investor like her.
The stock seems incredibly speculative, trading at approximately 80 times its sales. This is significantly higher than the usual 10 times sales threshold considered expensive.
And there are doubts regarding whether the recent deals made by the company can generate the necessary revenue growth to align with other growth stocks. In fact, the Malaysia deal with see its subsidiary issue and manage Mastercard Prepaid Card services to just 40 customers and 1,200 cardholders by 31 December 2024.
Cathie Wood may also question whether RC365 truly holds a competitive advantage in the AI and payments sector, whether it has the potential to become a market leader in its industry.
As an investor focused on disruptive technologies and transformative innovations, she would carefully assess whether RC365 aligns with her investment criteria and presents an attractive opportunity for future growth. I don’t know, of course, but I think the conclusion could be ‘no’.
