Cathie Wood warns of 'price deflation in the pipeline' — but is sticking to these 3 stocks

Ark Invest’s Cathie Wood points out the potential problem of the Fed’s hawkish stance.

“None of those voting on the Federal Reserve is focused on the significant price deflation in the pipeline,” she tweeted last week. “The Fed seems to be making decisions based on lagging indicators and analogies.”

The super investor also points to the inversion of the yield curve, which can be a leading indicator of an impending recession.

It’s a scary picture, especially since the economy isn’t firing on all cylinders. Real GDP in the U.S. for both Q1 and Q2 showed contractions.

Wood's top stock holdings

But Wood is sticking to her guns. Here’s a look at the top holdings in her flagship fund Ark Innovation ETF (ARKK).

Tesla stock (TSLA)

The electric vehicle maker is currently the largest holding at ARKK, accounting for 10.7% of the fund’s weight.

The stock delivered astronomical gains in 2020 and most of 2021, but has pulled back substantially in 2022.

Year to date, Tesla shares are down nearly 30%.

But business remains on the right track. In Q2, deliveries of the Model S, Model X, Model 3 and Model Y totaled 254,695 vehicles, up 27% year over year.

Ark Invest also sees a game-changing product coming for the company — robotaxi.

“Tesla’s prospective robotaxi business line is a key driver, contributing 60% of expected value and more than half of expected EBITDA in 2026,” wrote Ark analyst Tasha Keeney in a report in April.

In that report, Ark expects a share price of $4,600 (pre-split) for Tesla by 2026. On a split-adjusted basis, that represents a potential upside of around 450% from where the stock sits today.

Zoom Video Communications stock (ZM)

When meetings and classes moved online due to the pandemic, Zoom’s business flourished.

But as the economy reopened and employees started going back to the office, there have been concerns about the growth potential of this video communications company.

In 2022, Zoom shares have fallen a staggering 60%.

But Wood continues to see opportunity in the stock. In fact, Zoom is currently the second-largest holding at ARKK, accounting for 8.4% of the fund’s weight.

In June, Ark Invest released a research report showing how Zoom shares could see a glorious revival in the not-too-distant future.

“According to ARK’s open-source research and model, Zoom’s share price could approach $1,500, compounding at a 76% annual growth rate, in 2026,” Wood’s team wrote.

Since Zoom shares trade at around $73 a piece right now, that price target implies a potential upside of over 1,900%.

Roku stock (ROKU)

The secular trend of on-demand video streaming has created several winners in the tech space.

Roku is one of them. Since going public in September 2017, the stock has returned more than 120%.