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In this video, I cover Cathie Wood's huge bet on the mispricing of "stay-at-home" stocks and "recovery" stocks.

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Cathie Wood always seems to take a contrarian stance against the institutional crowd. The typical institutional investments include index funds, financials, energy, and emerging markets, but Cathie clearly doesn’t invest in those markets. Now, Cathie is back again with another prediction against the institutional crowd, and it just happens that she is betting almost her entire net worth on this. In fact, 85% of Ark’s top 10 cumulative holdings are literally betting on this prediction. Cathie is a long-term investor and always has 5-year price targets on her stocks. However, as an active trader, she also focuses and predicts the short-term movements of all financial assets, including stocks, cryptos, and commodities. This video will go in-depth into her bold short-term prediction for a certain sector of stocks. Welcome to Casgains Academy. If you’re new to the channel, please consider subscribing for more content like this, and let’s get right into it.
Most of us are tired of being trapped at home all day, especially after being trapped inside for so long. As a result, many of us are starting to spend money on the recovery sectors that are open. This includes eating outside, traveling around, reserving hotel rooms, and going to the movie theatre. Analysts have called the stocks involved in this space recovery stocks because sales are supposed to recover to pre-pandemic levels. On the other side of the stock market, another portion of stocks has been called “stay-at-home stocks.” The reasoning behind that is quite simple; the stay-at-home companies thrived during the pandemic. Analysts labeling these stocks as I mentioned sounds logical. However, Cathie is seeing something completely different. In her eyes, the recovery stocks won’t recover as much as analysts are predicting in the short term. On the contrary, she believes that the quote-unquote “stay-at-home” stocks have become ingrained in people’s lifestyles because they are more efficient than their old counterparts. One example of this is YouTube, which has experienced more viewership during the pandemic.
The question that we have to ask now is since restrictions during the pandemic are loosening, are you going to stop watching YouTube? Are you going to stop watching movies on your streaming services, like Netflix, Hulu, FuboTV, and Disney+? Analysts think that the answer to those questions is yes, but Cathie thinks the opposite. Many of the old counterparts of the stay-at-home stocks are not cost-efficient at all. So while short-term demand for recovery services is increasing right now, people are going to go back to online services over the long term. For example, people are now realizing that watching movies in theaters is not cost-efficient when you can just watch the same movies at home. You might argue that watching movies on the big screen is an unparalleled, unique experience, and while that may be true, I’m sure that after weighing the cost and benefits, many would prefer watching in the comfort of their homes without having to book tickets, travel, buy overpriced popcorn, and have distracting people nearby. The reason why Cathie is so confident in her prediction is that most of the stay-at-home stocks were already growing companies pre-pandemic. For one, if what I just said is true, sales of stay-at-home services are going to be substantially higher post-pandemic than analysts are predicting. The majority of analysts are predicting that stay-at-home stocks will have their growth slow down substantially in 2022. As you can see in this chart, analysts are estimating that revenue growth will fall off a cliff in 2022 after many people go back to pre-pandemic services. One of the reasons why these analysts may be off on their numbers is because of the network effect. Because many people have tried online services during the pandemic, those that enjoyed the product during the pandemic will recommend it to others. This will theoretically keep growth for the stay at home companies at relatively high levels. Another reason for Cathie’s prediction is that the innovation platforms behind the stay at home companies have hit the market share necessary for escape velocity.