Cathie Wood Goes Bargain Hunting: 3 Stocks She Just Bought
Key Points
Cathie Wood bought shares of Taiwan Semiconductor, Baidu, and Pony AI on Monday.
Growth is slowing at TSMC, but its high-margin business model deserves a market premium.
Baidu received another market upgrade at the end of last week. The bulls are coming.
Cathie Wood kicked off the new trading week with an active shopping list. The CEO, co-founder, and ace stock picker at Ark Invest added to seven of her existing stakes on Monday. She also did a fair share of selling, but let's focus on the in door instead of the out door at her family of exchange-traded funds.
Wood increased her stake in Taiwan Semiconductor Manufacturing (NYSE: TSM), Baidu (NASDAQ: BIDU), and Pony AI (NASDAQ: PONY) on Monday. Let's take a closer look.
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1. Taiwan Semiconductor Manufacturing
Taiwan Semiconductor may be the least known among the eight stocks with market caps north of $1.5 trillion. It doesn't make it any less important. The world's largest foundry is defying the gravity of its market's historical cyclicality. Investing in TSMC is a refreshing mix of contrasts.
Revenue is on track to top 18% annual growth for the fifth time in the last six years. Zoom in and the growth gets better. TSMC has posted six consecutive quarters with year-over-year top-line growth of 30% or better. Don't hold out for the industry pioneer to stretch its streak to seven quarters.
Image source: Getty Images.
TSMC announced on Monday that revenue for the month of October rose 17%, its weakest growth in 18 months. It did raise its full-year guidance, but analysts see fourth-quarter revenue climbing in the mid to high teens.
The foundry founder will do just fine. Despite toiling away in a business that some mistakenly categorize as a commodity, TSMC has delivered 21 years in a row in which net margin topped 30%. Its latest quarter treated investors to a net margin of 45.7%, its strongest showing in three years. This means that for every $100 in generated in revenue for the three months ending in September, a whopping $45.70 of that made it to the bottom line.
2. Baidu
It's probably not fair to say that Baidu is an artificial intelligence (AI) stock that no one is talking about anymore. China's leading search engine is trading 57% higher in 2025, and the bullish momentum is fueled by Baidu's prospects at picking up some of the AI business in the new normal of trading restrictions with U.S. companies and China's own appetite for AI tech solutions.
Deutsche Bank became the latest Wall Street firm to come around, upgrading the stock to buy from hold on Friday. Analyst Leo Chiang sees Baidu emerging as an AI leader in China with its cloud computing and robotaxi efforts. Baidu's push into AI chips could be a major needle mover before long.
Despite all of the buzz and upticks, Baidu is trading for just 12 times trailing earnings. It's not a perfect situation. Its flagship business is meandering. Annual revenue is expected to dip marginally this year, something that has happened in two of the past three years. However, with great profitability power comes great opportunity. I like Wood returning to Baidu here.
3. Pony AI
Finally we have an investment with that trendy new stock smell. Pony AI has been public for almost a year. It's making headway in the competitive race to commercialize autonomous driving. It's a major player in China, but it was founded in California nine years ago.
Pony AI isn't profitable, and its revenue growth has been yawn-worthy. However, it's scoring milestones globally, and investors are starting to notice. The shares may be trading barely above their $13 initial public offering price from late November of last year, but it has been a volatile year higher. The stock has traded as low as $4.11 and as high as $24.92 since going public.
Expectations are high. Analysts see revenue gains accelerating next year, only to roughly double its business in each of the three subsequent years. This unlikely head turner with less than $86 million in trailing revenue should be topping $1 billion on the top line by 2029.
Rick Munarriz has positions in Baidu. The Motley Fool has positions in and recommends Baidu and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
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