Cathie Wood just bet on an under-the-radar stock that should benefit from the infrastructure boom

Published Mon, Apr 5 20212:51 PM EDTUpdated Mon, Apr 5 20213:02 PM EDT

Cathie Wood might be betting on an infrastructure spending boom, based on Ark Invest's latest purchase. The firm's flagship fund — Ark Innovation — purchased 453,214 shares of software-centric industrial company Trimble on Friday. Based on the company's closing price of around $83 per share last Thursday, Ark's purchase was worth north of $37.6 million. Trimble's products and services include mobile mapping and GPS receivers. Trimble is also the top holding in Wood's new space exploration and innovation ETF ARKX , which just started trading last week. The company represents more than 8% of the ETF's weight. Both ETFs hold a similar number of shares of the company (ARKK owns 453,214 and ARKX owns 496,748). Shares of Trimble jumped 4.5% to a 52-week high on Monday. Trimble uses a software-centric approach to construction management, agriculture and transportation. Since these industries are some of the least digitized industries, they could greatly benefit from technology adoption to drive productively, according to analysts. Wall Street expects Trimble will benefit from President Joe Biden's $2.3 trillion infrastructure bill. "With 25% to 30% of revenue stemming from infrastructure, per our estimates, we believe TRMB's geospatial, construction, and civil engineering offerings are well positioned to benefit from any increase in infrastructure demand," KeyBanc Capital Markets analyst Jason Celino told clients after Biden's announcement. Trimble should benefit from the overall spending on roads, bridges and highways. Demand for utilities projects and transportation could also drive spend on Trimble equipment and software solutions, according to Morgan Stanley. Wood — chief investment officer and CEO of Ark Investment Management — has made a name for herself by investing in "disruptive innovation" stocks. The firm's flagship fund, Ark Innovation , has seen nearly $16 billion flood the fund in the past year, according to FactSet. Wood often touts companies that use disruptive technology that will change the way the world works. It is likely that is what the popular investor sees in Trimble, which has a water management software where they use satellites to help farming. "Longer term, we continue to believe secular growth in adoption of precision technology and integrated software offerings will be the core value driver for TRMB. Continuing strength in commodity prices and infrastructure funding globally should support these continued adoption plans," Morgan Stanley equity analyst Meta Marshall told clients. Trimble's price tag While Wood is known to invest in high-multiple companies with large price tags like Tesla, many Wall Street firms consider Trimble to be expensive after the stock gained more than 65% in just six months. Morgan Stanley said with Trimble at a historical peak multiple, it believes incremental infrastructure spending is built into Trimble's valuation. The firm has a hold rating on the stock. Meanwhile, Bernstein has a buy rating on the company, telling clients that "on a risk-adjusted basis" Trimble offers "the most attractive way to invest in infrastructure," the firm's analyst Chad Dillard said. "Relative to the EPS upside from this bill, these stocks have had muted performance after the Jan '21 Georgia Run-Off, when infrastructure started to get priced in," he said. Of the 15 analysts that cover Trimble, 10 have a buy rating on the stock, according to FactSet. Five analysts have a hold rating. Wolfe Research warned clients last week that Trimble earning the top holding in Wood's new space ETF could garner retail trading attention in the stock. "Recent support from ARKX chatter has only exacerbated the clear rerating uncertainty that had crept into conversation with (institutional) investors in recent weeks" Wolfe Research analyst Blake Gendron told clients. "In terms of the retail chatter, from what we can tell key [Wall Street Bets] pundits may not like the ETFs until Ark steps out a bit on the risk curve (particularly SPACs)." Shares of Ark Innovation are down 1.7% this year amid a rotation out of innovation names from the threat of rising interest rates. — with reporting from CNBC's Michael Bloom.

The Trimble logo is displayed on a smartphone.

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Cathie Wood might be betting on an infrastructure spending boom, based on Ark Invest's latest purchase.