Tuesday, April 16, 2024

Cathie Wood’s Ark Invest Sells $205 Million In Tesla Stock—Buys Crypto, Gaming And Streaming Shares

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Topline
In her first Tesla sales since January, famed stock picker Cathie Wood, the CEO of investment firm Ark Invest, has offloaded a massive stake in the electric vehicle maker helmed by Elon Musk over the past week, dumping more than $200 million in shares to instead splurge on recently struggling stocks like Coinbase, Zoom and Roblox, which have plummeted as much as 50% this year.

Famed stock picker Cathie Wood sold Tesla shares for the first time in more than two months over the … [+] past week, while adding to massive stakes in Coinbase, Roblox and Zoom.

David Yellen/The Forbes Collection

Key Facts

According to Ark’s daily transaction reports, two of the firm’s funds, includings its flagship Ark Innovation ETF, sold a combined 52,335 shares of top holding Tesla on Wednesday, representing a stake worth about $57.5 million, and three funds sold about $147.5 million on Friday.

The transactions follow a stunning run-up of more than 40% in Tesla prices over the past two weeks, as the broader market recovered from a geopolitically fueled selloff, and mark Ark’s first Tesla sales since mid-January; the New York City investment firm actually bought roughly 60,000 shares in mid-February, after the stock had plummeted nearly 30% for the year.

Though Tesla was Ark’s top-sold holding over the past week, the firm also offloaded about $21 million worth of six other stocks, including Vertex Pharmaceuticals and software company Splunk.

In their place, Wood has tacked on to a massive position in another top holding, Coinbase, buying more than $100 million worth of shares over the same period, while also splurging on Gen-Z gaming platform Roblox, streaming giant Roku and former pandemic darling Zoom.

Though they’ve skyrocketed about 74% over the last year, shares of Tesla, priced at about $1,104 are down nearly 12% from an all-time high in November, while Coinbase, Roblox and Roku are down 19%, 48% and 42% for the year, respectively.

Ahead of the transactions, Wood defended the lackluster performance of tech stocks and her fund this year, telling Barron’s on Thursday that Ark is “disrupting the financial services industry” while insisting that “value stocks are in a bubble.”

Surprising Fact
Despite skyrocketing nearly 150% in 2020, Ark’s Innovation ETF fell 24% last year and is down another 27% in 2022. The S&P 500 is down 4% this year.

Key Background
Following a wave of Tesla selling in 2020, Wood said Ark likes to trade around a stock’s volatility, taking advantage of low prices to buy, and selling when she believes prices could take a hit. “When we feel like analysts are hyperventilating about a stock—including Tesla—we naturally just take profits because we know we’re going to get another opportunity associated with controversy to buy the stock lower,” Wood said at the time. Tesla still makes up nearly 9% of Ark’s flagship fund, representing a $1.2 billion stake, but that’s down from a $2.3 billion stake, representing 11% of the fund, in October.

What To Watch For
On Monday, Tesla announced it will seek shareholder approval for a stock split at its upcoming annual meeting. Stocks that have announced a stock split on average rose 25% over the next 12 months, versus 9% for the broader S&P 500, according to Bank of America.

Contra
Increasingly, Wood’s strategy—which Ark says focuses on “disruptive innovation”—has garnered skepticism on Wall Street. As tech stocks plummeted in January, traders betting against Ark’s flagship fund gained more than $1 billion—eclipsing their entire haul of $941 million for last year. “The idea of shorting innovation in America is ridiculous,” Wood said about the shorts at the time. Among her critics, Scion Asset Management—the hedge fund headed by investor Michael Burry, who famously predicted the housing market crash in 2007—disclosed it holds bearish put options on $30 million worth of Ark shares late last year.

Further Reading
Ark’s Cathie Wood Says Passive Investing Sparked The ‘Most Massive Misallocation Of Capital In The History Of Mankind’ (Forbes)

Cathie Wood’s Ark Invest Sold $605 Million In Tesla Last Month—But Doubled Down On Crypto Markets, Retail Traders And Online Betting (Forbes)

‘Give Us Five Years’: Cathie Wood Defends Struggling Tech Stocks As Flagship Fund Craters (Forbes)

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