Topline
As a rash of disappointing earnings battered the already-struggling technology industry this week, famed stock-picker Cathie Wood, the CEO of New York City’s ARK Invest, cashed in on recent gains of top holding Tesla and splurged on former pandemic darlings that have plummeted in value this year.
After skyrocketing nearly 150% in 2020, Ark’s flagship fund has tumbled 66% from an all-time high in … [+] February 2021.
Key Facts
According to Ark’s daily transaction reports, three of the firm’s funds, including its flagship Ark Innovation ETF, sold nearly $94 million worth of Tesla shares on Thursday, tacking on to Wednesday sales of $66 million to become Ark’s top-sold holding this week.
The transactions follow a 4% run-up in Tesla prices over the past two days thanks to a record $3.3 billion profit reported on Wednesday, fighting off a broader plunge that pushed the tech-heavy Nasdaq down 4% over the same period.
The high-profile trader also offloaded a massive stake in Spotify, dumping about $74 million in shares on Wednesday and Thursday as the stock plummeted 18% amid a broader rout for streaming stocks, spurred by Netflix’s widely panned earnings report late Tuesday.
Despite selling Spotify, Ark took advantage of another streaming stock’s plunge—buying $61 million worth of Roku as shares tumbled 15% on Wednesday and Thursday to mark the firm’s biggest purchase this week; it also bought shares of Shopify and Zoom worth about $53 million and $34 million, respectively.
Though they skyrocketed as much as 700% during the pandemic, shares of Shopify and Zoom have crashed 65% and 45% this year, leading a decline among technology stocks as the Federal Reserve begins fighting decades-high inflation with interest rate hikes that tend to hurt company earnings, particularly for high-priced stocks.
It’s been similarly tough for Ark, which touts a portfolio of disruptive innovation stocks: Despite skyrocketing nearly 150% in 2020, the firm’s flagship fund fell 24% last year and has tumbled 66% from an all-time high in February 2021.
Tangent
Wood also sold a roughly $5 million stake in Twitter this week as the social media giant fielded an unexpected takeover offer from Tesla CEO Elon Musk. “We had been cutting back on Twitter after Jack Dorsey handed over the reins,” Wood told CNBC on Tuesday, while also chiming in on the back and forth. “I think there’s going to be some drama, and we don’t know if the advertising model, the subscription model, some combination of that is going to prevail,” Wood said.
Key Background
Stocks have struggled in recent months as Fed officials work to combat surging inflation by unwinding the central bank’s pandemic-era stimulus measures. After rising 27% in 2021, the benchmark S&P 500 has fallen 9.5% this year. The Nasdaq has plummeted 17%. Wood, meanwhile, has defended the lackluster performance of tech stocks and her fund this year, telling Barron’s last month that Ark is “disrupting the financial services industry” while insisting that “value stocks are in a bubble.”
Tangent
Tesla still makes up nearly 9% of Ark’s flagship fund, representing a $1.2 billion stake that’s by far the firm’s biggest holding. However, that’s down from about 11% in October following the wave of recent selling and a nearly 17% decline for Tesla stock. Wood has previously 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 in 2020.
Further Reading
‘Give Us Five Years’: Cathie Wood Defends Struggling Tech Stocks As Flagship Fund Craters (Forbes)
Dow Drops 350 Points, Yields Surge After Powell Signals Bigger Rate Hikes Starting In May (Forbes)
