Sunday, 22 December 2024
by BD Banks
Cathie Wood, CEO of Ark Investment Management, is an active trader targeting at tech stocks that she believes to have a “disruptive” impact.
She often sells her favorite tech stocks to secure gains.
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This week, she offloaded three tech stocks—all from her top five holdings—amid a hawkish Fed rate cut.
Investors and analysts have mixed opinions on Cathie Wood. Supporters see her as a visionary in tech investing, but critics say she’s only a mediocre fund manager.
Wood’s followers affectionately dubbed her “Mama Cathie” after she drew widespread attention with a remarkable 153% return in 2020.
However, her longer-term performance isn’t so rosy:
The flagship ARK Innovation ETF (ARKK) , with $6.7 billion under management, has returned 11.08% year-to-date through Dec. 19, with an annualized three-year return of -15.50% and a five-year return of just 3.38%.
In comparison, the S&P 500 is up 24.66% this year, with a three-year annualized return of 9.98% and a five-year return of 14.65%.
Cathie Wood’s investment strategy is straightforward: Her ARK ETFs typically buy shares in emerging, high-tech companies in fields such as artificial intelligence, blockchain, DNA sequencing, energy storage, and robotics.
Wood believes these companies will transform industries, but their volatility causes significant swings in ARK funds’ values.
Related: Cathie Wood’s net worth: The Ark Invest CEO’s wealth & income
Wood recently expressed optimism about a shift to looser regulations under Donald Trump’s presidency, particularly regarding technology, cryptocurrencies, and digital assets.
“In the last four years, we saw massive concentration toward very few stocks,” Wood said on CNN’s Inside Politics Sunday on Dec. 1. “I think the market’s going to broaden out right now and reward companies who are at the leading edge of innovation.”
Not all investors seem persuaded by Wood’s confidence. Over the past year, the ARK Innovation ETF (ARKK) experienced a net outflow of nearly $3.3 billion, with $104.8 million exiting the fund in just the past week, according to ETF research firm VettaFi.
From Dec. 17 to Dec. 19, Wood’s ARK Innovation ETF (ARKK) sold 34,598 shares of Tesla and 33,402 shares of Palantir Technologies (PLTR) , and her Fintech innovation ETF (ARKF) sold 19,426 shares of Coinbase Global (COIN) .
The details of the transactions are:
That chunk of stocks was valued at roughly $21.5 million.
The sale was made amid the Fed’s hawkish interest rate cut. On Dec. 18, the Fed lowered the Fed funds rate by 25 basis points. However, it also indicated that the central bank wouldn’t cut interest rates very aggressively in 2025, disappointing many.
Despite the rate cut, the hawkish tone suggests tighter financial conditions than hoped in 2025, which could hurt stock market growth and investor sentiment.
The dollar soared to a two-year high after the news, while cryptocurrencies and stocks slumped.
However, Wood had already begun trimming positions in Tesla and Palantir ahead of the interest rate cut.
Tesla (TSLA) remains a significant part of ARK Invest’s portfolio, but the fund has gradually reduced its exposure following substantial price gains. The stock has surged 45% since Donald Trump’s presidential victory on Nov. 6.
From Dec. 11 to Dec. 13, ARK Funds sold 164,595 Tesla shares valued at roughly $70 million.
Wood has been a strong Tesla advocate for years.
Related: Analyst revamps Tesla stock price target after EV-outlook review
In 2018, she predicted Tesla’s pre-split shares would hit $4,000 by 2023, a forecast seen as overly optimistic by most analysts. However, Tesla reached the split-adjusted equivalent in 2021, proving her right.
Tesla began to shift upward in Q3 as it reported better-than-expected earnings and shared bold growth targets.
Adjusted earnings per share reached 72 cents, topping forecasts of 58 cents, which CEO Elon Musk described as a “record Q3.” However, revenue slightly missed estimates at $25.18 billion versus the expected $25.37 billion.
Tesla expects to see vehicle growth of 20% to 30% next year, Musk said.
Wood has also been selling Palantir as its stock surged after its strong third-quarter earnings released on Nov. 4.
Palantir reported Q3 earnings of 10 cents per share, exceeding Wall Street’s expectation of 9 cents. Its revenue was $726 million, topping the consensus estimate of $701 million.
Chief Executive Alex Karp credited the performance to soaring demand for artificial intelligence.
Related: Analysts sound alarms on Palantir stock into 2025
In November, the ARK Funds sold 1.26 million shares of Palantir, valued at roughly $67.7 million.
This was followed by another sale of 95,570 shares on Dec. 6, valued at $7.3 million.
Palantir’s valuation appears to be overly inflated at the moment. Several Wall Street analysts have expressed concerns over the issue, warning against chasing the stock’s surge.
Therefore, Wood’s taking profits off the table seems reasonable.
Despite the recent sales, Tesla and Palantir remain the top and fifth-largest holdings in the ARK Innovation ETF, accounting for 16.7% and 5.7%, with valuations of $1.06 billion and $361.6 million, respectively.
Coinbase’s stock price is closely tied to the cryptocurrency market. As a cryptocurrency exchange, Coinbase’s revenue relies heavily on trading volume, transaction fees, and the overall interest in digital assets.
Wood first purchased Coinbase on Apr.14, 2021, the day of Coinbase’s Nasdaq debut. On that day, ARK acquired approximately $246 million worth of COIN shares.
Since then, she has continued to be an active investor in Coinbase, regularly buying and occasionally trimming its position depending on market conditions and portfolio strategy.
Coinbase is the top holding in the ARK Fintech Innovation (ARKF) , accounting for 9.76% of the fund, and the third-largest holding in ARK Innovation (ARKK) , making up 8.61%. The investments are valued at $109 million and $550 million, respectively.
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