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

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Famed stock picker Cathie Wood, the CEO of investment firm Ark Invest, offloaded a massive stake in Tesla last month, dumping more than $600 million in shares to instead splurge on recently struggling stocks like Coinbase and Robinhood—doubling down on her staunchly bullish stance on disruptive tech despite growing skepticism around the strategy on Wall Street.

Key Facts

According to Ark's daily transaction reports, the firm's funds sold another 381,000 shares of Tesla this week, representing a stake worth about $297 million and lifting its total sales of the stock to $605.7 million based on closing market prices.

By far, Tesla has remained Wood's most-sold stock throughout September, but she's also sold stakes in Singapore-based Internet firm Sea, Swiss pharmaceutical giant Novartis and industrial automation company Teradyne for a combined $583 million.

In their place, Ark has shifted its buying focus over the past two weeks to a crop of new stocks that all started trading this year and haven't been faring too well, led by a $143 million investment in cryptocurrency exchange Coinbase, whose shares have plunged 34% since an April trading debut amid a broader crypto-market rout.

In the middle of her Coinbase buying spree last month, Wood hit back at "naysayer" investors critical of the nascent cryptocurrency space, calling bitcoin "much more than just a store of value or 'digital gold,'" and forecasting its prices could skyrocket from current levels of about $41,000 to more than $500,000 in the next five years.

Ark has also been plowing into a slew of tech stocks that rallied last year at the height of pandemic uncertainty, but have since shed as much as 50% of their value—investing roughly $320 million in New York automation company UiPath, and about $160 million each in streaming company Roku, Zoom Video Communications and genetics testing firm Invitae.

Ark declined to comment on its specific trades, but transaction reports reveal the firm's top buys this month also include at-home healthcare company Signify Health, online brokerage Robinhood (another crypto-exposed stock) and sports-betting company DraftKings.

Contra

Increasingly, Wood's strategy—which Ark says focuses on "disruptive innovation"—has garnered skepticism on Wall Street. As of Friday morning, the firm's $25 billion flagship fund, the Ark Innovation ETF, seemed poised for its worst quarterly outflows ever, with investors cashing out some $2 billion over the past three months, according to a Bloomberg analysis. Meanwhile, Scion Asset Management—the hedge fund headed by investor Michael Burry, who famously predicted the housing market crash in 2007—last month disclosed it holds bearish put options, which are placed when investors believe an asset's value will fall, on $30 million worth of Ark shares.

Surprising Fact

Despite skyrocketing 90% over the past year, Ark's Innovation ETF has fallen 11% in 2021—compared to an 18% gain for the S&P 500.

Key Background

Technology stocks led the market's rally last year, generating massive returns for tech-heavy investors like Ark. Starting this spring, however, accelerating economic growth and the threat of rising interest rates spurred a stock-market rotation away from growth stocks, like those in tech, to cyclical and value-leaning slices of the market (like energy and financials). That rotation came to a head on Tuesday, with tech stocks posting their worst one-day decline since March. Cryptocurrencies haven't been spared from the fallout either, with the market down about 25% from an all-time high in May.

Tangent

Following a wave of Tesla selling last year, 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 told CNBC. Despite her recent sales, Wood earlier this month said she believes Tesla's stock price could skyrocket nearly 300% by 2025.