Cathie Wood’s investment firm, known for investing in companies that are shaking up their industries. They are testing a portfolio that would let her bet against the corporate victims of that disruption.
Cathie Wood — known for her innovation ETFs that garnered billions in inflows during the pandemic. They said Ark Invest is internally testing a fund that takes the strategy a step further by simultaneously betting against major stocks in the benchmarks that are being disrupted.
Wood, a widely followed stock picker, founded and runs the asset-management firm ARK Invest. ARK currently offers six actively managed exchange-traded funds. But none have the capability to short stocks borrowing shares and selling them later in a bet that prices would drop.
“We’re testing out a portfolio, but it’s really Ark on steroids,” Wood told CNBC’s “Squawk Box” on Wednesday. Wood said she wants to test the strategy on Ark’s employees and did not say when the fund would be made available to retail investors.
ARK’s flagship fund, the ARK Innovation ETF (ARKK) ditched 56,975 shares. It is worth an estimated $63.5 million, in Elon Musk’s electric-vehicle giant. ARK funds sold a tranche last month worth more than $200 million. Wood had indicated in September that she would be willing to sell down her flagship fund’s stake in Tesla (ticker: TSLA), according to reports.
“We think the benchmarks are where the big risks are long term because they are filling up with value traps. Those companies that have done very well historically but are going to be disintermediated and disrupted by the massive amount of innovation that’s taking place,” Wood said.
She said that when market conditions warrant more caution, portfolio managers and analysts typically fall back on stocks in the benchmark indexes. They dump the stocks that her ARK funds invest in, which are either small parts of benchmarks or not in them.
Wood also said that the new strategy, as with Ark’s other plays, would come with its share of volatility. But she said that as technologies like DNA sequencing, robotics, energy storage, AI, and blockchain converge, the bigger wins were still several years out.
ARK Funds
Wood’s ARK funds offered up a mixed showing on Wednesday. Wood’s ARK Innovation (ARKK) fund was up 1.7% in the stock market today. ARK Fintech Innovation (ARKF) rose 1.3% on Wednesday. The ARK Genomic Revolution (ARKG) ETF climbed 1.5%, reversing higher.
Year to date, those funds are down significantly while the major indexes are up solidly. ARKG hit a 52-week low on Tuesday.
Tesla stock remains ARK Innovation’s top holding. But ARK has been selling more shares in Tesla recently. Tesla stock rose 0.6% in Wednesday’s trading.
In turn, the investment firm has scooped up more stocks like Zoom Video Communications (ZM) and Roku (ROKU), which have fallen sharply in recent months.
ARKK produced total returns of 152% last year but is down 13.43% year to date according to FactSet. Tesla makes up 10.28% of the fund, its biggest holding.
Below are key trades for Ark on Tuesday
Bought 645,110 shares — estimated to be worth $133.3 million — in Zoom Video Communications Inc on the dip. The stock plummeted 14.7% to close at $206.64 a share on Tuesday.
Sold 43,188 shares — estimated to be worth $14.56 million — in Facebook Inc. The stock closed 1.10% lower at $337.25 a share on Tuesday.
Bought 499,744 shares — estimated to be worth $13.81 million — in Robinhood Markets Inc . The stock closed 0.68% lower at $27.65 a share.
