With growth stocks down bad over the past weeks, there’s been a lot of reshuffling amongst fund managers right now. That’s especially the case with famous tech funds, like Cathie Wood’s ARK Invest. With Ark’s top fund, the Ark Innovation ETF (NYSE: ARKK), down over 55% so far this year, it’s no surprise the ETF has been making changes. The most surprising of which is that a new stock has become Wood’s top pick.
Tesla (NASDAQ: TSLA) used to be the ETF’s single largest investment. However, with Tesla down substantially this year, Cathie Wood’s flagship fund has now bought up shares in Roku (NASDAQ: ROKU) instead. According to the Ark Invest website, the streaming service provider now represents 8.4% of her fund’s holdings. In comparison, Tesla represents just over 8.2%. In USD terms, that’s around a $717 million stake in Roku compared to a $702 million position in Tesla.
Compared to March, Tesla represented around 9.7% of her ETF’s portfolio, while Roku came in at just 6.4%. Despite this, ARK Invest still remains incredibly bullish on Tesla. This includes providing an updated price target for the car company of $4,600 per share. That represents a 600% upside from its current market price. However, some analysts are wondering why she is lowering her relative position in Tesla if a 600% price jump is on the horizon.
In an earlier interview, Cathie Woods said that her fund’s strategy has shifted because “We’ve been concentrating our portfolios towards our highest conviction names…The reason we concentrate our portfolios is because during risk-off periods most investors and analysts diversify their portfolios and get closer to their benchmarks, the benchmarks against which they’re measured. We do not have any one benchmark.”
Despite the shift in investment strategy, that hasn’t done much to mitigate ARK’s losses. While the fund’s down over 55% this year, indexes like the S&P 500 are down only 20% year to date, and the Nasdaq’s down around 28%. In comparison, Tesla has fallen by around 40% and Roku’s down 59.6%. However, ARK has seen a surprising comeback over the past several days, gaining as much as 15% since May 12th.
Another surprising move from ARK Invest recently has been its decision to buy more of General Motors (NYSE: GM) for its electric vehicle business. The decision to sell Tesla might be more of a price issue than a concern over short-term EV economics.
The general outlook for growth and tech stocks remains incredibly pessimistic. Many analysts are predicting a full-blown recession this year, and depending on how the Fed responds, growth investments could see a year or two of terrible returns before things return back to normal.
Tesla Company Profile
Founded in 2003 and based in Palo Alto, California, Tesla is a vertically integrated sustainable energy company that also aims to transition the world to electric mobility by making electric vehicles. It sells solar panels and solar roofs for energy generation plus batteries for stationary storage for residential and commercial properties including utilities. The Tesla Roadster debuted in 2008, Model S in 2012, Model X in 2015, Model 3 in 2017, and Model Y in 2020. Global deliveries in 2019 were 367,656 units. Tesla went public in 2010 and employs about 50,000 people. – Warrior Trading News
