In recent years, Ark Invest’s Cathie Wood has become one of Wall Street’s most intriguing personalities.
Most portfolio managers emphasize textbook concepts such as valuation multiples or intrinsic value. Wood is different. Ark Invest offers investors access to a wide range of exchange-traded funds (ETFs), the majority of which consist of emerging technology companies.
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However, to her credit, she balances Ark’s portfolio with some exposure to larger, more established opportunities. Wood’s top positions include most of the “Magnificent Seven,” many of which are leaders in the artificial intelligence (AI) landscape.
And in that segment of her portfolio, her recent sales amounted to Tesla(NASDAQ: TSLA) and purchases of Amazon(NASDAQ: AMZN) looks like a smart switch.
Generally, portfolio managers do not disclose the precise timing of their trades or discuss the rationale behind their decisions. Sometimes hedge fund managers give interviews on financial news programs and discuss their recent investment moves, but often these revelations come long after any significant buying or selling has taken place.
But Wood and the Ark Invest team do things a little differently. Every evening, Ark Invest sends an email to its followers detailing which stocks the funds bought and sold during that day’s trading session. In addition, Wood is often seen on CNBC or Yahoo! Finance, and is not shy about discussing her plays with great conviction.
Over the past two weeks, Wood has consistently trimmed her Tesla position.
Category
October 24
October 28
October 29
October 30
November 1
November 4
November 5
November 7
Tesla shares sold
85,500
120,000
13,900
62,200
30,600
9,900
2,300
85,000
While such consistent sales may give the impression that Wood is running for the hills, there is more here than meets the eye. Since Tesla reported its third-quarter earnings results on October 23, its shares have risen more than 30%.
TSLA chart
Wood recently explained this during a segment on Yahoo! Finances she sees now as an opportune time to take some profits and rebalance the Ark funds. Considering how volatile Tesla stock can be, a selloff could come out of nowhere.
During the month of October, Wood took Tesla profits and reinvested in his mega-cap tech cohort, Amazon. Between October 8 and November 7, Ark Invest acquired more than 395,000 shares of Amazon.
Amazon’s diverse businesses, which span e-commerce, cloud computing, advertising, streaming, grocery delivery and subscription services through its Prime membership program, make it a particularly attractive opportunity regardless of the economic climate.
And now, thanks to a smart partnership with Anthropic, Amazon has the opportunity to deploy AI across its entire ecosystem, strengthening customer engagement across all its business segments.
This strategy is already starting to pay off as Amazon’s profit machine scales at an unprecedented pace. With $48 billion in free cash flow over the last twelve months and $88 billion in cash and equivalents on the balance sheet, it is more than equipped to continue investing in AI-driven strategies that can accelerate growth.
Image source: Getty Images
The big idea for investors to keep in mind here is that Wood is still incredibly bullish on Tesla over the long term, despite its recent profit-taking. Recall that Ark Invest placed a five-year price target of $2,600 on Tesla stock a few months ago. Moreover, Tesla still remains a core pillar within Ark’s funds. I suspect Wood will continue to hold the shares to varying degrees over time.
I see Amazon doubling down as a particularly smart move at this point. The shares are historically cheap on a price-to-free cash flow basis, and I wouldn’t be surprised to see Wood post more profits as the company enters a new phase of AI-related growth.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Amazon and Tesla. The Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool has a disclosure policy.
Cathie Wood Sells Tesla and Buys These ‘Magnificent Seven’ Stocks Instead was originally published by The Motley Fool
