ARK Invest CEO Cathie Wood’s tech bargain hunt

Cathie Wood’s ARK Invest continued to buy tech stocks in September. The latest investments include chipmaker Nvidia [NVDA] and software company Adobe [ADBE]. There has also been a management reshuffle with Wood handling over control of two of the investment firm’s funds.

Cathie Wood’s ARK Invest continues to bet big on tech companies, despite this year’s shift away from growth stocks. The latest investment is in chipmaker Nvidia [NVDA], which has seen its share price halve so far this year. Considering how far some of these stocks have fallen, ARK Invest could be picking up some bargains, especially for its flagship ARK Innovation ETF [ARKK].  

However, investing in tech stocks amid the downturn carries a high degree of risk. Not only is the ARK Innovation ETF dependent on investors not walking out the door with their cash, but it’s difficult to predict whether tech stocks will recover after this year’s steep selloffs. 

With such belief in innovation and tech stocks, it’s perhaps no surprise that the ARK Innovation ETF has taken a pounding in 2022 having dropped more than 60% — a far steeper drop than both the Nasdaq’s 31% fall  and the S&P 500’s 23% decline over the same period. 

In August, the ARK Innovation ETF saw its largest outflows in a year as some investors lost patience with the fund’s focus on disruptive innovation. Tesla [TSLA], Zoom [ZM] and Roku [ROKU] are the fund’s three top holdings, accounting for around a quarter of all holdings. Tesla has a 10.68% weighting in the fund with the stock having dropped 30% this year, Zoom accounts for 8.4% of the fund and its stock down 60% this year, and Roku accounts for 7.4% with the stock down 74% this year.

ARK Invest bets on tech

Whether the ARK Innovation ETF can rebound depends on a resurgence in battered tech stocks like Nvidia. ARK Invest purchased more than 400,000 shares in Nvidia [NVDA] in September. The chipmaker’s share price is down 58.4% this year (through 26 September) as slashed earnings and macroeconomic conditions weigh on sentiment.  

Wood is a fan of Nvidia and the stock has been a mainstay of ARK portfolios since 2014, alongside Tesla. This year the firm has stuck to its strategy of tech stocks despite a gloomy economic outlook.

ARK Invest looks set to continue investing in tech stocks for the time being. In September, Wood added to existing positions in Adobe [ADBE], Velo 3D [VLD] and General Motors [GM].

Adobe’s share price took a hit after announcing it was buying collaborative design platform Figma for $20bn. Like Nvidia, Adobe’s stock has also been beaten by slowing growth and the wider sell-off in tech stocks. 

On 13 September, the ARK Innovation ETF added to positions in Roku [ROKU] (+250,000 shares), Zoom (+208,000 shares) and cancer diagnosis pioneer Exact Sciences [EXAS] (+55,340 shares). 

Twilio was another big buy in September, with over 47,000 shares added to the ARK Innovation ETF. The communication platform’s share price is down over 72% since the start of the year.

In the ARK Space Exploration & Innovation ETF [ARKX], the firm continued to add to its position in Velo3D, which is a 3D printing company with clients in the aviation and aerospace industries, this month. Velo3D brought in $27m in revenue last year but a strong pipeline of orders could see that figure more than triple to $87.7m this year, according to Yahoo Finance data. Analysts are forecasting revenues of $148.1m in 2023, up 68.9% year-on-year.

Management reshuffle

Up until the start of the year, Wood had been the sole portfolio manager of all nine ARK ETFs.  However, this year she relinquished control of two of the investment firm’s funds. Since September, William Scherer has overseen the ARK 3D Printing ETF [PRNT] and ARK Israel Innovation ETF [IZRL]. Scherer has been a trading manager at the firm since 2014. 

Another shakeup this month was ARK’s head of research Brett Winton being promoted to chief futurist at ARK Invest, sparking speculation that he was being lined up as a potential successor to Wood’s.

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