Famed growth stock investor Cathie Wood is rebalancing her largest and most accessible growth stock fund.of Ark Innovation ETF (ARKK -3.75%) Exchange-traded funds (ETFs) sold millions of shares. coinbase global (coin -4.72%), Zoom video communication (ZM -1.59%)and Twilio (TWLO -3.48%) In the last few weeks.
These are some of Cathie Wood's most popular investments, and she often praises them in recent interviews. So why would she part with so many of these select holdings?
I have no direct connection to Ms. Wood's money management firm, but let's consider why she is moving away from these particular stocks in February 2024.
What is Ark Innovation ETF?
Ark Invest's flagship fund seeks companies that engage in “disruptive innovation” that has the potential to change the world through breakthrough products and services. His three strains under my microscope still fit this description to a T.
- Coinbase is one of the world's largest, oldest, and most trusted cryptocurrency trading services.
- Zoom Video became well-known during the lockdown phase due to the coronavirus pandemic, but its user-friendly digital video conferencing solution was destined for innovative growth long before that unique event. It looked like.
- Twilio provides custom cloud-based communication tools that enable other businesses to incorporate the right audio and video tools into their core business apps.
Coinbase: Just a little trimming.
As of President's Day weekend, the Ark Innovation ETF had sold 370,000 Coinbase shares in February. This is a 7% reduction and is part of a significant 32% reduction since early December.
There's no need to speculate as to why Mr. Wood is making this move. Her fund is just cashing in her profits after an “epic” bull market over the past few months.
“This is simple portfolio management,” she said in a video interview with Yahoo Finance on Friday. “It’s just trimming and profit-taking and really nothing more.”
In fact, Coinbase stock is trading about 275% above its 52-week low last summer. Cathie Wood simply redistributes some of the fund's profits to other high-growth investment ideas at lower stock prices and valuation ratios.She still believes in rising rapidly Bitcoin (BTC 0.67%) Prices are driven by a so-called “halving” event in late April, with Coinbase claiming that its regulatory compliance efforts give it an edge in the crypto trading competition.
In other words, Cathie Wood is a big fan of Coinbase, even though she's been cutting back on her fund's investment in this high-flying stock. This remains the largest holding in the Ark Innovation ETF portfolio, accounting for 9.6% of the fund's overall holdings.
Zoom Video: Not the best investment in this market
Going further, Zoom Video tells a completely different story.
Wood hasn't publicly disclosed the rationale behind the Zoom sales, so I have to find other means to understand what's going on. The fund sold 2 million shares of Zoom Video stock in February in a fairly abrupt policy shift. This 25% drop wasn't a reaction to the stock price spike. Cathie Wood nearly stopped buying Zoom Video stock in October 2022. From there, the stock fell 8% by early February, when a wild selloff began.
Wood isn't throwing Zoom Video under the bus with her bearish remarks, but her trading actions speak louder than words. She clearly thinks other growth stocks have better long-term value right now, and she says it makes sense to take some losses on the Zoom Video investment and try again with a new idea. is thinking.
The stock's price is modest for a former market darling, but its revenue growth has stalled as the multi-year contracts that fueled its growth began to expire during the coronavirus lockdown. By 2024, Zoom Video will need to reload its rocket engine with new fuel, as videoconferencing is likely to be less effective than it once was.
So I take these sales numbers as a sign of dissatisfaction with Zoom Video's deferred growth dreams. If she were to go back to building Ark's Zoom Video stock, I would definitely raise my eyebrows in curiosity and take a closer look. As of now, Zoom Video is one of the 10 largest investments in the Ark Innovation ETF, accounting for 4.8% of its total holdings.
Twilio: Unsteady progress under new management
My hopes of finding a clear pattern in Wood's recent trades are dashed, as Twilio looks like a combination of her Coinbase and Zoom Video sales.
When Twilio's rapid sell-off of the Ark Innovation ETF began in the last week of January, the stock was up about 50% from its annual low last summer. But when viewed on a longer time scale, Twilio's chart looks like a twin to Zoom Video, which has shown an almost identical 86% price decline over the past three years.
TWLO data by YCharts
Cathie Wood was very excited about Twilio in early 2024, telling a CNBC reporter that the stock appears to be undervalued given Twilio's vast collection of valuable data. However, the company is running under new management and Mr Wood seems unimpressed with this former favorite so far. His holdings fell by 38% in February, and Twilio now accounts for just 2.1% of the Ark Innovation ETF's holdings.
So the Ark Innovation ETF's biggest and most profitable sell-off in February was just a cautious profit-taking move, with smaller moves reflecting disappointment with the poor performance of two growth stocks. It seems like it is. You can't win them all, but Cathie Wood continues to have great interest in all three of her stocks anyway.
Anders Bylund holds positions at Bitcoin, Coinbase Global, and Twilio. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, Twilio, and Zoom Video Communications. The Motley Fool has a disclosure policy.
