HOOD - Analyzing 13Fs: ARK Investment Management (Cathie Wood) Q1 2023 Update

2023-05-02 03:11:45 ET

Summary

• Fortune is slowly turning in favor of Cathie Wood and her investment management firm as the rapid decline of her ETFs and their underlying assets has perhaps finally bottomed.
• Front-running tech stocks have delivered unexpectedly good earnings in defiance of expectations, while Cathie continues to double down on her favorite "innovative disruption" stocks.
• The reported U.S. equity-based assets under management increased by $3.1 billion to $14.2 billion as per the latest filing, compared to the last quarter.
• They continued adding to their Tesla, Block, Roku, Coinbase, Shopify, and Zoom Communications positions.
• Some of ARK's previously held positions saw some trimming this quarter, including companies like Exact Sciences, Twilio, Toast, and DraftKings.

In today's article, we bring you the latest update in our recurring series based on analyzing 13F filings and the latest moves of some of the world's most renowned funds and asset managers. Our original article on the matter and the main thesis behind it can be accessed through this link , and the fourth-quarter update can be read here .

Quarterly Overview

After Cathie Wood and her team just turned their heads on what is likely the worst year performance-wise the management firm will endure in a while, fortunes seem to be slowly turning amid a rather timid macroeconomic situation. Some solid earnings performance, especially within the tech sector, might prove a saving grace for the fund as capital slowly trickles back into its coffers. After tens of billions of dollars have been erased over the past couple of quarters, the reported U.S. equity-based assets under management increased for the first quarter of the year by $3.1 billion to $14.24 billion based on their latest filing. In contrast, just a little less than two years ago she managed more than $50 billion through all of her funds.

Cathie Wood's flagship fund, the Ark Innovation ETF ( ARKK ), is up almost 15% year-to-date after losing almost three-quarters of its value in 2022. Other smaller ETFs they manage, like ARK Fintech Innovation ( ARKF ), ARK Genomic Revolution ( ARKG ), and ARK Next Generation Internet ( ARKW ), have had strong starts to the year as well. What is characteristic of this quarter is the noticeable increase in both the top 10 holdings concentration of the firm as well as the number of major portfolio holdings. As per the latest filing, ARK currently has seven major holdings and still holds 38 major ownership stakes. They had a busy quarter, adding 5 new positions while increasing their stake in 79 existing holdings. On the other end, they have sold out of 15 positions while taking the opportunity to trim down 116 of the holdings. Tesla ( TSLA ) regained the title as the largest holding within the management firm, accounting for 7.92% of the portfolio, closely followed by Roku ( ROKU ) and Zoom Video Communications ( ZM ) taking up 5.77% and 5.63%, respectively. This is largely due to the previous top holding, Exact Sciences (EXAS), going through a major trimming this quarter. Below is a look at their other top holdings.

Expanded Positions

Tesla ( TSLA ): for six consecutive quarters, ARK has been actively chipping away at her TSLA position but changed course since Elon Musk's EV-maker fell off the $300 per share range late last year. Cathie kept accumulating Tesla as the share price was breaking 52-week lows and well into the recovery. This quarter, ARK bought another 814 thousand shares while the stock traded between $106 and $215, growing their TSLA stake by more than 17%. It once again became their largest holding, accounting for 7.92% of the AUM. Shares of the company can be bought for as little as $164.31.

Block ( SQ ): has been a part of their portfolio since the fourth quarter of 2016 and has since grown to become their 7th largest holding. SQ now accounts for 5.05% of their US-based AUM. Their exposure was increased by 16.3% this quarter, with ARK buying shares in the $60-$89 range. They add some 1.4 million shares of the fin-tech company. SQ can now be purchased for around $60.79 per share.

Coinbase Global ( COIN ): this is the second consecutive quarter in which the ARK team added to their COIN holdings. They have increased their position by around 28% by adding 2.5 million shares. New shares were added while the crypto-exchange firm traded in the $35-$85 range. Considering these prices and the number of shares they bought it was likely one of their largest trades of the quarter. COIN currently trades at the higher end of the range at around $53.79 per share.

Robinhood Markets ( HOOD ): another infamous Cathie Wood pick got added to this quarter as well. Robinhood is currently the 18th largest holding of her funds and was increased by 8.51% in Q1. They have added 2.4 million shares between prices of $8 and $11. She has been long-bullish on the commission-free broker and has held the position since the third quarter of 2021. Back then, the stock was trading in the $40-$50 range. Today, shares in the broker can be bought for as little as $8.77 per share.

ARK Investment Management also increased its exposure to companies including Pacific Biosciences of California ( PACB ), Teladoc Health ( TDOC ), Roblox Corporation ( RBLX ), Zoom Video Communications ( ZM ), Shopify ( SHOP ), Roku ( ROKU ), and others.

New Positions

AMD ( AMD ): is perhaps the most interesting new addition to the ARK portfolio during the quarter. However, even as such, it remains relatively negligible. ARK Investment Management purchased more than 186 thousand shares of the chip-maker while it traded in the $64-$100 range; although it traded above $80 a share for a good deal of the quarter. The company currently trades at $90.24 per share.

Pinterest ( PINS ): this is the second new purchase "with a ring" to it, but also to a rather negligible size. ARK paid between $23 and $29 for 465 thousand shares of the social media company. The company currently trades at $22.52 per share.

ARK also acquired minor stakes in Mobileye Global Inc ( MBLY ), 5N Plus Inc ( FPLSF ), Nayax Ltd ( NYAX ), and Satixfy Communications ( SATX ).

Reduced Positions

Exact Sciences ( EXAS ): in what was likely the largest trade of the quarter, ARK dumped 4.6 million shares onto the open market. It is worth keeping in mind that the firm already disposed of 1.52 million shares of EXAS last quarter, trimming back the size of its once-largest holding. Exact Sciences has now become the 6th largest holding, accounting for 5.42% of AUM. The position decreased by 29% as ARK sold shares between $49 and $72. It can now be purchased for $63.24 per share.

Twilio ( TWLO ): is another "loser" in the portfolio held since the fourth quarter of 2018, when it traded in the $65-$95 range. After cutting its exposure by 15.65%, TWLO has been downgraded and now represents the 11th largest holding for Cathie Wood. This came after ARK Investment Management sold 1.15 million shares while TWLO traded in the $49-$79 range. Shares in the company can be bought today for $52.61.

Cathie Wood also cut her stakes in DraftKings ( DKNG ), PagerDuty ( PD ), 10x Genomics ( TXG ), NVIDIA ( NVDA ), Grayscale Bitcoin Trust ( GBTC ), Kratos Defense & Security Solutions ( KTOS ), MercadoLibre ( MELI ), StoneCo ( STNE ), Incyte ( INCY ), Deere & Co. ( DE ), and other, less notable holdings.

Closed Positions

Fate Therapeutics ( FATE ) is a company that lost 80% of its market value in a little over a year. The position in Fate was systematically constructed almost every quarter since mid-2019, only to be completely cleared out in just two quarters. They dumped 4.21 million shares a position that was worth more than $42 million as of the end of Q4 2022. ARK was paying anything in the range of $20-$120 for a piece of the biopharmaceutical company.

ARK Investment Management also parted ways in the first quarter with Palantir Technologies ( PLTR ), Exco Technologies ( EXCOF ), Adobe Systems ( ADBE ), Silvergate Capital ( SI ), and Organovo Holdings ( ONVO ), among others.

Final Overview

Tech darlings among FAANG and elsewhere have been delivering unexpectedly good earnings in defiance of most expectations over the course of the past couple of weeks and Cathie continues to double down on her favorite "innovative disruption" stocks. If the positive sentiment persists well into the next couple of quarters, Cathie's actions throughout the market sell-off can position her in an extraordinarily good position to outperform in the upcoming period.

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