Summary
- Cathie Wood and her ARK Investment Management have just turned their backs on their worst year of performance since the inception of the investing firm.
- The market continued to systematically dissect any leftover enthusiasm in the growth and technology space, significantly hurting her "innovative disruption"investment style.
- Amid the sell-off, reported U.S. equity-based assets under management decreased by another $2.79 billion to $11.54 billion, compared to the $14.34 billion the firm reported last quarter.
- Cathie decreased her exposure to Exact Sciences, Zoom Video, Block, Teladoc, UiPath, Beam Therapeutics, and many more as fund outflows pressured her decision-making process.
- The investment firm notably added to its Tesla, Coinbase, Ginkgo, Twilio, and Roku holdings, increasing the concentration of its top 10 holdings.
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 .
ARK Investment Management Q4 '22 Heatmap (Quiver Quantitative)
Quarterly Overview
Cathie Wood and her ARK Innovation fund have just turned their backs on their worst year since the inception of the investing firm. Their US-based assets found themselves strapped to the operating room's surgery table for the better part of the fourth quarter as the market continued to systematically dissect any leftover enthusiasm in the growth and technology spaces. Her flagship fund, the Ark Innovation ETF ( ARKK ), closed the year down over 60% in 2022, as rising interest rates and a hawkish FED crushed most growth stocks. The result of this is that reported assets declined even further to only $11.2 billion, compared to the $14.3 billion that was reported in the last quarter.
It is worth pointing out again that Cathie Wood oversaw the management of more than $50 billion in assets a little more than a year ago, representing a gigantic outflow of capital. The fourth quarter saw ARK Investment Management open just 4 new positions while expanding 52 of their already existing positions. On the other end, the firm closed 4 positions while trimming its position in 134 holdings. The ARK fund's holdings concentration has been a well-stated fact for a long time, as their top 10 holdings remained at a very high 45% of the AUM.
By the end of the fourth quarter, the funds had only four outsized holdings, each taking up more than 5% of AUM, as Tesla ( TSLA ) got quietly replaced by Exact Sciences ( EXAS ). The other two are Zoom Video Communications ( ZM ) and Square ( SQ ), taking up 6.4% and 5% of the portfolio, respectively. Cathie Wood has no issues with acquiring significant ownership stakes in high conviction rate investments, which has led to a 5% or more ownership in 38 companies.
Some examples are Ginkgo Bioworks Holdings ( DNA ), Intellia Therapeutics ( NTLA ), and Teladoc Health ( TDOC ), among others, significantly reflecting her "innovation-oriented" investing style. Besides her flagship fund, Cathie Wood oversees the management of these funds through several lesser-known exchange-traded funds, including ARK Next Generation Internet ( ARKW ), ARK Fintech Innovation ( ARKF ), ARK Autonomous Tech ( ARKQ ), and ARK Genomic Revolution ( ARKG ).
New Positions
Prime Medicine ( PRME ): represents the largest addition for the reporting period. ARK Investment Management purchased 1,639,984 shares of the gene editing startup between $14 and $22. The firm had its IPO in October of last year. This amounts to a 1.74% ownership stake in the company but takes up only 0.27% of the funds AUM. Unlike most other IPOs, the company still trades roughly in the range of its offering price, currently being sold at around $17.62 per share.
ARK Investment Management also acquired minor stakes in iShares Russell 1000 Growth ETF ( IWF ), Vanguard Growth Index Fund ETF ( VUG ), and 3iQ CoinShares Bitcoin ETF ( BTCQF ).
Expanded Positions
Tesla ( TSLA ): it is almost impossible to discuss Cathie Wood without at least touching on the subject of her favorite stock. After almost six consecutive quarters of cutting pieces of their TSLA position, ARK pivoted and entered into a buying spree in the fourth quarter last year. As the price kept breaking 52-week lows, Cathie used the opportunity to buy 544,555 shares, expanding her Tesla position by 13% from the prior 13F filing. She seems to be on the correct side of this trade, given that the company's stock has almost doubled in price year-to-date. Shares of TSLA trade once again around the $200 range.
Coinbase Global ( COIN ): after cutting their exposure to COIN by almost 13% in the third quarter, ARK had a change of heart and used the fourth quarter to expand their position by approximately 19%. The shares were bought anywhere in the $32-$78 range thanks to the stocks volatile quarter. This is technically still a net decrease in terms of absolute numbers, but the latter shares were possibly bought for almost one-half of the price of those in the last quarter. Coinbase was worth close to $80 billion at the end of 2021, despite famously having no physical headquarters at the time. COIN currently trades at around $60 per share.
Ginkgo Bioworks Holdings: they have added once more to the position they have been building up since Q3 of 2021. The position was increased by 13%, having added 17,565,211 more shares this quarter. They likely paid between $1.5 and $3.5 a share. As mentioned before, ARK holds one of the largest stakes in the company at more than 13%. The company was trading in the mid-double digits back when they first started buying shares. Ginkgo is now trading at the back end of that spectrum at around $1.66 per share.
Verve Therapeutics Inc ( VERV ): is another heavily beaten-down stock that trades for roughly one-half of last year's price. Even though ARK initially entered the position in the $30-$75 range, they've used the recent decline to lower their average price. They added 971,971 shares, increasing their position by almost 29%. Verve has grown to become the 26th largest holding within the firm. The company is now trading at around $19.18 per share.
Other notable positions that ARK increased were Twilio ( TWLO ), Schrodinger ( SDGR ), DraftKings ( DKNG ), Roku ( ROKU ), CareDx ( CDNA ), and Cerus ( CERS ).
Reduced Positions
Exact Sciences: ARK disposed of 1,521,212 shares of EXAS during the quarter, trimming back the size of their largest holding. The position decreased by 8%. The firm still holds a major 9% ownership stake in the company. The firm is currently selling for $64.79 per share.
Zoom Video Communications ( ZM ): remained the second largest holding of the fund, with Cathie Wood's ARK holding a 4.22% stake in the company. ARK sold some 270,000 of ZM, trimming their exposure by 2.5%. They've owned the stock since the fourth quarter of 2020, and the position has since grown to take up more than 6% of the portfolio, compared to last quarter when the company only took up 5.5%. Shares of ZM are currently trading for $73.04 per share.
Block ( SQ ): is one of the portfolio's oldest positions, having been built up since 2016, when the company was trading for less than $10 per share. This quarter saw ARK cut its exposure by 2%, disposing of 188,489 shares in the process. Unlike the previous two companies, the firm owns "only" slightly more than 2% of the outstanding shares, but it still constitutes ARK's fourth largest holding. SQ currently trades at around $72.61 per share.
Teladoc Health ( TDOC ): is another major portfolio holding that was skimmed in the fourth quarter. The firm disposed of 1,929,862 shares cutting its position by 9%. The position itself is worth around half a billion dollars given today's prices and ARK owns 11% of the company. Shares of Teladoc can once again be bought at around $29.
ARK Investment Management also cut its stakes in UiPath ( PATH ), Shopify ( SHOP ), Intellia Therapeutics ( NTLA ), Beam Therapeutics ( BEAM ), CRISPR Therapeutics ( CRSP ), Unity Software ( U ), PagerDuty ( PD ), and Robinhood Markets ( HOOD ), among others, less notable trimmings.
Closed Positions
Signify Health ( SGFY ) is likely the most interesting position that was completely closed out in the fourth quarter. SGFY announced that the healthcare giant CVS Health ( CVS ) will acquire it in a deal valued at $8 billion, paying $30.50 per share. Merger arbitrageurs pumped the price near enough to the deal price for Cathie Wood to close her own position, locking in some fair gains. Signify currently sells for $28.72 per share.
Zymergen was similarly closed out as it was taken over by the previously discussed Ginkgo. Cathie also sold out of IronSource Ltd, Hyperfine ( HYPR ), as well as Alleima AB ( OTC:SAMHF ), among other, less notable positions.
Final Overview
ARK Investment Management Q4 Top Holdings (Author Spreadsheet - 13F Data)
Tech stocks just bid farewell to an extremely difficult and uncertain investing year that saw many investors' favorite tech picks lose up to three-quarters of their market cap. Cathie Wood and her ARK funds felt almost the full pain of this process, given that the vast majority of her investments were based within the sector. However, still undeterred by the market selloff, Cathie found room in the fourth quarter to double down on her "disruptive innovation" and growth stocks, predicting that deflationary trends will continue well into next year. After all, the firm can still boast its annualized return of just shy of 10% since its inception back in 2014. Cathie Wood firmly believes that she is using the pressure as an opportunity to reconstruct her portfolio and lean more on her "highest conviction plays" while being confident that once the economic hardship brought on by rising inflation and the Federal Reserve's rate hikes, her fund will once again beat the market.
For further details see:
Analyzing 13Fs: ARK Investment Management (Cathie Wood) Q4 2022 Update