Up 28% in January, would you do what ARK’s Cathie does?
Well, the Guru of Growth has been going in hard on Coinbase (COIN) stock for the last few weeks, a sure sign that she’s as confident as ever that the crypto exchange platform will be out front of any crypto sector recovery.
It’s either that or another sign Cathie D (for Duddy) Wood, the famed American investor and founder, CEO and CIO of Ark Invest, is as crazy-brave on the new tech boom thesis which has been her pre-determinant on markets since ARKK first bought into the fiscal vernacular some 8 years ago.
It’s a thesis which can swing as violently as a Parisian’s affection or an Australian cricket team trying to build a decent second innings lead in India.
In January, after copping enormous stick for an awful 2022, Wood’s flagship Ark Innovation (ARKK) ETF delivered its best month of gains ever, some 27.9% worth of wins – just as investors might’ve been starting to crack.
Now the Ark Innovation Fund’s asset management firm Ark Invest, is up 40%, after losing nearly 70% of its value last year.
Led by Wood and her tireless hunt for value and growth, Ark Innovation has since grabbed half a million more Tesla shares for circa US$100 million, some 360,000 COIN worth $23 million, and $12 million worth of the New York telehealth firm Teladoc (TDOC) now also in her top ten holdings.
According to regulatory disclosures, Wood’s also increased stakes in Intellia Therapeutics (NTLA), video game open platform Roblox (RBLX) and another US medtech riffing on genomics, Twist Bioscience (TWST).
Wood’s been a rock-star stock-picker ever since the circa US$60 billion (assets) ARK Invest took root with the pre-meme stock generation, striking a chord with pure play investments in sci-fi channel style innovations like anything Elon Musk thinks of, AI, self-driving cars and genomics.
After failing to find satisfaction stints at other investment firms, Wood began ARK in 2014, with an eye to packaging active innovation growth focused stock portfolios and wrapping them in an ETF format.
“We are the new Nasdaq,” Wood told Bloomberg, after the January record went live.
Although down 1.3% after a grim earnings report novernight, COIN is now up a casual 50% in 2023, happily swinging about in the mid to high double-digits on any given day.
Coinbase notched $2.3 billion in trading revenue. In 2021, it raked in about three times that at US$6.8 billion.
It’s fair to say most crypto and blockchain-related businesses are still in a bit of intensive care, trying hard to recover from last year’s punishment, with the outlook changing on a near-hourly basis.
Of course, there’s the US regulatory uncertainty with a likely crypto crackdown on crypto in the post and Coinbase has become a bit of a short-squeeze candidate – it’s been taking some heavy bets against it, creating the kind of hype that did for the likes of AMC and GameStop (GME) at the height of all that meme-stock business.
According to Barrons research, that’s a tricky trade all of its own. A crowded short squeeze can be unpredictable, and investors can easily get burned.
“The extent of the (COIN) short-squeeze risk is remarkable,” Barrons said earlier this month.
According to financial data group S3 Partners, among US stocks, the average short interest (which is the % of a company’s shares sold short) is 4.9%.
S3 says Coinbase has short interest of more than 25%.
Nevertheless, on the docket, ARKK took control of more than 253,000 COIN shares over a four day spree which began on the 10th of February as per the fund’s trading updates.
Next door at The Ark Next Generation Internet ETF (ARKW) snapped up some 42,000 shares over the same period.
While the stock is up 84% year-to-date, it’s well off its year-to-date (YTD) high of $87.63, of 3 February.
But the verbose crypto bull still has some work to do to just back up some of the upbeat chatter she’s made during February alone.
Talking to CNBC at the start of the month, Wood said the astonishing collapse of FTX, Celsius et al in 2022, the networks of Bitcoin and Ethereum were still going about their decentralising work as ‘seamlessly.’ as ever.
Wood then not only reiterated her famous prediction that Bitcoin would clock US$500K by 2030, but claimed that number was actually ARK’s base range.
The bullish scenario she said was in fact much higher.
The shares dropped 5.4% on 16 February, likely in reaction to a downgrade from DA Davidson – from ‘buy’ to ‘neutral’ – ahead of the company’s fourth quarter (Q4) earnings due to release after the market closes on Tuesday.
It’s a well trodden path. As per Cathie’s Modus Operandi, in December, just as Coinbase managed to clock an 82% YTD loss, Ark popped by to steal a $3.2 million taste of the crypto exchange.
Over the weekend Wood kept pumping the growth stock story on her mate Elon Musk’s new plaything, saying innovation-investing will make back all its lost since the central banks got all mean and cruel.
One more thought: @ARKInvest has a five year investment time horizon. Now that the most brutal interest rate increase in history is near an end, growth stocks in general and innovation-based strategies in particular should make up for lost time. https://t.co/sgYreOQBZI
— Cathie Wood (@CathieDWood) February 18, 2023
Wood has spent the last few months emptying the ARK Invest nest of her significant Nvidia stake.
Regulatory filings show that from November last to January, Wood’s ARK Innovation ETF was totally bereft of the chip stock which is also up some 50% this year.
Meanwhile, Wood has also significantly trimmed its Nvidia stakes in both the ARK Fintech Innovation ETF (ARKF) and the ARK Next Generation Internet ETF (ARKW) although they still own 48,272 and 81,054 Nvidia shares respectively.
But this isn’t so much a poor reflection of Nvidia than a better example of Wood’s innovate or die philosophy.
She did the same when Nvidia was doing well at the back end of 2021 simply taking profits off the table to reinvest in other stocks.
She explained the approach to Yahoo! Finance a week or so back saying there’s more lucrative opportunities out there than Nvidia, which has done well out of its AI position, but doesn’t own a slice of the tech like other stocks can.
“We believe that the hidden gems that will benefit perhaps the most from artificial intelligence are those companies with proprietary datasets.”
According to ARK’s latest annual innovation report, AI “is catalysing all kinds of changes in all kinds of industries, and I don’t think that investors have done enough research on how profound this impact is going to be.
ARK’s believes AI should increase the productivity of knowledge workers more than 4-fold by 2030.
“At 100% adoption, AI could increase global labor productivity ~US$200 trillion, dwarfing the ~US$32 trillion in total knowledge worker salaries.”
“I think the market’s scrambling to try and understand how AI is going to impact the world,” Wood said
In this regard, she offered her mate Elon’s Tesla as a proprietary tech owner with a fistful of data to back it up.
Ark Invest also grabbed well over 609,000 Shopify shares last week, splurging US$35 million on the platform which took an absolute nosedive after it dropped much-worse-than-anyone-expected revenue growth for the first quarter of 2023
After opting not to offer any forward guidance, Shopify’s stock price plunged and Cathie struck, making some very light work of trading days in history.
It’s largest daily stock decline was 17.6% in March of 2020.
However, overnight the US broker D.A. Davidson upgraded SHOP’s rating to Buy from Neutral.
“Now that the dust has settled post-4Q22 earnings call, we believe current consensus could prove conservative and a return to small losses is a fleeting issue.” the broker suggests.
Shopify, now the 8th largest holding in Ark’s flagship fund, “is one of the most important software companies given its leadership in a nearly boundless TAM.”