Cathie Wood is dumping Tesla shares and investing in these seven outstanding stocks instead.
Over the past few years, Cathie Wood of Ark Invest has become one of Wall Street's most captivating characters.
Usual portfolio managers focus on concepts from textbooks, such as valuation ratios or fundamental value. However, Wood is unique. Ark Invest offers investors the chance to invest in a variety of exchange-traded funds (ETFs), with the majority of these investments focused on emerging tech businesses.
Despite this, Wood also ensures that Ark's portfolio includes some exposure to larger, more established companies. Among these more traditional investments are many of the "Super Seven," which are leading the way in artificial intelligence (AI).
Moreover, in the AI-related portion of her portfolio, Wood's recent selling of Tesla (TSLA -0.90%) and subsequent purchasing of Amazon (AMZN 1.26%) indicate a strategic shift.
Why might Wood be reducing Ark's Tesla stake?
Portfolio managers typically do not disclose their trade timings or the reasons behind their decisions. Occasionally, hedge fund managers might discuss their investment moves on financial news programs, but often, these revelations occur long after any significant buying or selling has taken place.
Shares of Tesla sold
However, Wood and the Ark Invest team operate differently. They regularly send out an email analyzing the stocks purchased and sold during that day's trading session to their followers. Moreover, Wood frequently engages in discussion about her high-conviction plays on CNBC or Yahoo! Finance.
85,500
For the past two weeks, Wood has consistently been reducing the Ark fund's Tesla position.
120,000
| Category | Oct. 24 | Oct. 28 | Oct. 29 | Oct. 30 | Nov. 1 | Nov. 4 | Nov. 5 | Nov. 7 || --- | --- | --- | --- | --- | --- | --- | --- | --- || Tesla shares sold | 85,500 | 120,000 | 13,900 | 62,200 | 30,600 | 9,900 | 2,300 | 85,000 |
13,900
Such consistent sales could give the impression that Wood is running away, but there's more to it. Following Tesla's third-quarter earnings report on Oct. 23, its shares increased by more than 30%.
62,200
Wood explained during a Yahoo! Finance segment that she saw this as an opportune moment to secure profits and rebalance the Ark funds. Given Tesla's volatile stock price, a sudden drop could occur at any time.
30,600
Why Amazon appears like a sound decision
9,900
Throughout October, Wood used her Tesla profits to invest in Amazon's tech megacap sector. Between Oct. 8 and Nov. 7, Ark Invest purchased over 395,000 Amazon shares.
2,300
Amazon's business encompasses a wide range of industries, including e-commerce, cloud computing, advertising, streaming services, grocery delivery, and Prime membership services. It remains an attractive investment opportunity, regardless of the economic climate.
85,000
Moreover, through a deal with Anthropic, Amazon now has the chance to leverage AI across its entire ecosystem, increasing customer engagement across all its business segments. This strategy is already showing results as Amazon's profit engine is growing at an unprecedented pace. With $48 billion in trailing-12-month free cash flow and $88 billion in cash and equivalents, it has the resources to continue investing in AI-driven strategies that will spur growth.
Final thoughts
The key point for investors to remember is that despite her recent profit-taking, Wood remains bullish on Tesla's long-term growth prospects. Remember, Ark Invest set a five-year price target of $2,600 for Tesla stock just a few months ago. Furthermore, Tesla remains a significant component of Ark's investment strategy. Therefore, Wood is likely to hold onto the stock to varying degrees over time.
Buying further into Amazon seems like a shrewd move at present. Its shares are currently undervalued on a price-to-free-cash-flow basis, and I wouldn't be surprised if Wood continues to add to her position as Amazon enters a new growth phase focusing on AI.
After reducing Ark Invest's Tesla stake, Cathie Wood has been utilizing the profits to invest in Amazon, exhibiting her confidence in the tech giant's growth potential, particularly in its AI-driven strategies.
Subsequently, Wood's strategic shift from Tesla to Amazon signifies a broader investment focus in the finance world, highlighting the significance of diversifying portfolios to include both emerging tech businesses and established companies.
