Ark Invest CEO Cathie Wood continues to trim holdings in Tesla (TSLA 0.23%) and Shopify (SHOP -0.13%) from the investment firm's various exchange-traded funds (ETFs). Ark Invest sold 1,884 shares of the electric vehicle (EV) stock on Aug. 15 and then sold 182,314 shares of the e-commerce services company's stock the following day.
Strikingly, it seems that funds from the sales are being used to invest in an even more potentially explosive, high-risk growth stock.
On Aug. 16, Wood's company purchased roughly $16 million worth of Archer Aviation (ACHR 0.30%) shares for its Ark Innovation ETF (ARKK 0.71%). Archer is a maker of flying vehicles, or electric vehicle takeoff and landing (eVTOL) aircraft, and its business is still in a pre-revenue state.
What do Wood's recent stock moves say about Tesla, Shopify, and Archer Aviation?
Wood is still broadly bullish on Tesla and Shopify
Ark regularly publishes updates showing which stocks it has bought and sold. With the growth-focused investment firm's funds putting up strong performance this year, some investors have been paying close attention to the company's moves. But it would be a mistake to read too much into recent sales on these stocks.
While Wood has sold Tesla and Shopify recently, it's clear that the famous investor still has plenty of confidence in both companies. Tesla remains the single-largest stock holding by weight in the company's flagship Ark Innovation ETF and accounts for 10.1% of the total portfolio weight in the ETF. Meanwhile, Shopify accounts for approximately 9.6% of the total portfolio weight in the Ark Fintech Innovation ETF.
Tesla also accounts for 6% of total portfolio weight and is the sixth-largest holding in the Ark Next Generation Internet ETF. Shopify accounts for 4.4% of the equity weight in the portfolio and is the 10th-largest holding.
Ark's Tesla sales amounted to roughly $439,000, and its $8.9 million trim on its Shopify position is relatively small in the context of its overall holdings. Accordingly, it's likely that the moves have been made in order to free up some funds to make bets on some other potentially explosive plays. Within that mold, Wood appears to be increasingly excited about Archer Aviation.
Why is Cathie Wood buying Archer Aviation stock?
Archer Aviation went public in 2021 through a merger with a special purpose acquisition company (SPAC). While the stock has seen some volatile swings since its public debut, shares have been on a tear in 2023. The company's share price is up roughly 220% year to date.
Archer is a pioneering player in flying electric vehicles, and Wood seems to think it has the makings of a long-term winner. The recent investment in the eVTOL specialist wasn't the first Ark has made in the company.
With its recently published second-quarter report, Archer announced that it had secured $215 million in new investment funding from a cohort that included Ark, Stellantis, Boeing, and United Airlines. The fresh round of funding brought the company's total funding to more than $1.1 billion.
While flying vehicles have long been the stuff of science fiction and futurism, it looks like the industry may finally be taking off. An estimate from Morgan Stanley suggests that the urban air-mobility market will be worth $29 billion annually in 2023 and more than $1 trillion by 2040.
Archer is aiming to achieve FAA certification and begin commercial operations in 2025 and has received confirmation from the regulatory agency that things are on track to meet that goal. The company's Midnight vehicle has already received the FAA special airworthiness certificate -- a designation that will allow it to begin flying in U.S. airspace under limited settings and scenarios.
Through its deal with the U.S. Department of Defense, Archer management expects that its Midnight vehicle will become the first eVTOL aircraft to actually be delivered to a customer.
There certainly seems to be some promise here, but investors should keep in mind that Archer's outlook is highly speculative. While Cathie Wood is a fan of high-risk, high-reward growth plays, she isn't betting big on the company just yet.
Even after these recent purchases, Archer Aviation accounts for a relatively small portion of Ark's flagship growth fund. The Ark Innovation ETF holds Archer stock currently worth roughly $26.1 million, which means it represents roughly 0.4% of the fund's total stock holdings.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify and Tesla. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.
As an investment enthusiast with a deep understanding of the financial markets and investment strategies, I've closely followed the trends and movements in the stock market. I've tracked the actions and strategies of renowned investors and firms, including Cathie Wood's Ark Invest, to grasp their investment philosophies and decision-making processes.
Cathie Wood, the CEO of Ark Invest, is widely recognized for her disruptive investment approach focusing on innovative and high-growth companies. Wood's investment strategies have been closely monitored due to their influential impact on various sectors, particularly in technology, electric vehicles, and disruptive innovations.
Wood's recent stock moves involving Tesla (TSLA), Shopify (SHOP), and Archer Aviation (ACHR) provide valuable insights into her investment philosophy. Her decision to trim holdings in Tesla and Shopify while acquiring shares in Archer Aviation reflects a strategic shift toward potentially explosive, high-risk growth opportunities.
Regarding Tesla, despite the recent sell-off, it's important to note that Wood remains bullish on the company. Tesla continues to hold a significant position in Ark Invest's flagship Ark Innovation ETF (ARKK) and other ETFs, representing a substantial portion of their portfolio. This reaffirms Wood's confidence in Tesla's long-term growth prospects despite recent adjustments.
Similarly, Wood's move to reduce Shopify holdings doesn't indicate a lack of confidence in the company. Shopify still maintains a considerable position within Ark Invest's Ark Fintech Innovation ETF, indicating a continued positive outlook on the e-commerce services provider.
The noteworthy shift lies in Ark Invest's investment in Archer Aviation, a pioneering player in electric vehicle takeoff and landing (eVTOL) aircraft. Archer Aviation's innovative approach and potential disruptive impact on the urban air mobility market align with Wood's strategy of investing in groundbreaking technologies.
Archer Aviation's recent progress, securing substantial investment funding and working toward FAA certification for its eVTOL aircraft, suggests long-term promise. However, it's crucial to note that investing in Archer Aviation represents a high level of speculation due to the company's pre-revenue stage and the speculative nature of the urban air mobility market.
Wood's measured approach to Archer Aviation signifies a cautious stance, as the company currently constitutes a relatively small portion of Ark's flagship growth fund. Despite the recent purchase of Archer Aviation shares, it represents only a fraction of Ark Innovation ETF's total holdings.
In essence, Wood's strategic moves underscore her commitment to innovation and growth while balancing risk within Ark Invest's diversified portfolios. Understanding her rationale behind these adjustments provides valuable insights into the evolving landscape of disruptive technologies and high-growth investment opportunities in the market.
As a disclaimer, my expertise in investment analysis and market trends allows me to interpret and analyze these financial strategies. However, individual investors should conduct their own thorough research and consider their risk tolerance before making investment decisions based on this information.
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