Cathie Wood just totally sold out of your favorite stock! If that makes you feel like
this, don't worry, I'm right there with you. I don't typically make episodes about Cathie
Wood selling out of stocks because when she does, it can be for a wide variety of reasons,
not all of which are bad. However, with earnings reports sending some stocks to the moon and
cutting others in half, I figured it'd be useful to talk about the different kinds of
sales Cathie Wood has been making right now. My goal is to offer a little bit of insight
into why she might be selling out of some stocks but not others, and tell you what I'm
doing as a result, since I hold most of them. The stocks I'll be talking about are Nvidia,
Pinterest, Peloton, and Zillow, in that order. Your time is valuable, so timestamps are enabled
for your convenience. Let's dive right into it, starting with some basics.
One of the things you should know about Cathie Wood's 6 actively managed funds is that they're
not allowed to hold a lot of cash. That makes sense because people are paying ARK Invest
to manage their money, so they don't want to see a large chunk of that money staying
on the sidelines. The ARK funds are fully invested, meaning they typically have around
half of one percent in cash, if not less. So, what does Cathie Wood do instead of holding
cash? Well, each fund has a couple of cash-like positions. Here's what that means, exactly:
[Cathie Wood Apple Clip]. Right, so she's holding a few big, relatively stable tech
giants in her portfolios that she treats as cash. Let me point out two things here. First,
Cathie Wood has almost tripled her shares in Facebook, now Meta, over the last few trading
days. I do think that Meta is still largely a cash-like position for ARK Invest, but maybe
they're also happier holding more of it now since the Metaverse is a theme that ARK Invest
actively researches and invests in. Ok, Facebook isn't the company I want to talk about.
Nvidia is - ticker symbol N V D A. Nvidia is a great company that's got hands in basically
every type of artificial intelligence application ever. They're hugely disruptive in terms of
both software and hardware, they're a long-term winner in a hard-to-win market, and ARK Invest
is constantly talking about their innovations and their beneficiaries. Oh yeah, and Cathie
Wood basically completely sold out of Nvidia at the end of October and since then, the
stock has rallied over 30%. What gives? Well, the answer is probably that Nvidia is a cash-like
position to ARK Invest, just like Apple and... Meta. It's a big stock. Cathie Wood has actually
been lowering her overall position in Nvidia since late July or early August, right when
Robinhood IPOed and Cathie Wood was buying Ginkgo Bioworks. I obviously don't know for
sure, but it seems reasonable that selling Nvidia is part of how she got the money to
load up on those two stocks. My point is, just because Cathie Wood sold out of Nvidia
doesn't make Nvidia a bad stock OR Cathie Wood a bad investor -- there's just more to
the story, and knowing that might give you a leg up on other investors that only act
based on headlines. As a result, I still plan on putting Nvidia in my 100,000 dollar portfolio
sooner than later, even after its recent rally.
Speaking of getting a leg-up on others, let's talk about Pinterest because, well, ARK Invest
doesn't talk about Pinterest much at all. If you go to ark dash invest dot com, which
is where they share all of their research, and you click on articles, you can filter
their research by the company. If you type in P I N S, you get a single article from
late last year about Microsoft potentially buying TikTok. If you search for Pinterest
in this article, it's mentioned only once, in the following sentence: Compared to more
traditional social media platforms like Instagram, Snapchat, and Pinterest, TikTok's competitive
advantage appears clear - artificial intelligence. Whenever ARK Invest mentions Pinterest in
their newsletter or emails, which only happens once or twice, it's always in this context
of traditional social media. This is actually the stock I disagree with ARK Invest the most
on because people don't go to Pinterest to keep up to date and chat with friends -- they
go to Pinterest to plan projects and purchases. It isn't about catching up on what HAS HAPPENED,
it's about planning what is YET TO HAPPEN, which makes Pinterest's unique data set extremely
valuable. If you want to know my full investment thesis on Pinterest, I made an episode that
dives deep into all of the innovative things they do.
I'll leave a link to that in the top right-hand corner of your screen right now and in the
description below as well. In my opinion, this is a very rare case where ARK Invest
may not have the right long-term thesis on a stock, so they sold out of it for something
they have way more conviction in. In mid-October, ARK Invest had about 100 million dollars of
Pinterest stock, so I do think they really saw something in it. Then they sold out of
it when the Paypal acquisition rumors jumped the stock price up by over 20%. I'm not a
financial advisor and this is not financial advice, but I think Pinterest will be worth
way more than even $70 dollars per share, which is what the rumors said Paypal wanted
to acquire them for, so I'm still holding onto my current shares and might a few more
shares while the stock keeps sliding.
Next up, we have Peloton. Oh boy. These are the kinds of moves that make me think Cathie
Wood has psychic powers. On October 26th, ARK Invest had 1.7 million shares of Peloton,
totaling just under $160 million dollars. On November 1st, they had just 11 thousand
shares or roughly $1 million dollars in Peloton. On November 4th, Peloton reported earnings
and uh... [fire meme]. All kidding aside, here's a quick clip from Cathie Wood's most
recent episode of In the Know, where she talks about Peloton and why she sold it. [ITK 37:20]
This is a really
deep insight that took a while to sink in for me. Just like there's an important difference
between which Chinese tech companies their government supports and which ones are facing
extra regulatory crackdowns, there's an important difference between companies that are helping
an industry go digital and a true stay-at-home stock. According to Cathie Wood, the Zooms
and the Teladocs of the world are genuinely transforming our lives and all the pandemic
did for them was speed up their adoption by forcing people to try them out years before
they probably would have otherwise. Compare that to a company like Peloton, which brings
something physical into your home instead of you going to where you would normally do
it, which is the gym. They're pretty reliant on selling an expensive piece of home workout
equipment upfront, which is to their detriment when people are trying to spend less time
at home. To their credit though, the Peloton connected subscription alone is getting closer
and closer to accounting for half their revenue, which should greatly increase their margins
in the future.
This is where I made MY mistake. I initially put Peloton in the same bucket as Roku - another
physical device you get for your home to consume digital media. But Roku doesn't really have
that same upfront cost and its revenue model is all ads-based, not subscription-based.
The real secret sauce of Roku is how it uses artificial intelligence to match audiences
to ads and to content - very different from Peloton's differentiated products. So here's
an example where ARK Invest had the right idea and I didn't until it was too late. This
is where my investing behavior appears to have paid off. I wasn't too sure about Peloton
and as a result, I only had 5 shares of it in my portfolio so far, since I'm averaging
in my 100,000 dollars over a few months. If I spent my entire allocation on Peloton all
at once, I'd be a lot saltier about my position. As of now, I'm out about a hundred and fifty
bucks on Peloton so all I'm doing about it is nothing. I'm keeping my shares, keeping
up on the news, but otherwise, focusing my attention on other stocks for now.
And finally, there's Zillow. At the start of November, Cathie Wood had over a billion
dollars in Zillow. It was ARK Invest's 11th biggest position overall, right behind Zoom.
Massive. Since then, Cathie Wood sold over half of her shares as the stock dropped about
25% in price. Today, just one week later, it's ARK Invest's 33rd biggest position at
330 million dollars, but she's not out completely. Why not? Well, one of my favorite things about
following Cathie Wood is that usually, she just comes right out and tells us. [ITK 35:30]
So, she doesn't mention Zillow here by name, but Zillow just reported earnings on November
1st and announced that it was officially pulling the plug on its iBuying venture, reducing
its workforce by about 25%, and needs to offload around 7000 homes. ARK Invest is big on this
idea of frictionless value transfer and home buying is a process full of friction. It makes
a lot of sense for ARK to invest in companies modernizing and streamlining that process.
Well, according to a recent press release from their CEO, "Our home price forecasting
accuracy was far more volatile than we planned for and was further exacerbated by unpredictable
black swan-type events." That's a fancy way of saying that Zillow's data on housing prices
weren't that good, to begin with, and the pandemic certainly didn't do them any favorites
by causing housing prices to skyrocket. As a result of this, ARK Invest also cut their
position in Opendoor, ticker symbol O P E N, by over 25%. I don't know if ARK Invest
will sell out entirely, or just keep Zillow as a lower weighted position, but I think
this is a good example of the last type of ARK Invest sale -- a partial sale due to one
specific part of the investment thesis not holding true, but not necessarily the whole
thing.
Here's a very quick and funny story; I was actually pretty bullish on the concept of
iBuying and I do still think other companies can get it right. Earlier this year, when
I still had my day job, I ran a second channel called Ticker Symbol LIVE and I did a live
stream working through Zillow and iBuying. As I was talking about it, everyone in my
comments and the live chat was talking about how bad Zillow's data is. That live stream
really made me think twice about getting into Zillow stock and then I never ended up circling
back to it. So YOU, my awesome community, actually kept me out of this one. I think
that's super cool.
That's also why I think having a community of people to talk to about investing is so
important. If you're interested in joining a community of like-minded investors focused
on tech stocks and disruptive innovation, you're welcome to check out my 4,000 member
discord community. It's absolutely free and has a channel for every area that ARK Invest
focuses on, plus a few more than I found people are interested in discussing. It never hurts
to have a second set of eyes on your investment ideas and I often find myself learning something
new. I'll leave a link to that discord community for you in the description below as well.
Either way, I hope this episode helped you understand some of the different reasons that
Cathie Wood could sell a stock. Nvidia was a cash-like position. Pinterest is a company
they may not have analyzed too thoroughly, simply because there are so many other great
opportunities out there. Peloton is one they did but is facing real headwinds from being
an actual stay-at-home stock, as opposed to most other disruptive companies ARK Invest
focuses on. And between those two, there's Zillow, where only part of the thesis isn't
panning out, but that could be enough to change the investment whole story. Comment below
or tweet me your thoughts on the different reasons you sell a stock. Do you sometimes
sell to free up some cash, or do you only ever sell when something fundamentally changes
with the company or your own thesis in it? Do you think there are other reasons that
ARK Invest could sell a stock, beyond what I've covered in this episode? I'm excited
to hear your thoughts. Thanks for watching and until next time, this is Ticker Symbol
YOU. My name is Alex, reminding you, that the best investment you can make... is in
you.