💔 IT’S OVER! ARK Invest’s $1 BILLION Breakup with These 4 Stocks

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