The ARK Innovation ETF, under the management of Cathie Wood, has made a significant shift in its stock portfolio, reallocating approximately $14 million from electric vehicle manufacturer Tesla (NASDAQ:TSLA) to video game platform Roblox on Friday. This marks the 13th consecutive trade in which the fund has reduced its stake in Tesla, a trend that began on April 26.
Over this period, ARK Innovation has divested a total of 729,582 shares from Tesla, its largest holding. Despite these sales, Tesla continues to account for a significant portion of the fund's total assets. The company's share of the fund's total assets remained relatively stable at 11.4%, up slightly from 11.2% in early June. The reduction in Tesla shares held by the fund has been offset by an increase in the stock's value, with Tesla investors seeing a return of 27% over this period and the stock rising 124% year to date.
Tesla has maintained its position as the fund's largest holding due to its role in driving the automotive industry toward a fossil-fuel-free future. The company is also a key player in alternative energy solutions and is developing a supercomputer for self-driving systems that could open up new opportunities in the artificial intelligence market.
On the other hand, ARK Innovation has been increasing its stake in Roblox, despite a 31% decrease in the video game platform's stock since November 4, 2022. This strategy allows the fund to take profits from successful stocks like Tesla and invest in underperforming stocks like Roblox. Following a slowdown in sales growth last year, Roblox has now returned to double-digit annualized growth rates.
However, despite continuous investment in Roblox over the past ten months, ARK Innovation's exposure to the company has decreased from 3.4% to 2.9%. The fund's strategy of buying shares at a lower price could prove beneficial if Roblox manages to recover, but there is also a risk that the stock could continue to fall, potentially negatively impacting ARK Innovation's short-term returns.
These recent portfolio adjustments by ARK Innovation indicate a long-term investment strategy. By reallocating some profits from Tesla to Roblox, the fund is taking a calculated risk on Roblox's potential for recovery. This approach aligns with ARK Invest's strategy of seeking out promising growth stocks. Despite reducing its stake in Tesla, ARK Innovation continues to hold a significant investment in the electric car manufacturer, which continues to generate substantial cash returns for the fund.
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