One of the most popular technology sector exchange-traded funds (ETFs), the ARK Innovation ETF (ARKK +1.51%) has seen major shifts in the past week, particularly regarding its Magnificent Seven stock holdings.
In the past few days, ARKK manager Cathie Wood has dumped shares of two Magnificent Seven stocks, Amazon (AMZN +1.00%) and Alphabet (GOOG +0.21%) (GOOGL +0.64%). On Sept. 15, Wood sold all remaining GOOGL class A shares (93 total). That followed the sale of 1,784 shares on Sept. 11. Wood also dumped a significant number of C shares, GOOG. On Sept. 14, she sold 11.7% of her GOOG shares, amounting to a roughly $13 million stake. As of Sept. 16, the ARKK ETF held about 288,000 shares of GOOG, an approximately $98 million position representing 1.5% of the portfolio.
The ETF also sold off a sizable chunk of its Amazon stock, dropping 20,000 shares or about 3.2% of its position, which amounted to a $5.1 million stake. As of Sept. 16, ARKK still held almost 614,000 shares valued at approximately $152 million. Amazon makes up about 2.37% of the portfolio.
Ark Invest’s Cathie Wood. Image source: Getty Images.
Buying Meta Platforms
It is not exactly clear why Wood trimmed shares of Amazon and Alphabet, but both stocks have trended lower in recent weeks following big surges higher in July into August, post-second-quarter earnings. However, both stocks are cheap, with Alphabet trading at just 17 times earnings and Amazon trading at 19 times earnings.
Ark ETF Trust – Ark Innovation ETF
Today’s Change
(1.51%) $1.31
Current Price
$88.23
Key Data Points
AUM
$5.6B
Expense Ratio
0.75%
Top Holdings
TSLA
9.66%
SPCX
6.68%
TEM
5.65%
Wood has not been doing as much buying lately in the ARKK ETF, but Meta Platforms (META -2.43%) stock was a big purchase recently. Wood purchased roughly 38,000 shares of Meta on Sept. 9 for a stake valued at almost $25 million. It increased ARKK’s position in Meta by almost 25%.
ARKK now holds some 191,000 shares of Meta, a $128 million stake. It makes up 2% of the portfolio and is now a larger holding than Alphabet.
Meta stock is up only 2% year-to-date, but unlike Amazon and Alphabet, it has been trending higher of late. In the past month, shares have surged about 14%. It is also reasonably valued, with a P/E ratio of 25 and a forward P/E ratio of about 20.
What is Wood thinking?
It is a little counter-intuitive to be buying the surging stock and selling the Alphabet and Amazon on the dip. It would be more likely to see investors like Wood adding shares of the hyperscalers on the dip, particularly at such low valuations.
But perhaps Wood has concerns about the potential for slower AI model development, as a Citigroup analyst recently warned, amid increasing AI spending. That could indeed dent earnings growth.
With Meta, the buys could be related to the promise of its new Muse AI agent as a way to better monetize its AI spending, as some analysts suggest.
The thing is, the moves that institutional investors like Wood are making are notable, because they may reveal some trends to watch. But the goals of Wood within her multibillion-dollar portfolios are vastly different and far more complex than those of the average retail investor whose goal is to build long-term wealth. For the long-term investor, while there could be short-term headwinds or nearer term spikes, owning, and buying, all three of the Magnificent Seven stawarts at these low valuations is a no-brainer.
