How Amazon Stock Fits Into Cathie Wood’s ARK Portfolios

Amazon stock is still a small component in Cathie Wood’s ARK portfolios. But could the asset management firm turn more bullish on AMZN shares?
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ARK Invest’s CEO and CIO Cathie Wood has been one of the most successful and talked-about asset managers of 2020. She rose to the top during the pandemic year after riding the tailwinds of long-term growth, tech disruption and innovation.

Despite her disdain for the more established, mega-cap Big Tech names, Amazon stock is currently a component in a couple of Cathie Wood’s ETFs. The Amazon Maven reviews ARK Invest’s positions in AMZN shares, and discusses if Ms. Wood might be open to being more heavily invested in this stock.

Figure 1: Cathie Wood, CEO of ARK Invest.

Figure 1: Cathie Wood, CEO of ARK Invest.

Read more from the Amazon Maven: 1 Key Secret to Amazon’s E-Commerce Success

Amazon stock: a small piece of the puzzle

As a recap, ARK Invest manages ten strategies that range from robotics and automation to space exploration. ARK Innovation (ARKK), whose assets under management are currently valued at $21 billion, is the largest of the firm’s ETFs. Amazon stock, however, is a component in two smaller funds:

  • ARK Fintech Innovation: Amazon is only the 34th largest holding, as of June 2021, valued at a “meager” $40.7 million. AMZN accounts for 1.1% of ARKF.
  • ARK Space Exploration: within this brand-new ETF, Amazon is the 10th largest stock. However, because of the fund’s smaller size, the AMZN position here is valued at only $19 million.

Could ARK buy more Amazon stock?

The Amazon Maven sees the case for including Amazon stock in ARK’s Fintech fund. The company is a giant in e-commerce, and a massive global platform through which transactions take place. The company has a branded credit card and a digital wallet, and is capable of making bolder moves into payments and banking.

The case for inclusion in the space exploration fund is a bit more of a stretch, in my view. CEO Jeff Bezos has been engaged in space travel with his company Blue Origins. However, other than through its founder’s influence, Amazon is unlikely to be a key player in space exploration, for now.

I believe that Amazon could be a good fit for either ARK’s innovation or robotics ETFs. Amazon Web Services aside, the e-commerce giant has been deeply involved in warehouse automation and drone delivery at scale. Both initiatives could help to shape the “retail of the future”.

Read more from the Amazon Maven: AMZN After Hours: Charging Towards All-Time Highs?

Big Tech = cash on the sidelines?

Despite the above, I believe that Cathie Wood and team would be reluctant to invest much more in Amazon stock now. The asset manager herself explained that ARK currently uses FAAMG stocks as a way to “park money on the sidelines”, when opportunities in higher-growth names do not seem appealing.

Here is her quote about the likes of Amazon and Apple:

“We are not saying that they are bad stocks at all, and they were a part of our portfolios in the early days. But as they were scaling into the trillion-dollar category, we believed that our research would be focused better on ‘the next set of FAAMGs’.”

In that regard, Cathie Wood is much more likely to invest in an e-commerce player like Shopify instead of Amazon. In fact, she has recently drawn a parallel between the two companies, saying that Shopify could grow to the size of Amazon one day.

Also playing against Amazon is the fact that high growth has been out of favor in 2021. ARKK, for example, is still down nearly 30% from the February peak, while the S&P 500 and Nasdaq climb to fresh all-time highs. Cathie Wood and team are much more likely to take advantage of the dip now than to put more money into a Big Tech stock, in my opinion.

Read from our Apple Maven partner: 2 Crucial Lessons From Cathie Wood About Apple Stock

Twitter speaks

Big Tech stocks like Amazon and Apple are a tiny piece of famed investor Cathie Wood’s ARK portfolios. In your view, which of the following FAAMG names would deserve higher allocation in a tech disrupter and innovator ETF? Leave your opinion below and follow @AmazonMaven on Twitter!

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Amazon Maven)