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Cathie Wood Watch: Roku Supplants Tesla as ARKK's No. 1 Holding

Tesla shares have dropped 41% since April 4.
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The 41% drop by Tesla  (TSLA) - Get Tesla Inc. Report shares since April 4 has put a sizable dent in the wealth of Elon Musk, chief executive of the electric-vehicle titan.

It also has hit holders of Cathie Wood’s flagship fund, Ark Innovation ETF  (ARKK) - Get ARK Innovation ETF Report. Wood is the hotshot money manager who is chief executive of Ark Investment Management.

Tesla represented Ark Innovation’s biggest holding on most days since at least 2017 until May 19, according to Bloomberg.

Tesla’s shares have dropped to the point that it’s now the No. 2 holding for Ark Innovation, surpassed as No. 1 by streaming platform Roku  (ROKU) - Get Roku Inc. Report

As of May 20, Ark Innovation’s Roku shares were valued at $716.5 million and its Tesla shares at $702 million.

Roku has tumbled in recent weeks, too -- 30% since April 4--but not by as much as Tesla. In addition, Ark Innovation has bought some Roku shares while selling Tesla shares. 

Wood has said that her sales of Tesla represent profit-taking and that she still believes in the company.

Still, Ark funds have dumped Tesla shares for at least four quarters in a row, according to Bloomberg. The funds held almost 1.59 million Tesla shares at March 31, down about 73% from almost 5.79 million shares a year earlier.

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As Ark funds have tumbled in recent months, Wood has defended herself by noting that she has a five-year investment horizon.

And the five-year track record of her flagship fund Ark Innovation ETF could indeed give investors comfort until May 9. The fund’s five-year return beat that of the S&P 500 until then. But the five-year annualized return of Ark Innovation totaled 11.88% through May 19, compared with 12.37% for the S&P 500.

Ark Innovation has slumped 56% so far this year, as Wood’s young, disruptive technology companies have hit the skids. And it’s down 74% from its February 2021 peak. Raging inflation and soaring interest rates have helped put the kibosh on tech stocks.

Still, Wood’s investors aren’t deserting her. Ark Innovation enjoyed net inflows so far this year, as of May 9, Bloomberg reports.

Morningstar’s View

Meanwhile, on March 29, Morningstar analyst Robby Greengold issued a scathing critique of Ark Innovation.

“ARKK shows few signs of improving its risk management or ability to successfully navigate the challenging territory it explores,” he wrote.

“Since its meteoric rise in 2020, the strategy has been one of the worst-performing U.S.-sold funds.… Wood’s reliance on her instincts to construct the portfolio is a liability.”

Wood countered Greengold’s points in a recent interview with Magnifi Media by Tifin. “I do know there are companies like that one [Morningstar] that do not understand what we're doing,” she said.

“We do not fit into their style boxes. And I think style boxes will become a thing of the past, as technology blurs the lines between and among sectors.”