The combined stock was worth some $42,218,204 as of Tuesday’s closing price.
DraftKings represents the 17th-largest holding of the Ark Innovation ETF and the 19th-largest component of the Ark Next Generation Internet ETF.
DraftKings’ stock came under pressure on Tuesday after the noted short-seller Hindenburg Research released a report detailing what they describe as “black market operations” at the fantasy sports and sports betting operator.
While the stock fell as much as 12% on Tuesday, it recovered to end the day down just 4%. Now, DraftKings has received some much-needed analyst support.
Thomas Allen, the managing director of equity research at Morgan Stanley, reiterated his “overweight” rating and $58 price target on shares of DraftKings after the short-seller report.
The analyst argued that “unregulated” market exposure is common for international online gaming/sports betting companies and that DraftKings’ partner, SBTech, has exposure that is more in the “grey market” area.
“We are Overweight DKNG on the thesis that its customer acquisition advantage through its legacy DFS business will drive outsized US B2C sports betting revenue and, in turn, profitability compared to consensus,” Allen said.
Jefferies analyst David Katz also maintained his “buy” rating and $75 price target on DraftKings, arguing that the SBTech acquisition was mainly meant to help the company own and developing the right betting technology, not gain international revenue.
“21Shares is forging a new path for crypto ETPs by leading with research and a keen understanding of this developing asset class,” Wood said in an emailed statement to Bloomberg about her joining the board of Anum Holdings. “I am thrilled to support its efforts.”
Amun and 21shares instruments are listed on national exchanges in Switzerland, Austria and Germany, among other locations and the company plans to list its first non-European product in coming months, the report said, citing Anum’s CEO Hany Rashwan.
Cathie Wood’s flagship exchange-traded fund tumbled by more than 5% on Monday to its lowest point so far this year as inflation fears drove a big selloff in high-growth tech stocks.
The ARK Innovation ETF, an actively managed fund that invests in disruptive technology from electric vehicles to autonomous driving, has tumbled over 16% year-to-date.
Wood’s flagship fund, which started trading in 2014 and currently has more than $22 billion in assets under management, has fallen around 32% since its February 12 peak of around $153.
The fund’s top holdings were all in the red as of Monday afternoon. Leading the downturn is Tesla, which slipped 5.5%, and Teledoc Health, which fell 7.2%. Roku and Square were lower by 5% and 7% respectively.
Rising inflation fears are driving the selloff Monday, with investors are weighing whether rising costs will derail the record-setting rally in stocks.
“While we remain conscious of the potential for rising interest rates, inflation risks, and higher taxes, we are not overly concerned with any of these risks as market fundamentals remain solid amid a gradual normalization of economic activity and policy stimulus,” Andrea Bevis, senior vice president at UBS Private Wealth Management, said in a statement.
Wood, however, shrugged off concerns surrounding technology shares, telling CNBC on Friday that she loves the setup for her ETFs.
“The worst thing that could have happened to us is to have the market narrowly focus on just our ilk of stock – the innovation space,” the star stock picker told CNBC.
Still, all of Wood’s five ETFs combined have lost about $2 billion in May, according to FactSet as first reported by CNBC.
The reflation trade out of growth and into cyclicals in anticipation of a reopened economy has damaged the flagship ETF managed by Cathie Wood’s Ark Invest.
The ARK Disruptive Innovation ETF has declined 32% since its peak at $160 in mid-February. The ETF is down 13% year-to-date, a flip from its 2020 return of nearly 150%.
Despite the negative returns for the ETF in 2021, investors are not backing down from investing alongside Wood, as $6.7 billion has flowed into the ETF year-to-date, according to fund flow data from ETF.com. The ARK ETF still has more than $21 billion in assets under management.
Detailed below are the five stocks that helped drive the decline in the tech-focused ETF managed by Cathie Wood, based on Thursday afternoon prices.
Ticker:SQ Decline from peak: 20% % of ARKK ETF: 4.66%
Ticker: TSLA Decline from peak: 26% % of ARKK ETF: 10.77%
Ticker:SHOP Decline from peak: 28% % of ARKK ETF: 3.66%
Ticker:ROKU Decline from peak: 42% % of ARKK ETF: 4.79%
Ticker:TDOC Decline from peak: 50% % of ARKK ETF: 6.37%
Combined, the shares were worth some $52 million based on Tuesday’s closing price of $16.94 per share.
After Wood’s buys, Skillz released its quarterly earnings results that included larger than expected losses and the stock fell as much as 10.83% on Wednesday.
Skillz more than doubled its quarterly losses versus the same period a year ago in the first quarter, losing $0.15 per share compared to analysts’ estimates for a $0.10 loss.
Still, there were plenty of bright spots in the quarterly report. First-quarter revenue jumped 92% year-over-year to $84 million and paid active users surged 81%.
Skillz also raised its full-year revenue guidance to $375 million, which equates to 63% year-over-year growth.
The company landed some analyst support from Wedbush analyst Michael Pachter post-earnings as well.
Pachter maintained his “buy” rating and $34 price target on the stock, citing the impressive growth of the company’s gaming platform.
Skillz also recently added ex-Airbnb Executive Ian Lee as its chief financial officer. Lee was the head of investor relations during Airbnb’s December, 2020 IPO. He holds an MBA in Finance from the Wharton School at the University of Pennsylvania.
Skillz launched a game developer challenge with the NFL last Wednesday as well, adding to the long-term bull case for the stock.
Shares of Skillz traded down 9.29% as of 3:38 p.m. ET on Wednesday.
Skillz saw its stock jump as much as 5.84% on Friday before paring gains after Cathie Wood’s ARK Innovation ETF added another 1,222,207 shares of the mobile gaming platform to its holdings on Thursday.
As of Thursday’s closing price, ARK’s roughly 1.2 million shares were worth $20.25 million.
The ARK Innovation ETF held 4,014,903 shares of Skillz prior to Thursday’s buys, making it the ETF’s 56th largest holding.
Skillz was founded in 2012 by Andrew Paradise and Casey Chafkin as a platform where ordinary gamers can compete to win real prize money.
The company boasts 2.4 million monthly active users and 9,000 registered game developers, according to its latest SEC filings. Skillz also dishes out more than $100 million in prizes to users each month.
The San-Francisco-based firm saw its revenue jump 92% year-over-year in 2020 to just over $230 million, although net losses increased to a record $122 million for the year as well.
Analysts are mostly bullish on Skillz’s prospects. The company holds four “buy” ratings, two “hold” ratings, and zero “sell” ratings from analysts.
Most recently, Jefferies analyst Andrew Uerkwitz initiated coverage on Skillz with a “hold” rating and price target of $17. Analysts’ average price target for the stock is $27.83 per share.
Skillz went public via a merger with the special purpose acquisition company (SPAC) Flying Eagle Acquisition Corp. back in December of 2020 at a valuation of $3.5 billion. The company is now worth over $6.5 billion.
Wood’s Ark Next Generation Internet ETF purchased 53,667 shares of Netflix, bringing the fund’s total holdings of the streaming giant to over $92 million as of Thursday morning.
Wood also added 5,214 shares of Netflix to the Ark Space Exploration and Innovation ETF. The space-focused exchange-traded fund now owns 24,480 shares of Netflix worth over $12 million. The streaming giant has a 1.8% weight in the fund.
In the first quarter of 2021, Netflix added fewer than 4 million subscribers – less than half the 8.5 million it signed up in the preceding quarter, and a quarter of the almost 16 million it attracted in the first quarter of 2020.
Despite lackluster subscriber growth, Netflix grew revenue by 24% year-on-year to $7.2 billion last quarter, and scored a 140% increase in net income to $1.7 billion.
Cathie Wood bought more than 3 million shares of the self-driving truck company TuSimple Holdings on its public debut Thursday.
The San Diego, California-based firm saw its stock struggle in its first day on the open market, trading down as much as 19% before recovering to break even at $40 for the day. Shares debuted on the Nasdaq under the ticker “TSP,” and traded down as much as 9% on Friday before mounting a recovery.
Wood’s flagship fund, the ARK Innovation ETF, picked up 2,350,496 million shares of the self-driving truck maker during the volatile day of trading.
The combined holdings of both ETFs were worth over $123 million as of Thursday’s closing price.
TuSimple raised $1.35 billion in its IPO this week, selling almost 34 million shares for $40 each. At that price, the firm is valued at nearly $8.5 billion.
TuSimple is the perfect thematic addition to Cathie Wood’s active exchange-traded funds due to its focus on autonomous driving, but the company is yet another unprofitable holding for Ark Invest.
Last year, TuSimple posted a net loss of $178 million on revenue of just $1.8 million, according to the firm’s S-1 prospectus.
TuSimple was founded by Dr. Xiaodi Hou, a renowned expert in computer vision software from the California Institute of Technology, in 2015.
The company raised over $648 million in seed funding before going public from big-name investors like Volkwagen Group, Goodyear Ventures, and Navistar, per Crunchbase.
The firm also counts UPS and the US Postal Service as backers.
The release of TuSimple’s self-driving trucks isn’t expected until 2024, however, meaning losses at the firm will likely continue in the neat term.
TuSimple uses lidar technology supplied by Aeva Technologies, which went public on March 15. The company hopes to improve efficiency and safety in trucking while lowering costs and reducing the carbon footprint of the industry.
It has created an “Autonomous Freight Network (AFN)” that stretches from Phoenix to Houston with the goal of “allowing freight to be moved from point to point safely and reliably using autonomous trucks.”
Shares of the autonomous trucking company fell 3.9% to $38.44 on Friday as of 10:54 a.m. ET.
Strategist Robby Greengold, CFA broke down why Cathie Wood’s ARK Invest could be in for some serious trouble during a market downturn in a Morningstar article on Wednesday.
The analyst illustrated key potential weaknesses in Wood’s flagship exchange-traded fund, the ARK Innovation ETF, including inexperienced analysts, lax risk controls, and an illiquid, bloated asset base.
“Thematic-investing specialist ARK Investment Management has been in tune with the market’s unfolding narrative in recent years, but its lone portfolio manager, inexperienced team, and lax risk controls make it ill-prepared to grapple with a major plot twist,” Greengold wrote.
A one-woman show
It’s no secret Cathie Wood’s active exchange-traded-fund investing strategy has been immensely successful since ARK Innovation’s inception in 2014. Her fund has returned 495% to first-day investors since it began trading on October 31, 2014, and it’s up 183% in the past year alone.
Still, as Greengold pointed out in his article, Wood is the lone portfolio manager at her firm, and there isn’t a deep bench to replace her when she steps down. Greengold questioned whether having only one portfolio manager at ARK could lead to problems in the future, especially given the fund’s struggle to retain talent.
Additionally, Greengold notes that during Wood’s 2001 to 2013 tenure at AllianceBernstein, she “ran several strategies similar to this one that had high volatility, poor downside performance, and underwhelming long-term results.”
ARK Invest did not immediately respond to a request for comment.
Greengold was especially critical about the fund’s inexperienced analysts.
Very few ARK analysts have experience beyond an undergraduate degree and only about half of the current team signed on with any work experience, Greengold said. He noted this contrasts with the norm for equity analysts who typically have an undergraduate degree, some internship or entry-level work experience, and at least some progress towards investment credentials like a CFA.
While Wood sees this as a benefit that allows her analysts to have unique perspectives, Greengold questioned their lack of experience. Although he did note Wood’s team is more diverse than much of the competition, and prior research has shown that this leads to more creativity, innovation, and even profits.
Inexperience leads ARK to outsource much of its more technical analysis to what the fund calls “theme developers.” The firm says these include academics, entrepreneurs, and former ARK analysts. According to Greengold, ARK’s “analytical edge remains unclear” given its strategy of hiring such outsiders for technical analysis,
Analysts at ARK also operate differently. Unlike other firms who break up their analysts by sector, ARK analysts are given one or more technological specialties, like DNA sequencing or robotics, and then asked to become experts in their field. Greengold argues this setup “could lead to ultra-specialization and potential blind spots that better-resourced firms wouldn’t miss.”
A lack of risk controls
Greengold also expressed concern about risk management at ARK Invest, citing how Cathie Wood doesn’t employ risk management personnel. The firm also has very few portfolio construction parameters that other firms use to stay within acceptable risk limits.
And on March 29, 2021, “the fund removed prospectus language limiting the size of its top positions and its ownership percentage of individual companies’ shares outstanding.”
Greengold worries this could lead to issues in a market downturn.
“Even a high-octane strategy like this one should be cognizant of the risks embedded in its portfolio and manage to a definable risk tolerance. It seems not to,” the strategist said.
“Without risk-management professionals to stress-test the portfolio’s risk exposures, estimate its potential losses during historical or hypothetical market environments, and gauge worst-case scenarios, the team is poorly positioned to prepare and react,” Greengold concluded.
A less than liquid portfolio
Finally, ARK Innovation’s portfolio has become less liquid and “more vulnerable to severe losses as its size has swelled,” according to Greengold.
Assets under management grew to over $23 billion in February. Additionally, the ETF has more positions in companies in which it holds at least a 10% stake than any other ETF.
Retaining stakes in small companies makes it difficult to sell without materially impacting their stock prices. This forces Wood’s ETF to exit and enter positions slowly over time, which, again, could be a problem in a downturn.
Wood overcomes the lack of liquidity in her portfolio by holding what she calls “cashlike” large-cap names. That way, in a downturn, Wood could sell those stocks and concentrate her holdings in top conviction plays.
The problem is, according to Greengold, that Wood followed a similar gameplan in 2008 at AllianceBernstein and her “large-growth-oriented separate account lost 45% before fees – substantially worse than the Russell 1000 Growth Index’s 38% decline.”
Wood’s ARK Innovation ETF is down 11% this month as a rotation away from highly valued tech names and into value plays continues to drag on results.
Cathie Wood’s flagship fund bought the dip in Palantir on Wednesday, ETF records show.
Wood’s Ark Innovation ETF added roughly 1.2 million shares of Palantir as the stock sank to $21.88, its lowest closing price since November 23.
As of Wednesday’s close, the exchange-traded fund holds 10.8 million shares of Palantir worth $251 million. The data surveillance company makes up 1.07% of the Ark Innovation ETF.
Shares of Palantir closed down nearly 6% on Wednesday and continued to slide in premarket trading Thursday but reversed course after the opening bell. Palantir jumped as high as 1.9% to $22.30 Thursday morning.
The data company has fallen 17% in the last month amid a lockup expiration that’s prompted profit-taking from company insiders.
In a CNBC interview in February, Wood explained that her Palantir trade is a long-term bet. She also praised CEO Alex Karp’s plan to forfeit short-term profits and invest aggressively in the future.
“It’s exactly how we invest. We want our companies to invest aggressively. We don’t want profits now,” the investing titan told CNBC.