Many investors in exchange-traded funds just seek to match the market's performance. But at ARK Invest, ETFs are all about beating the market. All five of ARK Invest's active ETF doubled investors' money in 2020, and that has everyone watching what red-hot investing star Cathie Wood is doing in the portfolio.
The nice thing about the active ETF structure is that you get to see what happens with ARK Invest's funds every day. With that in mind, here are ARK Invest's two favorite stocks from last week, as well as some positions it trimmed.
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1. Twitter
ARK Invest made a big purchase of Twitter (TWTR) stock last week. The ARK Next Generation Internet ETF (ARKW 3.20%) bought more than 1.4 million shares of the social media company on Jan. 26, spending somewhere in the neighborhood of $70 million in the process. That was more than 1% of the entire fund's assets.
Twitter made an aggressive move last week, acquiring paid newsletter platform provider Revue. The idea here is that many influencers build their follower bases on Twitter but then migrate to other platforms to monetize their newfound popularity. That's obviously not ideal for the microblogging company, so Twitter instead wants to give content writers a reason to stay within its ecosystem by considering charging subscribers for newsletters. It will then take a cut of the subscription revenue.
Twitter has been a solid stock picks for investors, with its share price having doubled since the March 2020 lows. ARK Invest seems to think it could climb even further from here, and that's certainly possible if Twitter can find more ways to squeeze more money from its top users.
2. Teradyne
The other big buy from ARK Invest was Teradyne (TER 2.14%). ARK Autonomous Technology & Robotics (ARKQ 1.75%) bought more than 86,000 shares on Jan. 26, putting roughly $12 million to work shortly before the industrial automation company reported its latest financial results. It added another 33,700 shares on Jan. 27 and 60,700 shares on Jan. 28.
Unfortunately for ARK investors, Teradyne's shares dropped sharply late in the week despite putting up reasonably good numbers. Revenue in the fourth quarter climbed 16% from year-earlier levels, capping a year with 36% top-line growth. Adjusted earnings per share rose at an even more impressive pace of 62%, and Teradyne announced a massive $2 billion stock buyback program. Yet shareholders had still wanted to see better performance.
Teradyne admitted that the industrial automation environment has been weaker than expected during the pandemic. However, as conditions start to return toward more normal levels, CEO Mark Jagiela is optimistic that 2021 will be a stronger year for Teradyne, and he expects merger and acquisition activity to remain strong even as the company benefits from the cost control measures it put into place last year. ARK Invest seems to agree about Teradyne's prospects, and the recent drop could prove to be a bargain opportunity for investors.
Selling high
Finally, investors also got to see ARK Invest's rebalancing activity in action during the volatility inspired by short squeezes in many popular stocks. ARK Autonomous Tech & Robotics sold off more than 217,000 shares of Virgin Galactic Holdings (SPCE 22.38%) on Jan. 27, just as its share price soared to close to $60 per share.
Similarly, ARK Fintech Innovation (ARKF 3.79%) sold off about $17 million in MercadoLibre (MELI 1.96%) stock on Jan. 25. That came as the stock poked above the $2,000 per share mark before losing ground the rest of the week.
Both stocks remain prominent players in their respective portfolios. However, the benefit of the active ETF framework is that the funds can take advantage of price disruptions to sell when shares are high and buy when they're low.
Keep watching
When fund managers do well, it pays to take notice of what they're buying and selling. Companies like Teradyne and Twitter are well-known stocks, but it's still valuable to see someone with ARK Invest's track record put investor money to work buying their shares.
