There's a new star in the investing space, and her name is Cathie Wood. The founder of the ARK Invest family of actively managed exchange-traded funds has revolutionized the industry, eschewing passive index tracking in favor of good old-fashioned stock picking. All five of Wood's ETFs have more than doubled over the past year, and all five feature diverse portfolios with several dozen stocks among their holdings.
However, there's one stock that Wood has praised more than any other. It's been an integral part of her ETFs' holdings over the past year, and its performance has been crucial to the success of ARK Invest. Below, we'll share what Wood has said about this company and whether she thinks it still has good growth prospects for the future.
The only bull in a room full of bears
After a stock has soared, it's easy to be bullish. But Wood was excited about her favorite stock long before it was red-hot -- and even when many believed it was on the verge of collapse.
To get some context, look back to August 2019. The share price of Wood's favorite had fallen by a third since the beginning of the year. Many were skeptical of its ability to bounce back from one of many controversies surrounding the company and its CEO. The company even cut prices on its main product line, and some even feared that a bankruptcy filing could be imminent.
The stock, of course, is Tesla (TSLA -3.06%), and nothing happening with the company 1 1/2 years ago deterred Wood from her bullish views. "We think the negative sentiment is pretty unbelievable," she said in a CNBC interview. Wood saw gross margins for the company's products rising over time and pointed to the ancillary potential of autonomous-vehicle technology as a huge tech asset on which no one at the time was putting much value.
In terms of competition, Wood noted, Tesla was building its own competitive advantage by building the go-to place of employment for those interested in innovation. "It's getting all the really great software engineers," she told CityWireUSA. "Tesla is taking all the oxygen out of the room for the other automakers."
It was long before that, in early 2018, when Wood put a seemingly outlandish $4,000 per-share price target on the stock. By early 2020, she had upped that call to $15,000 per share, with a time frame of 2024.
Despite all her critics, Wood was right. Her bullish calls were made before Tesla did its 5-for-1 split, so the old $4,000 and $15,000 price targets work out to $800 and $3,000, respectively, post-split. Tesla hit $800 per share earlier this year and remains near that level. That's taken $10,000 invested this time last year at a level closer to a split-adjusted $160 per share and turned it into nearly $50,000.
As for Tesla reaching $3,000 per share, that might take a few more years. But Wood hasn't retracted that call and is still adding to what's already an extensive position in Tesla in her ARK Invest ETFs.
Big bets on Tesla
You won't find a stock among ARK Invest's ETFs that has more money invested in it than Tesla. The following ETFs have positions:
- The flagship ARK Innovation ETF (ARKK 0.03%) is ARK Invest's biggest active ETF and holds 3.1 million shares worth nearly $2.48 billion at recent prices. Tesla makes up almost 9% of the fund's total assets.
- ARK Autonomous Technology & Robotics ETF (ARKQ -0.23%) is much smaller but has an even bigger concentration in Tesla stock. The fund holds about 511,000 shares valued at more than $400 million, making up just under 10% of the ETF's assets.
- Another 1 million shares of Tesla are in the hands of ARK Next Generation Internet ETF (ARKW -0.08%). Those shares have a value of just shy of $800 million, representing 8.5% of assets under management.
At least for now, Wood hasn't found any way to include Tesla in the holdings of ARK Invest's genomics or fintech ETFs. However, with the Elon Musk-led company, you never know what could be in store.
Buying more Tesla
Despite those big positions, Wood remains bullish on Tesla. Just this week, she said that ARK Invest has been buying shares. Wood pointed to the potential value of ride-hailing as yet another market for Tesla to tap into.
Tesla continues to inspire both bullish and bearish calls across the investment community. But two things are certain: Wood's belief in the EV pioneer hasn't wavered, and thus far, her calls about her favorite stock have panned out extremely well for ARK Invest's shareholders.