Sea Limited (NYSE:SE), the Singaporean e-commerce and video game company, traded as much as 5.2% over its previous day's closing price Friday, before settling down to close 3.3% higher. This can be attributed to a noted exchange-traded fund (ETF) making a sizable buy in the company's shares.
ARK Innovation ETF (NYSEMKT:ARKK), part of ARK Invest's suite of ETFs guided by stock market rock star of the moment Cathie Wood, bought over 100,000 shares of Sea Limited Thursday. And when one of Wood's funds makes a buy, people tend to notice the target stock and grab it too.
Wood and ARK Invest like value stock plays that might not necessarily be in favor with the market. Sea Limited has sharply grown the e-commerce side of its operations in a rather short space of time.
However, many investors are veering away from e-commerce titles these days. They fear that the success these companies enjoyed by serving shut-in customers during the coronavirus pandemic won't be sustainable when the outbreak retreats and the economy goes back to "normal."
Essentially, it looks as if ARK Invest is pouncing on an opportunity to get a bargain on a recently tarnished coronavirus stock. But as with any situation like this involving a famous investor's latest stock move, we shouldn't buy Sea Limited on that basis alone. Believers in the company should do so because they feel its business model still has potential and its valuations are appealing.