Superstar investor Cathie Wood just sold shares of one of her favorite stocks: Coinbase Global (COIN 5.68%). The cryptocurrency exchange platform has seen its shares almost triple year to date as cryptocurrencies rebounded. Crypto market value has reached about $1.2 trillion, up from a low of less than $800 billion earlier this year.
Coinbase is now the third-biggest holding in Wood's flagship Ark Innovation ETF (ARKK 1.05%) -- it was the second-largest prior to the sale. Does this recent move mean she's losing faith in the company?
I wouldn't bet on that. Wood is known to lock in profit here and there when some of her favorite stocks rise. After all, she owns significant stakes in them, so she can afford to do so -- and still maintain her exposure to these companies.
A $12 million sale of Coinbase shares
Wood sold $12 million in Coinbase shares this past week, according to the company's daily trade document. Even after the transaction, Coinbase maintained a top position in Ark Innovation with a weight of more than 7.8%.
Coinbase stock has soared just under 200% this year, and it's on track to gain 30% for the week (as of this writing). As CoinDesk reported, this week's gains came after Coinbase reached a deal with Cboe's BZX Exchange to maintain a surveillance-sharing agreement. This agreement concerns five spot Bitcoin ETF applications, CoinDesk added.
The move may relieve the Securities and Exchange Commission's (SEC) big worry regarding Bitcoin ETFs: the potential for market manipulation. The surveillance-sharing agreement is meant to tackle that problem, so it's seen as a big step toward a regulatory approval of these new investment instruments.
Last month, BlackRock filed an application with the SEC for a spot Bitcoin ETF and named Coinbase as the custodian, CNBC reported. Coinbase already generates some revenue through custodial fees, so we could imagine that a potential SEC approval of spot Bitcoin ETFs could result in an increase in custodial fee revenue as Coinbase performs more and more of these services.
But why would Wood sell Coinbase at a time like this? The shares could move even higher in the near term on more progress along the path to spot Bitcoin ETF launches -- and over the long term, thanks to more revenue opportunities.
Selling Tesla shares
As I mentioned, Wood often sells some shares of her biggest holdings after a time of significant gains. For example, she sold shares of Tesla (TSLA -1.11%) last month. The stock, the largest holding in Ark Innovation, climbed more than 100% in the first half of the year. Wood still firmly believes in the electric vehicle giant's future, even expecting it to reach $2,000 per share by 2027.
All of this means we shouldn't view Wood's sale of any particular stock as a change in her outlook on the company (unless she sells most or all of her shares). She is clearly still optimistic about Coinbase and Tesla despite the recent transactions.
Now, the question is: Should you follow Wood's strategy and sell shares of some of your favorite companies to lock in your gains, even if you're still bullish on the stock?
It depends. If the size of your position hasn't grown too large following a bullish run, you can hold on and try to maximize your return potential. But if the rising share price has left you overly exposed to a single stock, selling part of your position can rebalance your portfolio while providing cash that you can put into other stocks.
In any case, though, it's key to follow one main part of Wood's strategy: the idea of owning stocks for the long term. Wood isn't selling after a short period of time on a whim, and neither should you.
