Cathie Wood is an open book when it comes to her trading as the ace stock picker for Ark Invest. She publishes her transactions at the end of every trading day. As an optimist I tend to focus on the names that she's buying, but it's also important to check out what Ark's founder and CEO is selling.
What did Wood sell on Thursday? She lightened her positions in Roku (ROKU 0.95%), Tesla (TSLA -3.48%), and Nvidia (NVDA -0.46%) yesterday. They are three of this year's hottest stocks. Let's take a closer look.
1. Roku
Wood has been pruning away at her position in Roku since late last week. She has actually sold small stakes of Roku for six consecutive trading days through Thursday's close. Wood began the selling shortly after the streaming video pioneer posted blowout financial results last week, a report that sent the shares soaring 31% in a single day and 51% for all of July.
Selling Roku stock over the past week has proven to be the right call in the short term. The shares have surrendered 14% of their value over the last six trading days. However, it would be premature to say that she has reduced her exposure to Roku this year. The stock has nearly doubled in 2023, soaring 94% year to date. She has sold less than 10% of her position, so the value of her stake in Roku is still substantially higher than it was at the beginning of the year. She continues to own more than 8% of Roku's total shares outstanding. It is the third-largest position for Ark Invest across all of its holdings.
Image source: Getty Images.
Roku's popularity continues to grow. It had 73.5 million active accounts at the end of June, more than double its closest competitor and a 16% advance over the past year. The number of hours streamed by those viewers has risen 21% in that time, so engagement is only getting better.
Roku returned to double-digit revenue growth after a weak connected TV advertising market resulted in single-digit top-line growth in the two previous quarterly updates. Losses continue at Roku, but it has rattled off back-to-back reports of sequential improvement after seven consecutive periods of sequential deterioration. The recovery in the ad market will need to keep improving for Roku to resume its winning ways and claw its way back to profitability. However, when a niche leader is growing market share in a challenging climate it usually ends well for investors once the storm clouds start to clear.
2. Tesla
Tesla is another big gainer this year, up a refreshing 99% in 2023. The maker of electric vehicles has seen its shares nearly double despite margin-eroding price cuts and a challenging market for big-ticket purchases.
The lower price points and playing nice with government restrictions in order to pass on tax credits to buyers are working. Revenue rose 47% in its latest quarter, its strongest top-line growth rate since last summer. The bottom line isn't growing as quickly as a result of the lower car prices, but Tesla remains very profitable and did post year-over-year improvement in net income in the second quarter.
Tesla is Wood's largest position, accounting for a little less than 8% of the weighting of Ark's total holdings. She did lighten her position on Thursday, but it's the first time that she has sold some of her Tesla shares since late last month.
3. Nvidia
Roku and Tesla are crushing the market this year with stocks that have nearly doubled this year. Nvidia is faring even better, nearly tripling in 2023 with its 190% ascent.
The world's top dog when it comes to graphics processing units (GPUs) has become the leading play in artificial intelligence or AI. Nvidia always finds itself on the leading edge of emerging trends, its finger firmly on the pulse of everything from self-driving cars to virtual reality. Now it just happens to be the undisputed leader in AI chips.
Revenue growth has been sluggish at Nvidia in recent quarters, but it's not likely to stay that way. Analysts see earnings more than doubling with sales rising 61% at Nvidia this fiscal year. Nvidia isn't as large a position for Ark as Tesla or Roku. Wood has also lightened her stake in back-to-back trading days. It's still not something for investors to worry about. All three stocks have had massive rallies in 2023. Wood continues to own sizable stakes in all three market winners.
