Cathie Wood is known for two things: making daring investment moves that go against the crowd and doing this with a focus on the long term. This means Wood might sell a spectacularly popular stock that’s soaring and buy shares of a stock that’s dropped in recent times. The chief executive officer of ARK Invest does this to get in on innovators — her favorite type of company — at a reasonable price. She doesn’t mind if the stock struggles in the near term because she aims to stick with the companies in her portfolio throughout their growth stories.
Just this week, Wood has done exactly this, and the move concerns three artificial intelligence (AI) stocks. AI stocks are right up Wood’s alley as the technology promises to revolutionize the way the world works — and that could represent billions of dollars in revenue for companies that lead the way. This week, Wood cut her holding of one of her favorite stocks — one that’s soared 1,000% over three years — and added to her positions in two other AI giants. Let’s take a closer look at her moves.
So, let’s start with the stock Wood sold. This week, during more than one trading session, Wood sold shares of Palantir Technologies (NASDAQ: PLTR), a maker of AI-driven software systems. This stock, as of May 9, was the sixth-biggest holding, with a 6% weighting, in her flagship Ark Innovation exchange-traded fund (ETF).
Palantir reported fantastic revenue growth earlier in the week, with a solid balance of growth and profitability, and the company highlighted the strength of demand moving forward. So there wasn’t any bad news in the report, but, as a big holder of Palantir, Wood may have decided to lock in some profits to reallocate into other opportunities. On top of this, Palantir shares are pricey today at about 200 times forward earnings estimates, and this could weigh on near-term stock performance.
Still, it’s clear that with Palantir’s significant position in Ark Innovation, Wood still is optimistic about the company’s long-term prospects from earnings and share performance perspectives even after the stock has climbed in the quadruple digits over the past three years.
Now, let’s consider Wood’s buys. The top investor added more shares of AI chip designers Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD) to Ark Innovation this past week. It’s no surprise the bargain-hunting Wood made this move considering the valuations of these players right now. Nvidia trades for 26 times forward earnings estimates, down from 50 times earlier this year. AMD’s valuation decline has been less spectacular, but the stock still looks like a good value today for 25 times forward earnings estimates compared to more than 30 times a few months ago.
