Cathie Wood On Why Ark Is Buying Shares In Tesla Chinese Rivals Nio, Xpeng

Popular stock picker Cathie Wood is interested in Chinese electric vehicle stocks Xpeng Inc XPEV and Nio Inc NIO because of their “low-margin” feature, CnEVpost reported on Tuesday, citing a Bloomberg TV interview.

What Happened: Tesla Inc TSLA bull Wood last month initiated a position in Nio, a first for the popular investor known who has been building positions in Xpeng and is known for heavy exposure to Elon Musk-led Tesla Inc TSLA.

As per Wood, “high-profit margins” are not a good thing, a reason why her investment firm has stayed away from such companies. 

“So Xpeng and Nio, we have ... but they're very low margin,” the report quoted Wood as saying.

“It's all about next-gen transportation in a world where you know human-driven cars are still, relative to the eligible drivers, still (a) very low percentage. So, we're interested there.”

See Also: Cathie Wood Trims $147M From Tesla Stake And Initiates Position In This Rival EV Maker

Why It Matters: Nio reported a gross margin of 18.9% for the fiscal year 2021, compared with 11.5% a year ago. Rival Xpeng, which aims to boost gross margins to 25% in the future, reported a gross margin of 12.5% in 2021, compared with 4.6% a year ago.

In comparison, Tesla reported overall automotive gross margins of 27% last year and 21% in 2020. 

Ark Invest scooped up 420,057 shares in Nio last month, which is valued at $10 million as of Monday’s closing price in the EV stock. The investment firm holds 928, 648 shares, worth $29 million.

Price Action: Nio stock closed 8.7% higher at $23.8 a share on Monday.

Photo courtesy: Ark Invest