Analyzing 13Fs: ARK Investment Management Q2 2023 Update

Today we bring you the latest update in our recurring series based on analyzing 13F filings and the latest moves of some of the world's most renowned funds and asset managers.

It would seem that the bear market has been canceled, at least if the current market is to be trusted. Now, whether or not the economy has an honest chance to truly digest the bundles of issues that have led us to the point where we find ourselves today is a completely different question. It would seem everyone simply decided it would be too expensive to discuss such things. After the longest bull market in history graced investors across the globe with exuberant returns throughout the years, the 2022 bear market proved to be rather short-lived, statistically lasting less than 300 days while pulling the S&P 500 back by "only" 25.4%. However, there is one fund manager that will not object much to parting ways with a catastrophic 2022 that saw almost three-quarters of her AUM erased. Fortunes have turned on Cathie Wood and ARK Investment Management with high-flying innovative tech stocks once again on top of everyone's mind and back in investor crosshairs, at least judging by her fund's performance.

All of ARK's listed funds, including Cathie Wood's renowned flagship fund, have had an impressive run lately and managed to outperform major global indices, including the S&P 500 SPY. Ark Innovation ETF ARKK now has more than $9 billion in AUM by itself and is up 61% year-to-date after having almost three-quarters of its value erased last year in an unprecedented capital outflow. The rest of the ARK funds, such as ARK Next Generation Internet ARKW, ARK Fintech Innovation ARKF, and ARK Genomic Revolution ARKG, have similar year-to-date trends. ARK Investment Management reported that their U.S. equity-based assets under management increased to $14.73 billion. However, it is also fair to note that the funds have barely returned to close to one-third of their all-time highs, as ARK itself once managed more than $50 billion through all of its funds.

Their top ten holdings concentration has been marginally lowered to 50.25%, as compared to 52.61% reported last quarter. They have also decreased their major portfolio holdings positions taking up more than 5% of AUM to only four, as well as major ownership stakes, which were reported at 34 for the quarter ending in June. During a busy quarter, they opened six new positions while expanding 66 already existing holdings. Also, as per the latest filing, 108 ARK holdings have been trimmed while 3 ARK positions were fully closed out. Top holdings have also seen some mixups. While Tesla TSLA still remains somewhat entrenched at the top, taking up a whole 8.05% of AUM, the EV-maker is now closely followed by Coinbase COIN and UiPath PATH, which take up 5.90% and 5.40% of the AUM, respectively. A short summary for the second quarter looks something like this...

New Positions

In what is perhaps the biggest news for the quarter is that Cathie Wood is back in Palantir PLTR, no doubt helping the stock in its impressive 160% runup since January. Cathie cleared out Palantir at a tremendous loss from her ARK Fund holdings in early February of last year, only to reverse course now that the tech firm is trading at double the price. Palantir was one of the few companies so trusted by Cathie that it made its way into all six ARK funds in a memorable "billion dollar" purchase by the fund manager. The company fell into a broader basket of high-flying tech stocks at the time and was in the business of making proprietary data analytics tools for both the federal government and corporate customers. Whether Cathies's second venture into Palantir will prove more lucrative than the first one still remains to be seen. ARK bought 6.8 million shares of Palantir, which now trades at around $16 per share.

Other stocks that found their way into ARK funds are SoFi Technologies SOFI, Pure Storage PSTG, Taiwan Semiconductor TSM, Vanguard Growth ETF VUG, and The Trade Desk TTD.

Expanded Positions

Teradyne TER was a prominent ARK holding up until the tail end of 2021, when the funds were almost completely cleared out of Teradyne shares. ARK Investment Management bought some 560,000 shares between $90 and $111 per share in the second quarter, increasing their holdings by 92.70%. New shares were added while the automated test equipment manufacturer traded in the $107.40–$111.30 range. Teradyne can currently be purchased for $115 per share.

UiPath has been a part of their portfolios since the second quarter of 2021 and has since risen to become their 3rd largest holding. It takes up 5.40% of the fund's AUM. It was expanded by an additional 7.50%, with ARK buying 3.40 million shares between $12 and $20 per share. Shares of UI can currently be bought for $17.

After two consecutive quarters in which Cathie's team was cutting their Coinbase Global exposure, the course has been reversed and ARK purchased some 345 thousand Coinbase shares during the second quarter, increasing their position by 2.90%. New shares were added while the crypto-exchange firm traded in the $49–$71 range. The position now takes up 5.90% of AUM. After a big runup since January, the company currently trades at $96 per share.

Twilio TWLO exposure was increased by 12.61% during the quarter. Cathie Wood bought around 780,000 shares of Twilio. This made the San Francisco tech firm the 13th largest holding, taking up some 3.00% of AUM.

ARK Investment Management also increased its exposure to companies including Block SQ, Verve Therapeutics VERV, PagerDuty PD, Roblox RBLX, Intellia Therapeutics NTLA, and others.

Reduced Positions

If Tesla stock's most prominent bull finds herself in the seventh consecutive quarter of selling, perhaps it would not be a bad time for other investors to reconsider if they still like the position near the $300 range. ARK trimmed another 10.96% of their holdings, electing to sell 596,014 Tesla shares during the second quarter. Elon Musk's EV maker is already up 157.10% year-to-date and is currently selling for an exuberant NTM P/E of 44.30x and P/FCF of 74.77x, however, long-term bulls have dealt with much worse valuations at the time. Even after the sale, the position takes up almost 8.60% of its AUM. Its shares are trading at $265.

Exact Sciences EXAS was without a doubt the largest trade of the quarter, with ARK dumping another 4.2 million shares of the firm worth around $410 million at todays prices. This would mean the firm has disposed of nearly 10 million shares of the company in the last year, in a move that is not difficult to understand as ARK continues to part ways with a position they have held since mid-2020. Considering the prices over the past twelve months, Cathie is likely looking at heavy losses on the position. The position has been pushed under 5% of the firm's AUM. EXAS trades at $96 per share.

Shopify SHOP is the second-largest move for the quarter ending in June. After a huge runup of 97.2% year-to-date, Cathie Wood and ARK Investment Management disposed of 5.1 million shares. Shopify is now their 8th largest position, accounting for less than 4.00% of their AUM. Shares in the company can be bought today for $66.

Nvidia NVDA is another big-time winner that headed straight to the chopping block this quarter. The stock price is up an extraordinary 221.10% year-to-date. It was methodically chopped down to under 1% of the AUM over recent quarters since the runup, with this quarter seeing another trimming of 28.62% or around 118,000 shares of Nvidia. It currently trades at $467 per share.

ARK Investment Management also cut its holdings in more notable stocks like CRISPR Therapeutics CRSP, Roku ROKU, DraftKings DKNG, 10x Genomics TXG, Zoom Video Communications ZM, and others. They've closed out their stakes in Farfetch Limited FTCH, Niu Technologies NIU, and ATAI Life Sciences ATAI.

Final Overview

The market has seemingly decided that a bear market is too expensive and that focusing on fundamentals is rather boring, which proved quite fortunate for Cathie Wood. Her funds are now back to outperforming all major indices in a sentiment eerily similar to that of 2021, but with a much more negative macroeconomic backdrop. The famous fund manager went back and began recycling some of her more famous but overall less successful investment ideas, with Palantir being a prime example of the trend. It is still up for debate whether or not the fundamentals have significantly improved, or rather further decayed, since the first venture into these stocks.