This week, Cathie Wood, through her ARK Invest ETFs, executed significant sales of Tesla (TSLA), Palantir (PLTR), and Coinbase (COIN) stocks amidst a Federal Reserve interest rate cut. From December 17 to December 19, ARK Innovation ETF (ARKK) sold 34,598 shares of Tesla and 33,402 shares of Palantir Technologies, while ARK Fintech Innovation ETF (ARKF) offloaded 19,426 shares of Coinbase Global. These transactions amounted to approximately $21.5 million in stock value.
The Federal Reserve’s decision to lower the Fed funds rate by 25 basis points on December 18 came with a hawkish outlook, suggesting that future rate cuts in 2025 would not be as aggressive as some investors had hoped. This stance led to a stronger dollar, reaching a two-year high, while both stocks and cryptocurrencies experienced a downturn. The market’s reaction to this news underscores the complex dynamics between monetary policy, investor sentiment, and asset valuation.
Tesla, a long-standing favorite in Wood’s portfolio, has seen its stock surge by more than 68% since Donald Trump’s presidential win on November 5. Despite this rally, ARK has been trimming its Tesla holdings, with sales amounting to 164,595 shares from December 11 to 13, valued at $70 million. Wood’s faith in Tesla has been notable; her 2018 prediction of Tesla’s stock reaching a split-adjusted $4,000 by 2023 was met with skepticism but turned out to be accurate. Tesla’s third-quarter earnings exceeded expectations, with an adjusted EPS of 72 cents compared to the anticipated 58 cents. Revenue came in at $25.18 billion, slightly below the $25.37 billion forecast but still reflecting an 8% increase from last year’s $23.35 billion, reinforcing Tesla’s growth narrative.
Meanwhile, ARK’s decision to sell Palantir stock was driven by the company’s exceptional performance following its Q3 earnings report on November 4. Palantir reported record revenue of $726 million, marking a 30% year-over-year increase, and achieved $144 million in net income, the largest profit in its 20-year history. Adjusted earnings per share came in at 10 cents, slightly surpassing analysts’ expectations of 9 cents. Revenue from the U.S. market, encompassing both commercial and government sectors, surged by 44% to $499 million, underscoring the company’s growing dominance in this segment. Palantir’s growth has been fueled by strong demand for its artificial intelligence technologies, particularly from U.S. customers. Additionally, the company’s adjusted free cash flow exceeded $1 billion over the trailing 12 months, boosting its cash reserves to an impressive $4.6 billion. This remarkable performance highlighted Palantir’s momentum and likely prompted ARK to capitalize on its gains.
ARK sold 1.26 million PLTR shares in November and an additional 95,570 shares on December 6, indicating a strategy to capitalize on the stock’s surge driven by high demand for AI solutions. However, concerns have been raised about Palantir’s valuation, with several analysts warning against chasing the stock’s recent gains, suggesting Wood’s sell-off was a prudent move to secure profits.
Coinbase, deeply entwined with the crypto market’s health, saw ARK reducing its stake despite Wood’s historical enthusiasm for cryptocurrencies. Coinbase was first acquired by ARK on its Nasdaq debut in April 2021, with an initial purchase of $246 million. Despite this week’s sales, Coinbase remains a significant holding in both the ARK Fintech Innovation ETF (ARKF) and the ARK Innovation ETF (ARKK). In the ARKF portfolio, Coinbase comprises 9.76% of the fund’s holdings, making it the top holding in the ETF. Meanwhile, Coinbase is also the third-largest holding in ARKK, accounting for 8.61% of the fund’s investments. The combined value of these investments amounts to approximately $109 million in ARKF and $550 million in ARKK.
These moves by ARK Invest highlight a strategic portfolio adjustment in response to these individual company performances and broader economic signals from the Federal Reserve. Tesla, Palantir, and Coinbase continue to be substantial holdings within ARKK, signaling Wood’s belief in their future growth potential, albeit with a more cautious approach to current valuations. The nuanced strategy reflects the complexities of managing a portfolio amidst fluctuating market conditions influenced by monetary policy decisions.
Price Action: Tesla’s stock closed Friday’s trading session at $421.06, representing a decline of 3.46% compared to the previous day’s closing price of $436.17. However, in after-hours trading, TSLA experienced a slight rebound, increasing 0.55% to $423.36.
Meanwhile, Palantir closed 8.54% higher at $80.55, while Coinbase ended the day 1.75% higher at $278.71. COIN continued its positive momentum in after-hours trading, gaining another percentage point to reach $281.55.
h/t TheStreet
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