For a long time, her largest position was billionaire Elon Musk’s Tesla. Its estimated target price in 2026 is $4,600 per share. Which is a price that makes absolutely no sense to most value investors.
However, Tesla has written off nearly 34% in the past month and is no longer the largest position in Ark Invest’s portfolio. The stock of Roku, which is a video streaming service provider, took the top spot.
But it’s not about changing business strategy
Cathie Wood isn’t changing her business strategy, though, and it’s not about not trusting Tesla anymore. The rankings have changed mainly due to the recent stock market declines. Tesla is taken by many as one of the most overheated stocks, so at the sign of trouble, this stock is among the first to be dumped. Additionally, there is still debate and conjecture regarding Elon Musk’s takeover of Twitter and the situation regarding allegations of possible sexual harassment.
Investors seem to be concerned about how much Musk has on his plate. He leads Tesla, SpaceX, The Boring Company, and Neuralink. Musk took to Twitter on Friday to reassure Tesla shareholders that Twitter only takes up about 5% of his time and that he thinks about Tesla 24 hours a day.
To be clear, I’m spending <5% (but actually) of my time on the Twitter acquisition. It ain’t rocket science!
Yesterday was Giga Texas, today is Starbase. Tesla is on my mind 24/7.
So may seem like below, but not true. pic.twitter.com/CXfWiLD2f8
— Elon Musk (@elonmusk) May 19, 2022
The drop in Tesla’s stock, along with other fast-growing names, has hurt Wood’s fund. ARK Innovation ETF (ARKK) is down 26% in the past month.
The change in market sentiment
We discussed the potential change in sentiment for individual market sectors in a recent article on Apple. Indeed, with the current macroeconomic situation and with interest rates rising, it now looks like technology is no longer as interesting to investors and the market is looking elsewhere for value for its investments.
In times of high-interest rates, banks, for example, usually do well because higher rates mean higher profits for them. The energy sector is also doing well at the moment, with companies posting record profits.