As the CEO of Ark Invest, Cathie Wood has made a name for herself thanks to her strong conviction in exciting technologies and high-profile investments in emerging companies looking to disrupt the status quo.
Wood was an earlier supporter of electric vehicle (EV) manufacturer Tesla(NASDAQ: TSLA), often touting the prospects of autonomous driving and the role artificial intelligence (AI) could play in the company’s roadmap before it was fashionable. But recently, Wood has been reducing her stake in Tesla and reinvesting profits in another EV player, Archer Aviation(NYSE: ACHR), which is developing electric air taxis.
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Below, I’m going to break down Wood’s various moves and detail what’s really going on here. There’s a lot to digest and more than meets the eye with Wood’s swap for Archer. Let’s dig into the details.
In the month of October, Wood sold more than 280,000 shares of Tesla across the ARK Innovation, ARK Autonomous Technology & Robotics, and ARK Next Generation Internet exchange-traded funds (ETF). Wood followed these moves with selling another 530,000 shares between Nov. 1 and Nov. 7.
The timing of these sales is not necessarily coincidental. Wood began trimming Ark’s Tesla position on Oct. 24, the day after the company reported third-quarter results. During the last week of October, shares of Tesla gained more than 16%. Moreover, between Nov. 1 and Nov. 7, Tesla stock rocketed by 19%.
All told, since Tesla reported earnings on Oct. 23, the stock has gained roughly 38% as of Nov. 7 (the date of Wood’s last reported sale of Tesla stock).
Archer Aviation specializes in a niche pocket of the mobility realm called electric vertical take-off and landing (eVTOL) aircraft. While this may sound like something out of The Jetsons, EV air taxis actually have some pretty eye-opening use cases.
The most obvious application is to use Archer’s air taxis as an alternative mode of transportation in congested environments like cities. What’s exciting about this particular use case is the fact that congested urban environments are a worldwide issue.
During Archer’s Q3 earnings update, management shared with investors that the company signed an agreement with Japan Airlines and Soracle, which included an intent to purchase up to 100 of Archer’s aircraft with a value of $500 million “with the goal of bringing air taxi service to some of the most congested cities in Japan.”
In addition to collaborating with other airlines such as United Airlines and Southwest Airlines, Archer has also garnered interest from the U.S. military. Similar to electric cars, Archer’s aircraft are incredibly quiet, making them an appealing solution for stealth missions in the military.
During the last week of October, Wood added roughly 2.5 million shares of Archer stock to the Ark funds. Considering shares of Archer are trading for less than $5 and Tesla’s recent valuation expansion has made the stock a bit pricey, did Wood just make the trade of a lifetime?
Image source: Getty Images.
Given the information above, it’s clear that Tesla stock has made a pretty incredible run in an extremely short time frame. During volatile times like these, investors never go wrong taking some profits.
In Wood’s case, Tesla stock is a major position across the Ark portfolio. In a recent interview, Wood explained that Tesla’s outsized momentum as of late was making her position in the stock disproportionately large within Ark’s portfolio. As an astute portfolio manager, Wood is going to rebalance her positions from time to time and subsequently reinvest profits in other companies.
In my eyes, Archer is still largely a speculative opportunity. The company is still pre-revenue, and despite an impressive order book worth more than $6 billion, I think widespread commercialization of eVTOL aircraft is likely years away. At the end of the day, it’s clear that Wood’s recent actions do not suggest that she sees Archer as a superior opportunity over Tesla.
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Adam Spatacco has positions in Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.
