Investors at Ark might be kicking themselves this morning. The fund dumped 150,000 Tesla shares stock earlier this week (worth $39 million), just days before a 20% spike in share price.
All told, the firm would have made an extra $6 million if they’d held on until today’s opening bell.
Ark is perhaps Tesla’s biggest cheerleader, famously putting a $4,000 price target on the stock, and TSLA remains their highest-conviction play. But timing got the better of them this week, offloading shares right before Elon Musk’s best earnings report in a long time.
As CCN.com reported, Tesla came out fighting last night, beating Wall Street expectations with a surprise return to profitability. Tesla has managed only five quarter in the black since listing as a public company.
In addition to the strong numbers, Elon Musk doubled down on Model 3 delivery targets and put the Shanghai gigafactory and Model Y timeline ahead of schedule.
Musk also dismissed rumours of further funding rounds.
“We continue to believe our business has grown to the point of being self-funding.”
On the topic of progress at the Shanghai gigafactory, Musk said:
“We are already producing full vehicles on a trial basis, from body, to paint and to general assembly, at Gigafactory Shanghai. We have cleared initial milestones toward our manufacturing license and are working towards finalizing the license and meeting other governmental requirements before we begin ramping production and delivery of vehicles from Shanghai.”
Despite offloading shares earlier this week, Ark was quick to reaffirm the fund’s long-term conviction on Tesla. Chief Investment Officer Cathie Wood explained on Twitter that the move was little more than rebalancing the portfolio.
“When a stock reaches 10% of our portfolio we cannot buy it any longer. We can let it run to up to 12%, 13%, sometimes a little above that. But typically, by that time, because the stock has done 30% better than all the other stocks in our portfolio we will take profits. That’s portfolio management.
“Now in the case of Tesla as you know we bought it down into the $180 range and as it approached $240-50 it had crossed over 12-13% of the portfolio. We were taking profits because we were getting opportunities elsewhere in the portfolio particularly in genomics stocks that we felt we should take profits and reallocate.”
Tesla remains the firm’s largest holding at 10% and Ark is the 21st largest Tesla shareholder. Reaffirming her $4,000 price target earlier this year, Wood outlined Tesla’s edge:
“Our conviction in Tesla is so high it never left our top position. We learned about Tesla’s artificial intelligence chip. We saw the specs. Our analyst, James Wang, comes from Nvidia, and he said ‘oh my goodness.’ This leapfrogs the competition. They are at least three or four years ahead of the competition.”
Last modified: September 23, 2020 1:13 PM