THE big rebound in Tesla shares over the past few months has pushed the electric-vehicle maker to its highest-ever weighting in Cathie Wood’s flagship US$6.2 billion exchange-traded fund (ETF).
Tesla now represents 15.4 per cent of the ARK Innovation ETF (ticker ARKK) after rallying more than 80 per cent from its 2024 low set in April, data compiled by Bloomberg show. That’s even after the fund trimmed its positions in the Elon Musk-led company in recent weeks.
The weighting amounts to the strongest conviction in the stock in the 10-year history of the disruptive tech fund, according to an analysis by Strategas Securities. Tesla has long been among Wood’s high-conviction holdings, and reclaimed the top position in ARKK in April to unseat Coinbase Global. The ETF’s second-largest position, Roku, comprises about 9.1 per cent of the fund. Coinbase is third at around 8.5 per cent.
“The price appreciation aspect is definitely a huge catalyst,” said Todd Sohn, an ETF strategist at Strategas. “Usually they kept a cap of around 10 per cent to 11 per cent, but they are letting it run for now.”
The ARK Innovation ETF has not bought Tesla shares in recent months, although it did sell a couple of times in July, based on daily updates the firm sends to clients. The ETF has dropped about 12 per cent this year while Tesla has climbed around 5 per cent.
The carmaker’s shares were on track to rise for a 10th straight session on Tuesday (Jul 9), the longest winning streak since June last year. The rally got a boost this month from quarterly deliveries that beat the average analyst estimate.
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Ark Investment Management, the parent fund company, did not immediately respond to a request for comment.
Wood has been among Tesla’s ardent supporters, having shot to fame during the height of the pandemic for her bold price calls on the company. Retail traders embraced her views, pushing the company’s assets above US$60 billion at their peak in early 2021.
Demand has since dimmed. Ark’s six actively managed ETFs combined now have about US$11 billion in assets. As a cohort, the funds have seen a net US$3.4 billion outflow this year, led by a US$2 billion exodus from ARKK.
Still, Wood’s confidence in Tesla remains steadfast. In June, she updated her forecast for Tesla’s stock to US$2,600 by 2029, with a bull case of approximately US$3,100. Tesla shares are trading at around US$260 on Tuesday in New York.
Of the 10 exchange-traded funds that have Tesla making up 10 per cent or more of their entire portfolio, three are Wood’s. This includes the US$1.5 billion ARK Next Generation Internet ETF (ARKW) and the US$839 million ARK Autonomous Technology & Robotics ETF (ARKQ).
Others include the US$1.5 billion Fidelity MSCI Consumer Discretionary Index ETF (FDIS) and the US$730 million First Trust Nasdaq Clean Edge Green Energy Index Fund (QCLN). BLOOMBERG
