Cathie Wood’s Bet on Skillz Stock Is Enough to Change My Mind

The last time I wrote about Skillz (NYSE:SKLZ) stock was in April. I said that the odds of the mobile social competition platform company returning to the $40s where it traded in February were getting longer by the day. 

Three friends playing a mobile game against each other.
Source: Rawpixel.com/Shutterstock.com

I was torn about making an investment in the company because there wasn’t a catalyst to move its stock higher. As a result, I recommended that investors consider waiting for a better entry point.

On April 19, the date of my article, it closed at $14.11. The very next day, it fell to as low as $12.45. As I write this, the stock has fully recovered and then some. It should open today around $16.30.

While it is likely gaining because tech stocks are having a strong day, for me, it is the fact that Ark Investment Management CEO Cathie Wood has been buying SKLZ stock in recent weeks that has me reconsidering my stance on the company. 

Here’s why. 

Wood Leans Into SKLZ Stock

In April, my feeling on Skillz was that it had one of the better merger partners from a special purpose acquisition company (SPAC) standpoint. Jeff Sagansky and Harry Sloan are right up there for SPAC success stories. I just felt like investors could get a better price by patiently waiting. I didn’t know it would only take a day for that to happen. 

Anyway, when I read in early May that Wood has been buying Skillz on the dips, I took notice. She seems to have irritated a lot of people with her confidence. I am not in this group of grumpy investors. If she were a man, the investment world would applaud her firm’s success and growth.

I suggest you read Michael Patnick’s March 13 post on the subject. It does an excellent job breaking down why people might hate Cathie Wood. I’m not sure how someone hates an investment manager they don’t even personally know, but that’s a subject for another day. 

Batnick points out that it’s natural for people to want those at the top to fail. I’m not so sure I agree with that statement. I mean, unless somebody’s either a total a-hole or has personally done me harm in some way, it doesn’t affect my life whether they’re successful or not. It’s irrelevant. 

Having worked in and written about the financial services industry for most of my life, I know how hard it is to be a successful institutional investor for a lengthy period of time. The Warren Buffett’s of the world are few and far between.

So, when Batnick writes the following, even if it doesn’t last, I can’t help marveling at the feat:

“Cathie Wood’s Ark ETFs are on absolute fire. Last year, all 5 of her actively managed funds gained over 100%. They went from $800 million in assets in January 2018 to $50 billion today, a 62x increase.”

To hate someone who’s achieved this kind of remarkable growth misses the point entirely. People want to believe active management still works. Wood is proof that it can, even if only for a time.

That’s to be celebrated, not criticized.

Ultimately, she may have her comeuppance. However, being a devout Christian, I doubt she’ll care. 

She Bought More

According to Rich Smith of The Motley Fool, Wood bought an additional 1.4 million shares of SKLZ stock on May 13 and May 14 for her Ark Innovation ETF (NYSEARCA:ARKK), which brings the ETF’s holdings to 15.26 million shares, making it the 33rd largest holding with a weighting of 1.12%. 

What she does next will be interesting to watch. To get into the top 10, she’ll have to more than double the number of shares held. 

However, given this additional information, it’s easy to see why Skilz’s stock jumped by more than 12% on May 14. 

I’m not a fan of investing in stocks that don’t make money. Skilz doesn’t. That said, I fully understand and support Wood’s investment philosophy of owning companies that innovate and disrupt. 

Is Wood’s bet on Skillz enough to change my mind? You better believe it. 

If you haven’t bought but want to, I would consider buying half a position now and saving the other half if it drops back to $14 or lower. I don’t know if it will, so govern yourself accordingly. 

In the meantime, given how few successful women there are in investment management, I’ll continue to hope Wood and the entire Ark Invest team continue to outperform its peers.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


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