Famed contrarian investor Cathie Wood is continuing with her modus operandi. The founder and CEO of Ark Invest is known for betting big on former growth stocks as they fall. One of her longtime favorites? Tesla (NASDAQ:TSLA) stock.
Wood has made several purchases throughout 2022 as the electric vehicle (EV) leader has trekked into the red. Most recently, Wood’s fund made another significant TSLA stock purchase as Elon Musk offloaded a chunk of his own holdings. With one noteworthy stockholder selling while another moves to buy, it’s no surprise that TSLA is highly volatile today.
Tesla investors have been expressing concerns recently as shares have plunged. Does Cathie Wood know something they don’t? Let’s take a closer look at Ark Invest’s latest purchase.
Cathie Wood’s New TSLA Stock Bet
TSLA stock began today by rising, but lost any early momentum fairly quickly only to attempt a rally. As of this writing, shares are up about 0.5%. This volatile trading day is in keeping with the stock’s performance this month. Despite several brief surges, shares have failed to make up any ground, dropping by almost 20%.
As she often does, though, Wood clearly sees Tesla’s losing streak as an opportunity to buy the dip. Yahoo! Finance reports that Ark Invest recently purchased 74,862 new shares worth roughly $11.7 million. These shares are spread across three of Wood’s exchange-traded funds (ETFs). Specifically, the purchase breaks down to 61,537 shares for the ARK Innovation ETF (NYSEARCA:ARKK), 10,066 for the ARK Autonomous Technology & Robotics ETF (BATS:ARKQ) and 3,259 shares for the ARK Next Generation Internet ETF (NYSEARCA:ARKW). Tesla is currently the third-largest holding across all of Wood’s ETFs, behind only Zoom (NASDAQ:ZM) and Exact Sciences (NASDAQ:EXAS).
Wood previously purchased TSLA stock in both October and November 2022. While she did offload $41 million worth of shares in September, she also later identified a potential 10x opportunity for Tesla, making her bullish stance clear. Since then, though, shares have only fallen.
While experts predict that a market turnaround is coming in 2023, not everyone is optimistic that Tesla will recover quickly. Multiple Wall Street firms, including RBC and Goldman Sachs, recently lowered their TSLA stock price targets. Others like Citigroup have reiterated “hold” ratings. The overall industry sentiment toward Tesla has truly shifted.
The Road Ahead
This likely doesn’t matter to Cathie Wood, however. Wood loves to purchase high-growth stocks at their lowest. But Musk’s recent actions do continue to cast a shadow on the EV company. Multiple experts predicted that, if Musk were to take over Twitter, TSLA stock would plummet. Now, that exact scenario is playing out.
Longtime Tesla bull Dan Ives of Wedbush recently laid out the problematic nature of Musk offloading TSLA stock to support Twitter. In his words, “Musk uses Tesla as his own ATM machine to keep funding the red ink at Twitter which gets worse by the day.”
If this trend continues, TSLA stock will likely fall even more. Even Cathie Wood may not be able to justify betting on shares if Musk keeps this up.
On the date of publication, Samuel O’Brient did not hold (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.