One of the market’s best-known contrarian investors may be switching up her strategy. Cathie Wood is regarded for her modus operandi (MO) of buying beaten-down tech stocks while they dip. But the CEO of Ark Invest recently added a new stock to her fund’s holdings that doesn’t quite fit that description.
Archer Aviation (NYSE:ACHR) stock may be trading at a low price point, but it has performed extremely well recently. In fact, the air taxi innovator has captured the attention of many investors over the past month as it has surged by almost 60%. Wood’s purchase suggests, though, that she believes ACHR stock can rise even higher. Many other institutional investors share her bullish sentiment regarding the company’s growth prospects.
Why is Wood betting on a stock that falls pretty far outside her typical investment criteria? Let’s dive deeper into her recent purchase and assess this fast-growing company.
Is ACHR Stock Taking to the Skies?
Last week, Wood purchased ACHR stock multiple times. On Aug. 15, Ark Invest registered a trade for 646,849 shares. One day later, it reported another one for 2.694 million shares. As of this writing, Archer is the 28th holding in Wood’s ARK Innovation ETF (NYSEARCA:ARKK). It currently occupies 0.38% of the fund and boasts a market capitalization of $1.56 billion.
So far, Wood’s stake in Archer has been an excellent investment. ACHR stock started this week off with a bang, rising more than 16% this morning. Despite some volatility over the past few days, shares appear to have stabilized as a new week takes off. It also helps that Archer’s chief rival, Joby Aviation (NYSE:JOBY), has spent the past month trending downward while ACHR has risen.
Granted, it’s a great time to be gaining exposure to the air mobility market. According to recent projections, the market could be worth as much as $68.1 billion by 2032, expanding at a compound annual growth rate (CAGR) of more than 35%. Archer has done a great job securing lucrative partnerships, including a contract with the U.S. Department of Defense (D0D). As InvestorPlace contributor Chris MacDonald reports:
“Archer has partnered with DoD through AFWERX program since 2021, aiming to assess eVTOL potential for military purposes. Recently, Archer completed its first Midnight aircraft manufacturing.
“This aircraft’s vertical takeoff, 1,000lbs payload, electric powertrain, and low noise profile have caught DoD’s attention for their potential in enhancing military operations. These eVTOLs offer safer, quieter, and cost-effective alternatives to helicopters, benefiting various missions and operations.”
These factors likely all influenced Wood’s decision to double down on ACHR stock, even as shares have risen. If these projections are even close to correct, stocks in the air mobility space will enjoy an excellent race to the top. Archer is well-positioned to help lead this sector as it ushers in the next phase of air transportation.
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.
