In this article, we will take a look at the 10 tech stocks to sell now according to Cathie Wood.
Cathie Wood has made a roaring comeback in 2023 after suffering huge losses and criticism in 2022. Cathie Wood’s ARK Innovation ETF (ARKK) is up about 34% year to date through February 10. While only time would tell whether or not ARK’s outperformance would continue, Cathie Wood is making sure the market is aware of her strong comeback as she recently said that ARK provides long-term exposure to innovation better than any other benchmarks in the market. Wood made headlines by announcing, “We are the new NADAQ.”
Cathie Wood deserves the credit for her persistence and unwavering stance on innovation stocks and growth. She recently reiterated that she believes Bitcoin value will exceed $1 million in the next decade. Her top holdings still feature major tech stocks like Tesla, Zoom, UiPath and Shopify despite huge losses these stocks posted in 2022. The launch of ChatGPT and the AI wars that ensued are also giving a boost to Cathie Wood’s predictions about innovation and futuristic sectors like artificial intelligence, molecular diagnostics and autonomous cars.
Is the outperformance of Cathie Wood’s portfolio because of the short-term market rally? Will ARK investors have to wait for five or ten more years to reap the rewards of their patience and investments?
Many believe the current market rally won’t last for long. The latest jobs report which showed the strength of the labor market is already dashing hopes of market bulls as analysts believe the Federal Reserve now has more impetus to continue on its rate-hike spree despite signs that inflation is slowing.
One of the notable market experts advising caution is JPMorgan Chase’s Marko Kolanovic who recently advised investors to use the current market rally as an opportunity to cut their exposure. The analyst said that the disinflationary process in the US could be “transitionary.”
Kolanovic thinks strengths in the labor market could kill the possibility of soft landing. In such situation the Federal Reserve would try to tame inflation while the economy would keep growing.
“If that doesn’t come into fruition, it will result in a mean-reversion across this year’s equity winners,” Kolanovic said.
Cathie Wood of ARK Investment Management
Our Methodology
For this article we studied Cathie Wood’s ARK Investment Management’s Q4 portfolio and picked 10 tech stocks in which the hedge fund cut its exposure during the period. Some of these stocks were sold entirely by the fund, while others saw a massive stake cut by ARK.
Tech Stocks To Sell Now According to Cathie Wood
10. Proto Labs, Inc. (NYSE:PRLB)
Number of Hedge Fund Holders: 17
Proto Labs, Inc. (NYSE:PRLB) is a Minnesota-based prototyping and 3D printing company. Proto Labs, Inc. (NYSE:PRLB) has gained about 40% in 2023 through February 10. Cathie Wood’s hedge fund cut its stake in Proto Labs, Inc. (NYSE:PRLB) by 37% during the fourth quarter of 2022. The fund still owns about 359,000 shares in Proto Labs, Inc. (NYSE:PRLB) as of the end of 2022.
Proto Labs, Inc. (NYSE:PRLB) recently posted its fourth quarter results which easily surpassed analyst estimates. Proto Labs, Inc. (NYSE:PRLB) also increased its share buyback program to $250 million. During the fourth quarter, Proto Labs, Inc. (NYSE:PRLB)’s adjusted EPS came in at $0.26, topping consensus by 5 cents. Revenue in the period came in at $115.6 million, $5.47 million more than estimates.
A total of 17 hedge funds tracked by Insider Monkey reported owning stakes in Proto Labs, Inc. (NYSE:PRLB) as of the end of the third quarter of 2022. The total value of these stakes was $64 million.
9. Materialise NV (NASDAQ:MTLS)
Number of Hedge Fund Holders: 4
Materialise NV (NASDAQ:MTLS) is a Belgian 3D printing company. During the fourth quarter of 2022, Cathie Wood’s ARK Investment cut its stake in Materialise NV (NASDAQ:MTLS) by 39%. Still, the hedge fund owns about 3.5 million shares of Materialise NV (NASDAQ:MTLS) as of the end of the fourth quarter of 2022. Over the past 12 months the stock has lost about 52% in value. In October, Materialise NV (NASDAQ:MTLS) posted third quarter results. GAAP EPS in the quarter came in at $0.02, missing estimates by $0.01. Revenue also fell 6% on a YoY basis and totaled $56.82 million. This figure nonetheless beat consensus estimate by $0.23 million.
Materialise NV (NASDAQ:MTLS) said that for full-year 2022 its revenues will be at least 10% higher than in 2021.
Jim Simons’ Renaissance Technologies is also a notable stakeholder of Materialise NV (NASDAQ:MTLS) as of the end of the third quarter of 2022. The hedge fund had a stake worth about $3.3 million in Materialise NV (NASDAQ:MTLS).
8. Xometry, Inc. (NASDAQ:XMTR)
Number of Hedge Fund Holders: 24
Xometry, Inc. (NASDAQ:XMTR) is a Maryland-based AI-enabled marketplace for on-demand manufacturing. ARK Investment Management cut its stake in Xometry, Inc. (NASDAQ:XMTR) by 43% during the fourth quarter of 2022. The hedge fund still owns about 99,000 shares of Xometry, Inc. (NASDAQ:XMTR). In November, Xometry, Inc. (NASDAQ:XMTR) posted its third-quarter results. Adjusted EPS in the quarter came in at -$0.11, beating estimates by $0.13. Revenue in the quarter jumped a whopping 82% to reach $103.57 million, beating estimates by $0.2 million. For the fourth quarter, Xometry, Inc. (NASDAQ:XMTR) said it was expecting revenue in the range of $104 million to $106 million, versus the consensus estimate of $116.23 million.
Insider Monkey’s database of 920 hedge funds shows that 24 hedge funds had stakes in Xometry, Inc. (NASDAQ:XMTR) at the end of the third quarter of 2022. This was significantly up from 16 hedge funds which had stakes in Xometry, Inc. (NASDAQ:XMTR) in the previous quarter. This shows that hedge fund sentiment for Xometry, Inc. (NASDAQ:XMTR) is positive.
7. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 89
Cathie Wood’s hedge fund cut its stake in NVIDIA Corporation (NASDAQ:NVDA) by 63% during the fourth quarter of 2022. The hedge fund entered the first quarter of 2023 with about 523,181 shares of NVIDIA Corporation (NASDAQ:NVDA). NVIDIA Corporation (NASDAQ:NVDA) shares have gained about 47% year to date in 2023 through February 10. NVIDIA Corporation (NASDAQ:NVDA) is one of the leading tech gainers in 2023.
NVIDIA Corporation (NASDAQ:NVDA) is also popular among hedge funds. A total of 89 hedge funds tracked by Insider Monkey reported owning shares of NVIDIA Corporation (NASDAQ:NVDA) at the end of the third quarter of 2022. The net worth of these stakes was about $43 billion.
O’keefe Stevens Advisory made the following comment about NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2022 investor letter:
“The market and our portfolios had a challenging year as interest rates rose, and deteriorating fundamentals cut our largest position, NVIDIA Corporation (NASDAQ:NVDA), in half. Since our initial purchase in 2013, NVDA has seen its stock decline 50% one other time, back in 2018. The best-performing businesses and stocks do not go up and to the right. Mr. Market gets moody, and even one of the highest quality companies in the world is not immune. Drawdowns of this magnitude are challenging to stomach, even though the stock is up 50x in less than ten years. While we consider ourselves old school value investors, we continue to hold this fantastic company even though, optically, it does not appear cheap. Our confidence in Jensen remains, and while gaming is no longer in hyper-growth mode, the Data Center segment continues to grow. AI, Automotive, and other small but rapidly growing industries are the next leg of the story. Chris Mayer discusses the position in greater detail with commentary from our CIO, Peter O’Keefe. Click here to read the article.”
6. Zillow Group, Inc. (NASDAQ:Z)
Number of Hedge Fund Holders: 58
Zillow Group, Inc. (NASDAQ:Z) is a US-based internet marketplace for real estate. Over the past 12 months, Zillow Group, Inc. (NASDAQ:Z) has lost about 12%. However, Zillow Group, Inc. (NASDAQ:Z) shares rebounded in 2023 and are up about 28% in the year through February 10. Cathie Wood’s hedge fund reduced its stake in Zillow Group, Inc. (NASDAQ:Z) by 88% during the fourth quarter of 2022. The hedge fund entered 2023 with over 100,000 shares of Zillow Group, Inc. (NASDAQ:Z).
As of the end of the third quarter of 2022, 58 hedge funds had stakes in Zillow Group, Inc. (NASDAQ:Z), according to Insider Monkey’s database of 920 hedge funds. The total value of these stakes was about $702 million.
In January, BofA Securities analyst Curtis Nagle double-upgraded Zillow Group, Inc. (NASDAQ:Z). The analyst is hopeful that growth can return to double digits by 2024.
5. Sea Limited (NYSE:SE)
Number of Hedge Fund Holders: 55
ARK Investment Management had been cutting its stake in Singapore-based tech company Sea Limited (NYSE:SE) since the first quarter of 2022. The stake selling continued in last quarter of 2022 as the hedge fund cut its position in Sea Limited (NYSE:SE) by 91% during the December quarter. At the end of the period, the hedge fund reported owning over 24,000 shares of Sea Limited (NYSE:SE). Over the last 12 months Sea Limited (NYSE:SE) shares have lost about 61% in value.
In January, Sea Limited (NYSE:SE) shares fell after BofA analyst Sachin Salgaonkar downgraded the stock’s rating to Neutral from Buy, citing expected slowness in the company’s e-commerce business.
Here is what Hayden Capital has to say about Sea Limited (NYSE:SE) in its Q3 2022 investor letter:
“Sea Limited (NYSE:SE) reported earnings last week, after which the share price rebounded +36% in a single day. The most obvious question that comes to mind, is why didn’t we sell more last year, when prices were still high? The truth is that we did sell a significant amount, but in hindsight obviously wish we were more aggressive with the sales.
For example, we owned the peak number of shares of Sea Ltd in Q1 2020, and steadily trimmed over the next two years. From Q1 2020 to Q1 2022, we trimmed ~39% of our shares over that period. However, the issue was that the investment continued to grow as a percentage of the overall portfolio, since the share price appreciated much faster than our sales (+620% from 1Q20 to 3Q21). This was a similar case for our other long-tenured positions as well.
So why didn’t we trim more aggressively and just hold cash? The answer is that at its core, I believe that holding cash is implicitly a market timing call. I certainly didn’t foresee a likely recession on the horizon so quickly after the turbulence of Covid already had on the economy. Even in late 2021, after it was clear interest rates would start rising, we were still operating under the assumption that rates would cause valuations to compress, but likely wouldn’t have an impact on the overall earnings trajectory. Given our expectations for strong earnings growth, we thought this could more than offset the valuation compression over time, and would still generate strong IRRs over a 3 – 5 year timeframe…” (Click here to see the full text)
4. Spotify Technology S.A. (NYSE:SPOT)
Number of Hedge Fund Holders: 57
ARK Investment Management reduced 98% of its stake in Spotify Technology S.A. (NYSE:SPOT) during the fourth quarter of 2022. The hedge fund still owns over 21,000 shares of the music-streaming company. Spotify Technology S.A. (NYSE:SPOT) shares have been performing pretty well in 2023, having gained about 52% in value so far in the year through February 10. Spotify Technology S.A. (NYSE:SPOT) shares were rising after it was reported that activist hedge fund ValueAct Capital has initiated a stake in Spotify Technology S.A. (NYSE:SPOT). According to Bloomberg, the stake was revealed during an event at Columbia University, where ValueAct’s CEO Mason Morfit said that he wants Spotify Technology S.A. (NYSE:SPOT) to cut its spending and increase efficiency.
Insider Monkey’s database of 920 hedge funds shows that 57 hedge funds had stakes in Spotify Technology S.A. (NYSE:SPOT) at the end of the third quarter of 2022, compared to 49 funds in the previous quarter.
Rowan Street Capital made the following comment about Spotify Technology S.A. (NYSE:SPOT) in its Q4 2022 investor letter:
“We have written a few times (Q2 ‘20 Letter, Q2 ‘21 Letter, Q2 ‘22 Letter) about Spotify Technology S.A. (NYSE:SPOT) and it still remains our favorite idea that is currently extremely mispriced by the market, in our view.
Spotify is estimated to end 2022 with 479 million monthly subscribers. Management thinks that their subscribers can get 1 billion over the next 4-5 years. The paid subscribers are estimated to end 2022 at 202 million. Therefore, based on today’s price, we are paying only $74 per paid subscriber. Now, let’s assume that Spotify can get to only 5 euros in ARPU (they are at 4.63 euros currently), then they would be collecting 60 euros per paid subscriber over a 12 months period, which makes our current payback period of only 1.2 years. This may not be an ideal comparison, but just for some context, Netflix is currently selling for $590 per user and traded as high as $1,400 per user in 2021. According to the “Netflixed: the epic battle for America’s eyeballs” book by Gina Keating, the founder/CEO of Netflix Reed Hastings offered $200 per subscriber to Blockbuster back in 2007. Blockbuster’s management was insulted by such a low-ball figure and rejected his acquisition offer — the rest was history…” (Click here to read the full text)
3. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 35
Cathie Wood’s hedge fund had been gradually cutting its stake in Palantir Technologies Inc. (NYSE:PLTR) over the past few quarters. As of the end of the third quarter of 2022, ARK Investment Management reported owning over 220,000 shares of Palantir Technologies Inc. (NYSE:PLTR). The hedge fund sold these shares during the fourth quarter of 2022.
In January, Palantir Technologies Inc. (NYSE:PLTR) shares rose after investment firm Mizuho started covering the stock, saying that the company could provide “significant” value for its customers. Mizuho’s analyst Matthew Broome, who has a Neutral rating and a $7 price target for Palantir Technologies Inc. (NYSE:PLTR), said that “ongoing global disruptions” could boost the company’s business. However, the analyst noted short-term challenges amid slowing spending in commercial and government sectors.
2. Editas Medicine, Inc. (NASDAQ:EDIT)
Number of Hedge Fund Holders: 21
Massachusetts-based Editas Medicine, Inc. (NASDAQ:EDIT) ranks second in our list of the tech stocks that were sold by Cathie Wood during the fourth quarter of 2022. It’s a clinical-stage biotech company that is developing therapies for rare diseases based on CRISPR gene editing technology. Cathie Wood’s ARK had over 145,000 shares of Editas Medicine, Inc. (NASDAQ:EDIT) as of the end of the third quarter of 2022. These shares were sold by the hedge fund during the fourth quarter of 2022.
Earlier this month, investment firm Cantor Fitzgerald gave an Overweight rating to Editas Medicine (NASDAQ:EDIT) as the firm’s analyst Rick Bienkowski gave bullish comments for gene editing companies. The analyst has a $15 price target for Editas Medicine, Inc. (NASDAQ:EDIT). He said that Editas Medicine, Inc. (NASDAQ:EDIT) is positioned well to appreciate in the coming year amid favorable intellectual property positioning and expected clinical data updates.
1. TuSimple Holdings Inc. (NASDAQ:TSP)
Number of Hedge Fund Holders: 16
TuSimple Holdings Inc. (NASDAQ:TSP) is a California-based autonomous trucking company. Over the past 12 months, TuSimple Holdings Inc. (NASDAQ:TSP) has lost about 86% in value. As of the end of the third quarter of 2022, Cathie Wood’s ARK had reported owning about 16 million shares of TuSimple Holdings Inc. (NASDAQ:TSP). That position was sold during the fourth quarter of 2022, according to ARK’s latest 13F filings. In December, Bank of America reiterated its Underperform rating for TuSimple Holdings Inc. (NASDAQ:TSP) despite the company’s announcement related to restructuring according to which the company would cut its workforce by 25%.
You can also take a peek at 10 Hot Tech Stocks To Buy Now and 10 Hot Healthcare Stocks To Buy Now.
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Disclosure: None. 10 Tech Stocks To Sell Now According to Cathie Wood is originally published on Insider Monkey.
