One of Ark Invest CEO Cathie Wood’s strategies to weather the bear market and manage risk is through consolidation. She told CNBC on Tuesday that since February 2021, the investment firm has cut its portfolio down from about 58 to 34 stocks to focus on its “highest conviction names.” “When people invest in Ark, they know they’re getting truly disruptive, transformative innovation,” she said. That’s what we offer and we don’t pretend to offer anything else. So when you say risk management, what we do is concentrate our portfolio toward our highest conviction names. That means we are, with the weight of evidence, in some measure from our point of view exercising risk control.” Since the start of 2022, the flagship ARK Innovation ETF has cratered almost 53% and is down 66% from its highs. Some other popular Ark holdings have also plummeted from their peaks. Zoom , Tesla and Roku are among the firm’s “highest conviction” names, which have slumped 71%, 41% and 81% from their peaks, respectively, after long trading at elevated price-to-earnings multiples. Wood noted that many of these companies continue to grow revenue even as their stocks fall toward pre-pandemic levels. “We don’t need the higher multiples,” Wood said, adding that the flagship portfolio’s enterprise value to EBITDA is around 69 times. “I know a lot of people say profitless tech, we are not profitless on balance,” Wood said. “We make the assumption that in five years that number will be close to the market multiple on that basis, which is roughly 16 times.”
© heardonwallstreet.com