Growth investing mastermind Cathie Wood used to hold a ton of Nvidia (NASDAQ: NVDA) shares. However, her Ark Invest fund family has sold most of this artificial intelligence (AI) stock over the last year, cashing in on the market’s AI frenzy to seed investments in less-overheated growth stocks. These days, ARK only holds Nvidia stock worth $81 million.
Wood’s funds are actively buying shares of Tesla (NASDAQ: TSLA), though. With four large purchases in the last week alone, the electric vehicle and alternative energy heavyweight accounts for $763 million of Ark’s stock holdings.
But that’s not Wood’s strongest position. In fact, Tesla is tied for third place among Ark’s largest investments. No. 1 with a bullet is cryptocurrency marketplace Coinbase Global (COIN -1.16%) with a $911 million footprint on Ark’s investment roster today. That’s 6.8% of Ark’s overall assets, far ahead of Tesla’s 5.7% and Nvidia at just 0.6%.
Despite recent sales amid Coinbase’s recent price surge, this stock remains Ark’s top holding by a wide margin. That’s a testament to Wood’s long-term vision for the cryptocurrency sector. Despite taking profits, Wood sees enduring growth opportunities in the cryptocurrency space, with Coinbase and the brand-new Ark 21Shares Bitcoin ETF (NYSEMKT: ARKB) at the forefront.
Most of us ordinary investors don’t manage billion-dollar funds, and what works for Cathie Wood may not be best for you and me. Still, Wood’s enthusiastic stamp of approval may indicate a stock worthy of a closer look. Moreover, I’m a happy Coinbase shareholder myself. So, let’s check out the reasons behind Ark’s significant investment in Coinbase, examining the potential risks and rewards to help you decide if it’s a fit for your own portfolio.
Wood’s view: Coinbase holds a strategic edge
Cathie Wood has made it clear that she expects big things from the cryptocurrency market, and particularly the sector-leading Bitcoin (CRYPTO: BTC) name. Her 2030 price target for the “digital gold” coin has been $1.48 million per token over the last year with several reiterations of the same long-term outlook. The global economy is going digital. Bitcoin’s nearly inflation-free design and strictly limited supply should lead to dramatically higher coin prices over time, assuming that it remains the top crypto solution as the market evolves.
As such, she sees Coinbase as a leading nuts-and-bolts play on the asset-management infrastructure around Bitcoin and other cryptos. The company stands apart from other large service providers, such as Binance, thanks to its all-American background and proven focus on regulatory compliance. Unlike Binance, which has faced allegations of criminal activities and concerns over data security, Coinbase has maintained a cleaner regulatory profile.
This approach, in her view, positions Coinbase favorably compared to its competitors, making it a safer bet for investors looking to capitalize on the crypto market’s growth. In essence, Wood sees Coinbase as a critical enabler in the broader mainstream adoption of cryptocurrencies, especially Bitcoin. So her funds have been buying Coinbase stock when its share prices are falling due to scandals or fraud elsewhere in the crypto market.
Understanding Ark’s evolving cryptocurrency portfolio
That being said, Cathie Wood isn’t strictly committed to the Coinbase opportunity. Her funds have reduced their Coinbase holdings by approximately half since June, 2023, taking cash profits off the table to reinvest in other ideas. Diversification works for big-name investors too, you know.
And some of the former Coinbase funds have moved into more direct Bitcoin bets. Early swings at this idea included the Grayscale Bitcoin Trust (NYSEMKT: GBTC) when it was a traditional fund and not a more flexible exchange-traded fund (ETF). Nowadays, Ark Invest manages its own Bitcoin-based ETF — and some of her other funds already own shares of the Ark 21Shares Bitcoin ETF.
So Wood isn’t putting all her encrypted apples in the same digital cart, but spreading her cryptocurrency exposure across a couple of different asset classes. Even so, Coinbase remains Ark’s largest holding, not just in the crypto sector but among the entire stock portfolio.
My own Coinbase investment plays a smaller part in the total portfolio. Coinbase shares account for roughly 3.6% of my stock investments today. It’s my biggest crypto bet by far but only the seventh-largest position among 35 stocks and ETFs.
So I suppose my Bitcoin exposure is comparable to Cathie Wood’s, but on a smaller scale. Is this a case of “great minds think alike” or two Bitcoin investors making the same mistakes independently?
Only time will tell — but I’m sticking with my diversified Bitcoin investments with Coinbase in the pole position, and Cathie Wood follows a similar playbook. Whether your own Bitcoin strategy follows suit or explores completely different avenues, it’s safe to say that a little bit of Bitcoin exposure makes sense in 2024.
Anders Bylund has positions in Bitcoin, Coinbase Global, Grayscale Bitcoin Trust, and Nvidia. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, Nvidia, and Tesla. The Motley Fool has a disclosure policy.