Cathie Wood’s Ark Invest buys the dip in Roblox stock after earnings miss erases $11 billion in market value

• Cathie Wood’s Ark Invest viewed Roblox’s 27% decline on Wednesday as an opportunity.
• The growth investment manager purchased more than 450,000 shares of the video game company worth about $25 million.
• Ark Invest has been concentrating its holdings into high-growth stocks amid the ongoing decline.

Cathie Wood’s Ark Invest once again proved that it has a strong stomach for buying stocks on big declines, piling into shares of Roblox on Wednesday.

The roughly $25 million purchase of 454,707 shares of the video game company came after the stock plummeted as much as 27% on its fourth-quarter earnings report, which missed analyst estimates and revealed expectations of slowing revenue growth in 2022. Roblox erased $11 billion in market value after Wednesday’s decline.

Roblox posted a loss of $0.25 a share in the quarter, wider than a loss of $0.13 a share expected in a consensus estimate from Refinitiv. A year ago, the company lost $0.30 a share. Bookings came in at $770.12 million, slightly below analyst estimates of $772 million.

Ark Invest has been consistently buying shares of Roblox since it went public last year. Ark’s stake now sits at nearly 4 million shares worth just over $200 million.

And Ark Invest made a similar move earlier this week when it purchased about $20 million worth of Sea Limited shares after the stock plummeted about 20% due to India banning one of its popular gaming apps. 

The purchases highlight Ark’s continued strategy of concentrating its stock holdings amid the ongoing carnage in growth stocks, as it eventually anticipates a big rebound ahead that will lead to strong gains for its funds.

“We’ve been concentrating our portfolios towards our highest conviction names…the reason we concentrate our portfolios is because during risk-off periods most investors and analysts diversify their portfolios and get closer to their benchmarks, the benchmarks against which they’re measured. We do not have any one benchmark,” Wood explained in a recent interview with ETF Trends.

Whether the strategy pays off remains to be seen. Ark’s flagship ETF is down about 54% from its record high, and DataTrek observed that the unwind in the popular ETF over the past year closely resembles the downturn in the Nasdaq amid the dot-com bubble in 2000 and 2001. 

Ark Invest made the Wednesday Roblox purchase in its flagship Disruptive Innovation ETF, as well as its Next Generation Internet ETF.