Ark Invest's Cathie Wood buys more Zillow shares as they dive

Published Wed, Nov 3 20219:12 AM EDTUpdated Wed, Nov 3 202110:04 AM EDT

Cathie Wood is buying the dip on her favorite real estate stock, despite the revelation that Zillow Group is giving up on its home-flipping business. The innovation investor bought 288,813 shares of Zillow Group on Tuesday as the stock tanked more than 10%. The position was purchased in her flagship fund, Ark Innovation , and is worth roughly $25 million, based on Tuesday's closing price of $87.20. Shares of Zillow continued their dismal rout Wednesday — dropping more than 17% — after the company said it's shuttering its homebuying unit, called Offers. Zillow is also eliminating 25% of its workforce as it exits that business. After launching the instant buying product in 2019, Zillow ultimately found it too difficult to predict the home prices, which have been volatile due to the pandemic. The company said it would stop buying houses through the end of the year, citing tight labor and supply markets. Zillow shares started their slide earlier this week, after Bloomberg reported that the digital real estate company was looking to sell 7,000 homes for $2.8 billion to institutional investors, as it looked to unload its portfolio of properties. Zillow also missed revenue and earnings estimates for its third-quarter results . The company reported a loss of 95 cents per share on revenue of $1.74 billion. Wall Street expected earnings of 16 cents per share on revenue of $2.01 billion, according to Refintiv. The struggling real estate stock is Wood's 14th-largest holding in her flagship fund, representing 2.85% of the ETF. Wood also purchased 515,832 shares of sports betting company DraftKings in ARK Innovation on Tuesday. That position is worth roughly $24.5 million, based on DraftKings' closing price of $47.60 per share. Other notable purchases for Ark Invest include 405,757 shares of Robinhood — worth about $14.2 million — in ARK Next Generation Internet ETF and 699,500 shares of JD.com — worth roughly $56.4 million — in ARK Space Exploration and Innovation ETF . Wood continues to bet on her highest-conviction plays, even when the companies reveal series flaws in their business models. Last month, Robinhood reported a huge third-quarter revenue miss as cryptocurrency trading dropped off. The newly public brokerage said that, barring any change in the market environment, the headwinds that dragged down last quarter — like lower retail trading activity — will persist into year-end. Shares of ARK Innovation are down 1.1% in 2021. To be sure, Wood has a 5-year time horizon for her investing calls.

Catherine Wood, chief executive officer of Ark Investment Management.

Kyle Grillot | Bloomberg | Getty Images

Cathie Wood is buying the dip on her favorite real estate stock, despite the revelation that Zillow Group is giving up on its home-flipping business.