Why Is Cathie Wood Selling These 2 Stocks?

Cathie Wood, the founder of ARK Invest, has earned a reputation as one of the most prominent growth investors. She is well-known for making bold bets on disruptive technologies such as genomics, autonomous technology, space, artificial intelligence (AI), robotics, and defense systems. Her strategy is aggressive and forward-thinking. Yet, she is willing to tolerate volatility in exchange for large returns over time.

It is no wonder that when she buys or sells, the markets take notice. On Sept. 29, Wood reduced her stakes in Kratos Defense & Security Solutions (KTOS) and Roblox (RBLX), which are widely regarded as top-tier growth plays in the defense and innovative tech markets.

Kratos shares are up 246.4% year-to-date (YTD), while Roblox stock is up 135.4% YTD, far exceeding the market. This raises the question of why sell now, and should investors follow suit?

On Sept. 29, Wood’s ARK Autonomous Technology & Robotics ETF (ARKQ) sold 70,874 shares of Kratos for $5.97 million, bringing the total investment in the company to $151 million. Although Wood sold Kratos shares, it is still the fund’s second-largest holding, comprising 10.08% of the overall portfolio.

Kratos has been on the radar of many innovation-focused investors for years. Valued at $15.5 billion, Kratos Defense & Security Solutions is a U.S.-based defense technology company that develops and manufactures advanced systems for the military, government, and commercial customers. It is a high-tech defense contractor specializing in unmanned aerial vehicles, hypersonics, satellite communications, and advanced defense electronics.

In the second quarter of 2025, Kratos’s total revenue of $351.5 million exceeded its estimated range of $300 million to $310 million. This outperformance came from across the business, but the biggest contributors were its Defense Rocket Support segment, which benefited from the timing of hypersonic missions, and its C5ISR division, where organic revenue growth rates hit 116% and 25.4%, respectively.

Kratos’ Q2 revenue mix showed strong ties to U.S. government demand, as 71% of revenue came from U.S. government contracts (Department of Defense, non-DoD federal agencies, and other government customers). The remaining 12% came from commercial customers and 17% from foreign customers. Kratos updated its full-year 2025 sales projection to between $1.29 billion and $1.31 billion, reflecting 11% to 13% organic growth over 2024.

Recently, Kratos secured a significant new win with Poseidon, which is estimated to be a $750 million program awarded exclusively to Kratos. Production is scheduled to commence in 2027, following the completion of a new plant. The company refers to Poseidon as a “steady-state future revenue, profit, and cash flow engine.” Furthermore, Kratos’ team was selected for another initiative, Deimos, with a contract award expected soon. These opportunities, together, might serve as the foundation for Kratos’ long-term growth trajectory.

Overall, on Wall Street, Kratos’ stock remains a “Strong Buy” with analysts. Out of the 16 analysts covering the stock, 12 rate it a “Strong Buy,” one rates it a “Moderate Buy,” and three rate it a “Hold.” Given its dramatic surge this year, KTOS stock has surpassed both its average target price of $72.60 and high price estimate of $90.

On Sept. 29, Wood’s ARK Innovation ETF (ARKK) sold 27,906 shares of Roblox for $3.68 million, bringing the total investment in the company to $456.5 million. This now makes Roblox the fifth-largest holding, down from the third-largest holding, of the ARKK ETF, comprising 5.16% of the total portfolio.

Valued at $92.9 billion, Roblox is an online platform and game development system that enables users to play, create, and share games and virtual experiences created with its proprietary engine, Roblox Studio. Unlike traditional gaming platforms, it allows developers to create rich 3D environments, commercialize them with in-game purchases and virtual currency (Robux), and reach a global audience of users.

In the second quarter, Roblox’s revenue climbed 21% year-on-year (YoY) to $1.1 billion, while bookings increased 51% to $1.4 billion. Daily active users (DAUs) increased by 41% to 111.8 million, with APAC gaining 76% and users aged 13 and up reaching 54%. Importantly, 64% of Roblox’s viewership is now over the age of 13, indicating the platform’s penetration beyond its younger base.

Roblox is also implementing major changes to boost its ecosystem. Trusted Connections, age estimation, expanded privacy options, and RoGuard 1.0, an open-source AI safety toolbox, are among the most recent safety improvements. Furthermore, management announced that its IP License Manager now connects creators with partners such as Netflix (NFLX), Sega, Lionsgate (LION), and Kodansha, creating new potential for branded content.

Looking ahead, Roblox raised its fiscal 2025 guidance to reflect stronger trends. Revenue is predicted to increase by 22% to 25%, while bookings will rise by 34% to 37%. According to CEO David Baszucki, Roblox’s long-term investments in performance, discovery, safety, and creator monetization are driving a wave of engagement and revenue.

Overall, on Wall Street, RBLX stock is a “Moderate Buy.” Out of the 27 analysts covering the stock, 16 rate it a “Strong Buy,” two suggest a “Moderate Buy,” seven rate it a “Hold,” and two say it is a “Strong Sell.” The stock is trading close to its average target price of $139.88. However, the high price estimate of $180 suggests RBLX stock can rally as much as 30% over the next 12 months.

Wood’s investment philosophy has always centered around companies that can grow rapidly as the world embraces innovation. Kratos and Roblox fit the criteria. Yet even for someone with a long-term horizon like Wood, trimming or selling shares can be a strategic choice to rebalance the portfolio. ARK has not fully exited its position in both stocks but has scaled back to maintain a more balanced exposure. Wood’s funds still have a significant amount of exposure to retain upside if Kratos and Roblox continue to deliver, while freeing capital for more promising or less risky plays.

On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com