Popular stock selector Cathie Wood is interested in China’s electric vehicle shares Xpeng Inc XPEV and Nio Inc NIO because of their “low margin” feature, CnEVpost reported Tuesday, citing a Bloomberg TV interview.

What Happened: Tesla Inc TSLA bull Wood took a position in Nio last month, a first for the popular well-known investor who has built positions in Xpeng and is known for large exposure to Elon Musk-led Tesla Inc TSLA.

According to Wood, “high profit margins” are not a good thing, one reason her investment company has steered clear of such companies.

“So Xpeng and Nio, we have … but they have a very low margin,” the report quoted Wood as saying.

“It’s all about next-generation transportation in a world where you know that human-driven cars still have (a) very low percentage, compared to the eligible drivers. So that’s what we’re interested in.”

See also: Cathie Wood pulls $147 million from Tesla stake and takes position in rival EV maker

Why it matters: Nio reported a gross margin of 18.9% for fiscal year 2021, compared to 11.5% a year ago. Rival Xpeng, which aims to increase gross margin to 25% in the future, reported a gross margin of 12.5% ​​in 2021, compared to 4.6% a year ago.

In comparison, Tesla reported an overall automotive gross margin of 27% last year and 21% in 2020.

Ark Invest picked up 420,057 shares of Nio last month, which are valued at $10 million as of Monday’s closing price in EV stock. The investment firm owns 928,648 shares, worth $29 million.

Price action: Nio shares closed 8.7% higher Monday at $23.8 a share.

Photo Courtesy: Ark Invest

This post Cathie Wood on why Ark is buying shares in Tesla Chinese rivals Nio, Xpeng was original published at “https://www.benzinga.com/analyst-ratings/analyst-color/22/04/26466908/cathie-wood-on-why-ark-is-buying-shares-in-tesla-chinese-rivals-nio-xpeng”