Cathie Wood leads wealth management firm Ark Invest as its CEO and chief investment officer. Financial news programs and podcasts frequently feature Wood, who often promotes her long-term investment strategies in technology companies disrupting emerging markets.

Although Ark generally focuses its portfolio on smaller, speculative opportunities, Wood maintains some exposure to megacap stocks. According to Ark's records, e-commerce and cloud computing behemoth Amazon (AMZN -1.01%) is the thirteenth-largest position across the entire portfolio.

So far this year, shares of Amazon have dropped by roughly 18%. These declines don't appear to be deterring Wood, though. Between April 4 and April 8, Ark scooped up approximately 104,000 shares of Amazon -- spread across the ARK Next Generation Internet, ARK Autonomous Technology & Robotics, ARK Innovation, and ARK Fintech Innovation exchange-traded funds (ETF).

Let's dig into why Wood's decision to buy the dip in Amazon stock looks incredibly savvy right now.

Amazon stock is trading at historically cheap levels

The chart below illustrates Amazon's operating income, cash from operations (CFO), and free cash flow growth over the last 10 years. My takeaway from the top chart is that Amazon has become a more efficient enterprise from a cost and profitability perspective over the last decade.

AMZN Operating Income (TTM) data by YCharts.

Of note, my personal preference is to look at Amazon's operating income as opposed to net income as a proxy for its profitability. While net income is a more popular profit metric, I don't find it particularly insightful for Amazon. Operating income is less impacted from accounting adjustments, and can shed light into the specific profitability of certain segments such as Amazon's e-commerce business versus its cloud computing operation.

Amazon's ability to generate strong, growing operating income has played a role in the company's consistent cash flow growth. Taking this a step further, Amazon has reinvested its excess cash into new opportunities, including developing entertainment content, artificial intelligence (AI), and strategic acquisitions outside of the core e-commerce marketplace. All of these moves have helped Amazon build a more diversified operation, while the overall business expands profit margins and continues to generate steadily rising cash flow.

Even with these trends, investors are valuing Amazon at a historically steep discount based on operating income trends. As the chart below shows, the ratio between Amazon's market cap and operating income is near a 10-year low. While it's normal for valuation multiples to normalize over time, my take is that Amazon isn't getting much credit for its ability to strengthen the efficiency of its business and identify new opportunities for long-term growth.

Fundamental Chart data by YCharts.

Should you buy the dip in Amazon stock right now?

In my eyes, the main drag on Amazon stock right now is uncertainty around the Trump administration's new tariff policies. While tariffs could result in higher prices (inflation) for shoppers, a contrarian may see this as an opportunity for Amazon -- because its e-commerce marketplace is best-known for its variety of consumer goods available at highly competitive prices compared to traditional retailers such as Walmart, Target, or Costco Wholesale.

Image source: Getty Images.

In addition, I don't see Amazon Web Services (AWS) experiencing much a slowdown over tariff concerns. While corporations likely will operate under more stringent cost controls for the time being, the need for cloud infrastructure remains high -- especially as demand for AI remains strong, despite a murky near-term economic picture. Given that AWS is a core source of Amazon's profit margins, I think the company remains in a good position to continue generating healthy cash flow levels despite ongoing turbulence in the economy.

I think Wood made a savvy decision to buy Amazon at its current price point. I see the dip as a lucrative opportunity for growth investors to lower their cost basis and add to their positions.