Cathie Wood, head of Ark Investment Management, has been known to trade one side of a favorite stock (buy or sell) and then trade the other side a few months later.
But rarely does she buy and sell a stock in the same week. That’s what happened in recent days.
The investment community has conflicting views toward Wood, who may be the country’s best-known investor after Warren Buffett. Boosters say she’s a technology visionary, while detractors say she’s just a mediocre money manager.
Wood (Mama Cathie to her followers) rocketed to acclaim after a stupendous return of 153% in 2020 and lucid presentations of her investment philosophy in numerous media appearances.
PATRICK T. FALLON/AFP via Getty Images
But her longer-term performance is less impressive. Wood’s flagship Ark Innovation ETF (ARKK) , with $6 billion in assets, produced negative annualized returns of 5.7% for the last 12 months,
28.32% for the past three years and 1.55% for five years.
That’s quite woeful compared to the S&P 500. The index posted positive annualized returns of 20.95% for one year, 8.83% for three years, and 14.3% for five years. Ark Innovation’s numbers also fall well shy of Wood’s goal for annual returns of at least 15% over five-year periods.
Cathie Wood’s straightforward strategy
Her investment philosophy is pretty simple. Ark ETFs usually purchase emerging-company stocks in the high-tech categories of artificial intelligence, blockchain, DNA sequencing, energy storage, and robotics. Wood maintains that companies in those categories will change the world.
Of course, these stocks are quite volatile, so the Ark funds’ values frequently fluctuate up and down. Wood frequently adds to and subtracts from her top names.
Related: Cathie Wood snags $12 million of battered cyber stock
Investment research titan Morningstar offers a harsh assessment of Wood and Ark Innovation ETF. Investing in young companies with slim earnings “demands forecasting talent, which ARK Investment Management lacks,” Morningstar analyst Robby Greengold wrote in March.
The potential of Wood’s five high-tech platforms listed above is “compelling,” he said. “But the firm’s ability to spot winners and manage their myriad risks is less so…. It has not proved it is worth the risks it takes.”
This isn’t your father’s investment portfolio. “Results range from tremendous to horrendous” for Wood’s young, often unprofitable stocks, Greengold said.
Wood has defended herself from Morningstar’s criticism. “I do know there are companies like that one [Morningstar] that do not understand what we’re doing,” she told Magnifi Media by Tifin in 2022.
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“We do not fit into their style boxes. And I think style boxes will become a thing of the past, as technology blurs the lines between and among sectors.”
However, some of Ark’s customers apparently agree with Morningstar. Over the past 12 months, Ark Innovation ETF suffered a net investment outflow of $2.2 billion, according to ETF research firm VettaFi.
Cathie Wood swings both ways on Tesla
On July 22, ARK Next Generation Internet ETF (ARKW) dumped 14,859 shares of electric vehicle titan Tesla (TSLA) . As of that day’s close, the kitty was valued at $3.7 million.
The fund snatched 33,143 Tesla shares worth $7.2 million two days later.
The sale may simply have represented profit-taking. Wood has repeatedly expressed her love for Tesla and its CEO, Elon Musk, for years.
The stock skyrocketed 77% during the three months ended July 22 (to $251.51), even in the face of negative news.
Related: Not all Tesla fans and analysts are seeing Musk’s AI vision
But a weak earnings report that day sent the stock reeling.
Tesla posted a profit of 52 cents per share in the second quarter, down 43% from a year earlier and far short of analysts’ consensus forecast of 62 cents.
Revenue did rise 3% to $25.5 billion. However, Tesla sold many of its cars at discount prices to entice reluctant shoppers. So it registered a gross profit margin of only 14.6%, its lowest in at least five years and well shy of analysts’ 16.3% forecast.
The company’s stock slid 14% from July 22 to July 24 and traded at $223.75 on July 25.
The quick drop may have been too enticing for Wood to ignore, given that she clearly remains a bull on Tesla. It’s still the biggest holding in Ark Innovation ETF, at $808.85 million. Last month, she predicted that the stock would hit $2,600 in 2029, more than 11 times the current level.
But her next trading action on Tesla is anyone’s guess.
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