Cathie Wood, chief executive of Ark Investment Management, usually targets tech stocks that she says have a disruptive impact, aiming for growth.
Sometimes she’ll bet on companies that have yet to make a profit, and that’s what she did this week.
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Investors and analysts have mixed opinions on Wood. Supporters see her as a visionary in tech investing, while critics say she’s a mediocre fund manager.
Wood's followers nicknamed her “Mama Cathie” after she gained widespread attention with an impressive 153% return in 2020. However, her longer-term performance isn’t so hot.
The flagship Ark Innovation ETF (ARKK) , with $5.4 billion under management, has returned 18.03% year-to-date, with an annualized three-year return of -13.46% and a five-year return of 5.44%.
In comparison, the S&P 500 is up 29.24% this year through Dec. 11, with a three-year annualized return of 10.6% and a five-year return of 15.96%.
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Cathie Wood’s investment strategy explained
Cathie Wood’s investment strategy is simple: Her ARK ETFs typically buy shares in emerging, high-tech companies in fields such as artificial intelligence, blockchain, DNA sequencing, energy storage, and robotics.
Wood believes these companies will transform industries, but their volatility causes significant swings in ARK funds' values.
Investment research firm Morningstar is highly critical of Wood and ARK Innovation ETF.
Related: Cathie Wood sells $7 million of surging stock
Investing in young companies with slim earnings “demands forecasting talent, which ARK Investment Management lacks,” wrote Morningstar analyst Robby Greengold. “Results range from tremendous to horrendous.”
Wood recently expressed optimism about a shift to looser regulations under Donald Trump’s presidency, particularly regarding technology, cryptocurrencies and digital assets.
“In the last four years, we saw massive concentration toward very few stocks,” Wood said on CNN’s "Inside Politics Sunday" on Dec. 1. “I think the market’s going to broaden out right now and reward companies who are at the leading edge of innovation.”
But many investors share Morningstar's concerns. The Ark Innovation ETF saw a net outflow of $2.68 billion over the past year, according to data from ETF research firm VettaFi.
Cathie Wood bought 676,000 shares of AI health-care company this week
From Dec. 6 to Dec. 11, Ark Funds bought 676,535 shares of Tempus AI. (TEM)
That chunk of stock was valued at roughly $29.2 million as of Dec. 11’s close, a big buy among Wood’s recent trades.
Tempus AI is a health technology company founded in 2015. It uses artificial intelligence to make diagnostics more precise.
Related: Cathie Wood's net worth: The Ark Invest CEO's wealth & income
The company states that its goal is to integrate AI, including generative AI, into every aspect of diagnostics to empower physicians and researchers to make personalized, data-driven decisions.
"The ability to deploy AI in precision medicine at scale has only recently become possible," the company said in an SEC filing.
"Advances in cloud computing, imaging technologies, large language models, and low-cost molecular profiling, along with the digitization of vast amounts of healthcare data, have created a landscape that we believe is finally ripe for AI."
Tempus AI went public on June 14, 2024, with its initial public offering priced at $37 a share.
Wood began buying shares of Tempus AI shortly after its IPO. On June 20, 2024, ARK's Genomic Revolution ETF (ARKG) purchased 304,904 shares of Tempus AI, valued at $9.25 million.
Since then, Ark has increased its holdings in Tempus AI, including purchases of 61,157 shares on Sept. 25 and 170,649 shares on Oct. 22.
Tempus AI has not yet turned a profit. It reported losses of $290 million and $214 million for 2022 and 2023, respectively.
TEM stock has lost a third of its value this month. Wood’s purchase might well reflect a buy-the-dip strategy she frequently uses.
Guggenheim analyst Subbu Nambi initiated coverage of Tempus AI with a buy rating and $74 price target, thefly.com reported on Dec. 9.
Fund manager buys and sells:
- Cathie Wood sells $5 million of 2 surging tech stocks
- Cathie Wood buys $38 million of surging tech stock
- Cathie Wood sells $48 million of battered tech stock
Nambi said Tempus is a "pioneer" in intelligent diagnostics. It operates in "high-growth, attractive" oncology markets, with its unique data and comprehensive diagnostics menu seen as "key competitive advantages" for growth.
Tempus AI closed at $41.99 on Dec. 12. The stock is not in Ark Innovation ETF's (ARKK) top 10 holdings.
Related: Veteran fund manager delivers alarming S&P 500 forecast
