Cathie Wood, chief of Ark Investment Management, is going on a bit of a buying spree for a mega-cap technology stock.
She presumably buys mega-caps to help stabilize her funds, which mostly consist of more risky, small stocks. Sometimes she even buys mega-caps when they are rising. That was the case Monday.
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Investors and analysts are split in their views of Wood, possibly the country’s best-known investor after Warren Buffett. Her acolytes view her as a technology genius, while critics argue she’s just a mediocre money manager.
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Wood (Mama Cathie to her followers) rocketed to acclaim after a mouth-dropping return of 153% in 2020 and lucid presentations of her investment strategy in frequent media appearances.
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But her long-term performance isn’t exactly Buffett-esque. Wood’s flagship Ark Innovation ETF (ARKK) , with $5.5 billion in assets, produced annualized returns of 31% for the last 12 months, negative 26% for the past three years and positive 3% for five years.
That pales in comparison to the S&P 500. The index posted positive annualized returns of 41% for one year, 10% for three years, and 16% for five years.
Cathie Wood has simple investing strategy
Wood’s investment philosophy is clear. Ark ETFs usually purchase emerging-company stocks in the high-tech categories of artificial intelligence, blockchain, DNA sequencing, energy storage, and robotics.
Wood thinks that companies in those categories will change the world. Of course, these stocks are often volatile, so Ark fund values can oscillate sharply.
Renowned investment research firm Morningstar has lobbed strong criticism at Wood and Ark Innovation ETF.
Related: Cathie Wood unloads $10.5 million in surging fintech 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.”
Morningstar portfolio strategist Amy Arnott calculated that Ark Innovation destroyed $7.1 billion of shareholder wealth from its 2014 inception through 2023. That put the ETF No. 3 on her wealth destruction list for mutual funds and ETFs over the past decade.
Hedge fund heavyweight Loeb rips Cathie Wood
Star investor David Loeb, chief executive of Third Point Management, which manages $28 billion, isn’t doing somersaults over Wood either. After Wood wrote a commentary defending her investment philosophy in 2022, he cut loose on Twitter.
“Anyone teaching a value investing class or one on investment psychology should use this memo as a treatise to study the mindset of stonk hodlers,” he wrote. Stonk hodlers is slang for investors who hold (hodl) onto stocks (stonks) too long.
“Note the disparaging comments on luddites who look at archaic measures of value like cash flow as short-term traders,” Loeb continued.
Related: Cathie Wood's net worth: The Ark Invest CEO's wealth & income
Wood defended herself in a July 2024 posting on Ark’s web site. She acknowledged that “the macro environment and some stock picks have challenged our recent performance.”
But her “commitment to investing in disruptive innovation has not wavered,” Wood said. Many of Ark’s stocks are in “rare, deep value territory,” she said.
And with interest rates falling, her “disruptive innovation strategies should benefit disproportionately, as they did in the fourth quarter of 2023 and during the coronavirus crisis,” Wood said.
But some of her customers seem to side with the critics. Over the past 12 months, Ark Innovation ETF suffered a net investment outflow of $2.5 billion, according to ETF research firm VettaFi.
Cathie Wood buys Amazon this week
On Monday, Ark Autonomous Technology & Robotics ETF (ARKQ) snagged 20,883 shares of retail/technology titan Amazon (AMZN) worth $3.9 million as of that day’s close. ARKQ manages about $780 million, including a roughly $12 million position in Amazon as of Oct. 23.
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Amazon's stock price has ascended 17% to $188 since Aug. 5. So Wood didn’t exactly get a bargain, though the stock did pull back 3% from Sept. 24 to Tuesday’s close.
Ark purchased $14 million of Amazon stock two weeks ago.
Morningstar analyst Dan Romanoff is bullish on Amazon too, at least for the long term. He assigns it a wide moat, meaning he sees it with competitive advantages lasting at least 20 years. He puts fair value at $195, close to present levels.
“Amazon dominates its served markets, notably for e-commerce and cloud services,” he wrote in a commentary. “We see strong revenue and free cash flow growth for years to come.”
Wood's interesting Amazon may prove timely. The company is riding a wave of AI demand for AWS cloud computing data services. Training and operating artificial intelligence programs, including large language models, requires significant compute power.
Amazon may also prove timely given the fast-approaching holiday retail sales season. Holiday spending is expected to reach record levels this year. According to a National Retail Federation survey, consumers will spend about $902 per person this year, up $25 from last year and a new record.
In another notable move this week, Ark funds snatched 210,483 shares of online securities brokerage Robinhood Markets (HOOD) Tuesday. The cache was valued at $5.8 million as of that day’s close.
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