Cathie Wood, chief of Ark Investment Management, frequently adjusts her top positions, adding to a holding when the stock falls and selling when it rises.
Last week she did some notable buying. This week she was selling, as the S&P 500 index hit its 39th record close of the year Thursday.
Investors and analysts are split in their opinions of Wood, possibly the country’s best-known investor after Warren Buffett. Boosters argue she’s a technology guru, while critics argue she’s merely a mediocre money manager.
Cindy Ord/Getty Images for Bloomberg Businessweek
Wood (Mama Cathie to her acolytes) exploded to fame after a whopping return of 153% in 2020 and clear explanations of her investment strategy in numerous media appearances.
But her longer-term performance doesn’t exactly challenge Buffett. Wood’s flagship Ark Innovation ETF (ARKK) , with $5.9 billion in assets, produced annualized returns of 14% for the past 12 months, negative 27% for the past three years and positive 2% for five years.
That doesn’t come close to the S&P 500. The index registered positive annualized returns of 30% for one year, 11% for three years, and 16% for five years.
Cathie Wood’s straightforward strategy
Her investment philosophy is easily understood. 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 Ark funds’ values often oscillate widely.
Renowned investment research firm Morningstar is highly critical of Wood and Ark Innovation ETF.
Related: Cathie Wood buys $40 million of four beat up tech stocks
Investing in young companies with slim earnings “demands forecasting talent, which Ark Investment Management lacks,” Morningstar analyst Robby Greengold wrote in a commentary. “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 as No. 3 on her wealth destruction list for mutual funds and ETFs over the past decade.
David Loeb’s criticism of Wood
Star investor David Loeb, chief executive of Third Point, isn’t so high on Wood either. After she wrote a commentary defending her investment philosophy in 2022, he let fly 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 snatches $8 million of battered tech stock
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 if interest rates fall, as has begun, her “disruptive innovation strategies should benefit disproportionately, as they did in the fourth quarter of 2023 and during the coronavirus crisis,” Wood said.
Some of her customers apparently agree with the critics. Over the past 12 months, Ark Innovation ETF suffered a net investment outflow of $2.4 billion, according to ETF research firm VettaFi.
Cathie Wood sheds shares of streaming platform Roku
Ark funds sold 189,990 shares of streaming platform Roku (ROKU) on Monday, valued at $14.1 million as of that day’s close.
The move likely just represents position-trimming, as Roku is still the second biggest holding in Ark Innovation. The stock has jumped 46% over the past three months.
Morningstar analyst Matthew Dolgin doesn’t share Wood’s enthusiasm for Roku. He’s unimpressed by its business model.
Related: Cathie Wood's net worth: The Ark Invest CEO's wealth & income
“Roku’s strategy is to remain a leading provider of streaming devices by maintaining low prices and accepting losses in its devices segment,” he wrote in a commentary. “It intends to then drive profits from Roku user accounts.”
So might this work? “We are skeptical that this is a viable strategy,” Dolgin said. “That’s because we don’t see competitive advantages that are likely to turn the firm toward sufficient profit after a history of generating losses.”
Dolgin assigns Roku no moat, meaning he sees no sustainable competitive advantages for the company.
Cathie Wood jettisons Roblox, Robinhood, Palantir
In other trades this week, Ark funds sold 117,884 shares of videogame platform Roblox (RBLX) , valued at $5.5 million as of Thursday’s close.
The stock is Ark Innovation’s third biggest holding and has climbed 27% over the last three months.
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Ark Fintech Innovation ETF (ARKF) sold 62,718 shares of online securities brokerage Robinhood Markets (HOOD) , valued at $1.4 million as of Wednesday's close.
The stock is Ark Innovation’s sixth biggest holding and has gained 11% over the past month.
And Ark Innovation unloaded 52,895 shares of data analytics software provider Palantir (PLTR) , valued at $1.9 million as of Thursday’s close.
The stock is Ark Innovation’s seventh biggest holding and has soared 41% in the past three months.
Related: Veteran fund manager who correctly forecast stock drop updates outlook
