Semiconductor stocks have soared 24% this year, measured by the PHLX Semiconductor Sector index, amid market mania for artificial intelligence.
And after sliding in July and August as AI fervor cooled, the index has rebounded 9% in the past month.
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This week, Cathie Wood, chief of Ark Investment Management, did some trading of her own in the chip sector.
Investors and analysts are divided in their views of Wood, possibly the country’s best-known investor after Warren Buffett. Boosters view her as a technology guru, while critics contend she’s just a mediocre money manager.
Image source: Cindy Ord/Getty
Wood (Mama Cathie to her acolytes) rocketed to fame after a whopping return of 153% in 2020 and lucid explanations of her investment strategy in frequent media appearances.
But her longer-term performance won’t put stars in your eyes. Wood’s flagship Ark Innovation ETF (ARKK) , with $5.5 billion in assets, produced annualized returns of 20% for the past 12 months, negative 26% 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 37% for one year, 11% for three years, and 16% for five years.
Cathie Wood has simple investing strategy
Wood’s investment philosophy is 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 are game changers. Of course, these stocks are often volatile, so Ark funds’ values can shift widely.
Renowned investment research firm Morningstar voices strong criticism of Wood and Ark Innovation ETF.
Related: Cathie Wood buys two big-time technology stocks
Investing in young companies with little 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 No. 3 on her wealth destruction list for mutual funds and ETFs over the past decade.
Hedge fund heavy David Loeb rips Cathie Wood
Star investor David Loeb, chief executive of Third Point, isn’t singing Wood’s praises either. Critiquing a Wood commentary 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.
Wood defended herself in a July 2024 posting on Ark’s website. She acknowledged that “the macro environment and some stock picks have challenged our recent performance.”
Related: Cathie Wood's net worth: The Ark Invest CEO's wealth & income
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.
Some of her customers apparently agree with the critics. Over the past 12 months, Ark Innovation ETF saw a net investment outflow of $2.35 billion, according to ETF research firm VettaFi.
Cathie Wood’s makes move in semiconductors
This week, Ark Autonomous Technology & Robotic ETF (ARKQ) sold 2,250 shares of Taiwan Semiconductor (TSM) , the world’s biggest contract chip maker. The cache was valued at $403,830 as of Thursday’s close.
Wood took advantage of TSM’s surge over the past month to unload the shares. It’s still the fund’s 11th biggest holding at $22.9 million.
Morningstar analyst Phelix Lee also is bullish on TSM, assigning it a wide moat. That means he sees it with competitive advantages that will last at least 20 years. He puts fair value for the stock at $213. It traded Friday at $179, indicating upside of 19%.
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Lee cited two long-term growth factors for the company.
“First, the consolidation of semiconductor firms is expected to create demand for integrated systems made with the most advanced nodes,” he said.
“Second, organic growth of artificial intelligence, internet of things, and high-performance-computing applications may last for decades.”
Also this week Ark Next Generation Internet ETF (ARKW) sold off 27,312 shares of streaming platform Roku (ROKU) , valued at $2.1 million as of Thursday’s close.
The company’s 17% surge over the past month provided a selling opportunity. It’s still Ark Innovation’s No. 2 holding (at $608.6 million), trailing only Tesla (TSLA) .
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