Famed money manager Cathie Wood has insisted for months that the plunges of her young technology company stocks represent a buying opportunity.
And the chief executive of Ark Investment Management followed her own advice Feb. 10. Ark exchange-traded funds purchased 162,325 shares of beleaguered Coinbase Global (COIN), the biggest U.S. cryptocurrency exchange.
That stash was valued at $9.3 million at the end of trading Feb. 10. Wood likely views Coinbase as a bargain amid the stock’s 72% plunge over the past year, caused by turmoil in the digital currency market. To be sure, the stock has rebounded 57% year to date.
She has been buying Coinbase for months, with the last purchase before Feb. 10 coming Jan. 12. Coinbase ranks as the eighth biggest holding in Wood’s flagship Ark Innovation ETF ARKK.
Morningstar Likes Coinbase's Cost Cuts
Morningstar analyst Michael Miller also sees Coinbase as undervalued, with a fair-value estimate of $90, compared to the stock’s recent price of $56.45.
Coinbase announced cost cuts, including layoffs, last month. “While these cost reductions reflect the challenges that Coinbase faces, we see them as a necessary and positive step for the company, as revenue has declined dramatically from its 2021 peak,” he wrote in a commentary.
“While we see the shares as undervalued, we caution investors that Coinbase’s results are deeply intertwined with cryptocurrency prices, which are inherently volatile, creating considerable uncertainty in the company's prospects.”
As for Wood, her performance hasn’t exactly overwhelmed the investment world over the past year, as her young tech stocks have slumped. Her flagship Ark Innovation ETF (ARKK) has slid 44% during that period and 75% from its February 2021 peak.
That said, the fund has rebounded 28% so far this year, joining the tech stock surge.
Wood has defended her strategy by noting that she has a five-year investment horizon. But the five-year annualized return of Ark Innovation was only 1.69% through Feb. 10, compared with 11.27% for the S&P 500.
The fund’s performance also doesn’t come close to Wood’s goal for annualized returns of 15% over five-year periods.
