Every era has its famed money managers, and one for this era is Cathie Wood, chief executive of Ark Investment Management.
Known to her devotees as Mama Cathie, Wood’s reputation soared after a stupendous return of 153% in 2020 and clear presentations of her investment philosophy in ubiquitous media appearances.
But her longer-term performance is nothing to brag about. Wood’s flagship Ark Innovation ETF (ARKK) , with $8.1 billion in assets, has generated a return of 25% for the past 12 months.
That lags the 40% return of the technology-heavy Nasdaq Composite index. Ark funds holdings are virtually all tech stocks.
Ark Innovation’s annualized return is negative 24% for the past three years and a mere positive 3% for five years.
That compares unfavorably with positive 9% and positive 17% for the Nasdaq during those periods. Wood’s goal is for at least 15% annual returns over five-year stretches.
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Cathie Wood’s Market Philosophy
Wood’s investment strategy isn’t hard to fathom. Ark’s ETFs generally buy young, small-company stocks in the high-tech categories of artificial intelligence, blockchain, DNA sequencing, energy storage, and robotics. She views those areas as game changers for the global economy.
Related: Cathie Wood’s Ark is suffering from a discouraging trend
These stocks are quite volatile, of course, so the Ark funds are subject to rollercoaster rides. And Wood frequently trades in and out of her top names.
Investment research titan Morningstar is quite critical of Wood and Ark Innovation ETF. “ARK Innovation has dubious ability to successfully navigate the challenging territory it explores,” Morningstar analyst Robby Greengold wrote last year.
The potential of Wood’s five high-tech platforms listed above is “compelling,” he said. “But Ark’s ability to spot the winners among them and navigate their myriad risks is less so. The strategy’s booms and busts have culminated in middling total returns and extreme volatility since its 2014 inception.”
It’s not an investment 101 portfolio. “The strategy narrowly invests in stocks with paltry current earnings, elevated valuations, and highly correlated stock prices,” Greengold said. “Their extreme volatility underscores their highly uncertain futures.”
Wood has defended herself from Morningstar’s criticism. “I do know there are companies like that one [Morningstar] that do not understand what we're doing,” she told Magnifi Media by Tifin in 2022.
“We do not fit into their style boxes. And I think style boxes will become a thing of the past, as technology blurs the lines between and among sectors.”
But some of Wood’s customers apparently agree with Morningstar. During Ark Innovation’s rally of the past 12 months, it saw a net investment outflow of $1.3 billion.
Cathie Wood's latest trades
On Monday, Wood traded three stocks that she rarely touches. Ark Fintech Innovation ETF (ARKF) purchased 12,498 shares of social-media goliath Meta Platforms (META) , valued at $6.2 million as of Monday’s close.
Fund manager buys and sells:
- Warren Buffett just sold shares of this popular streaming stock
- Paul Tudor Jones’ hedge fund just made a big bet on Nvidia stock
- Stanley Druckenmiller just sold two AI tech stocks
It’s hard to argue that Wood got a bargain, given the stock’s 167% surge over the past 12 months. But artificial intelligence mania could easily push it still higher.
Ark Genomic Revolution ETF (ARKG) snagged 10,981 shares of biotechnology stalwart Amgen (AMGN) , valued at $3.1 million as of Monday’s close. Amgen stock has dropped 15% since hitting a record Feb. 1, pressured by a disappointing earnings report.
So perhaps Wood picked up a bargain. The stock has climbed 18% over the past 12 months.
Meanwhile, Ark Genomic dumped 84,636 shares of pharmaceutical giant Pfizer (PFE) , valued at $2.2 million. How Pfizer fits into Wood’s investment philosophy is unclear. But the fund has only 35,282 shares left. The stock has tumbled 36% over the past year.
Also on the selling side, Ark funds unloaded 134,749 shares of Coinbase Global (COIN) , the country’s largest cryptocurrency exchange. That cache was valued at $30.9 million as of Monday’s close.
The stock has skyrocketed 187% over the past six months amid the surge in cryptocurrencies. So Wood, who has sold it steadily during the past three weeks, may think now is a good time to take profits. She remains an evangelist for cryptocurrencies.
The author owns shares of Meta, Amgen and Pfizer.
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