Following Donald Trump's recent election win, Cathie Wood's ARK funds experienced a big surge.
In the past week, ARK Invest's flagship fund, the ARK Innovation ETF (ARKK) is up 15.93%, compared with the S&P 500’s 4.66% gain.
Wood often sells shares of companies that surge after strong earnings reports.
That's exactly what she did this week. This enables her to secure profits and rebalance her portfolios.
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Investors and analysts have mixed views on Cathie Wood. Supporters see her as a visionary in tech investing, while critics say she’s an average fund manager.
Nicknamed “Mama Cathie” by her followers, Wood gained widespread attention with an impressive 153% return in 2020, driven by her transparent, accessible discussions of strategy in the media.
Related: Cathie Wood buys $15.7 million of tumbling tech stock
However, Wood’s longer-term performance isn’t so rosy.
The flagship ARK Innovation ETF, with $5.8 billion under management, has returned 3.25% year-to-date, with an annualized three-year return of -23.84% and a five-year return of 4.02%.
Meanwhile, the S&P 500 has gained 27.17% this year through Nov. 8, with an annualized three-year return of 10.14% and a five-year return of 15.99%.
Cathie Wood’s investment strategy explained
Cathie Wood’s investment strategy is simple: ARK ETFs typically buy shares in emerging, high-tech companies across fields like artificial intelligence, blockchain, DNA sequencing, energy storage, and robotics.
Wood believes companies in these areas will revolutionize industries, though the stocks are notoriously volatile, leading to substantial swings in the ARK funds’ values.
Investment research firm Morningstar has criticized Wood and the Ark Innovation ETF significantly.
"Investing in young companies with slim earnings 'demands forecasting talent, which ARK Investment Management lacks," Morningstar analyst Robby Greengold wrote. He described the ETF’s performance as ranging from “tremendous to horrendous.”
While Wood’s five high-tech platforms are “compelling,” he noted, "the firm’s ability to spot winners and manage their myriad risks is less so…. It has not proved it is worth the risks it takes.”
Related: Cathie Wood's net worth: The Ark Invest CEO's wealth & income
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” but reaffirmed her “commitment to investing in disruptive innovation.”
Wood also stated that many of ARK’s investments are now in “rare, deep value territory,” and she anticipates her innovation-focused funds will benefit “disproportionately, as they did in the fourth quarter of 2023 and during the coronavirus crisis.”
Some investors appear to share Morningstar’s doubts. Over the past year, the ARK Innovation ETF experienced a net outflow of $2.67 billion, according to data from ETF research firm VettaFi.
Cathie Wood sells 1,091,997 shares of SoFi
From Nov. 5 to Nov. 7, ARK Funds sold 1,091,997 shares of SoFi Technologies (SOFI) over three consecutive days.
That chunk of stock was valued at roughly $12.85 million as of the Nov. 7 close.
SoFi started as a debt refinancing lender and now operates in three segments: lending (student, personal, and home loans), financial services, and a technology platform.
The company recently posted its fourth consecutive profitable quarter, beating Wall Street’s estimates.
For the third quarter, SoFi earned 5 cents per share, topping analysts' forecast of 4 cents. Revenue of $689 million, representing a 30% annual increase, also exceeded the expected $632 million.
The company also raised its 2024 revenue forecast to between $2.535 billion and $2.55 billion.
“2025 is the first year in which we don’t see headwinds,” SoFi CEO Anthony Noto told Barron’s. “We see a declining rate environment, we see a stable economy, and that’s going to bode well for our businesses. And for the first time, we’ll have wind at our back, as opposed to a headwind.”
Fund manager buys and sells:
- Cathie Wood buys $25.9 million of major tech stock
- Cathie Wood buys $15.7 million of tumbling tech stock
- Major asset manager warns on election, stocks risk
Joe Biden’s administration supported federal loan forgiveness, reducing opportunities for private lenders to refinance loans. But President-elect Donald Trump wants to limit the federal government’s role in the student-loan market, which could benefit private lenders like SoFi.
SoFi stock is up 31% year-to-date and has gained more than 105% over the past three months.
SoFi is not in ARK Innovation ETF’s top 10 holdings as of Nov. 8.
Related: Veteran fund manager sees world of pain coming for stocks
