Famed money manager Cathie Wood, chief executive of Ark Investment Management, on Feb. 6 bought more shares of another big-name holding, Roblox (RBLX), the online video game platform. Wood’s flagship Ark Innovation ETF (ARKK) purchased 130,100 Roblox shares that was valued at $5.1 million as of the Feb. 6 close.
Wood likely saw the stock’s 40% decline over the past year as a buying opportunity. The video game industry has suffered during that period, as the wind-down of the covid pandemic has sent people out of their homes more. That means they’re playing fewer video games.
To be sure, Roblox shares have soared 34% so far this year amid a strong technology stock rally. The company is Ark Innovation ETF’s 16th biggest holding.
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Wood’s Returns Tumble
Meanwhile, Wood’s performance hasn’t exactly overwhelmed the investment world over the past year, as her young technology stocks have slumped. Ark Innovation has slid 41% during that period and 73% from its February 2021 peak.
To be sure, the fund has rebounded 37% 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 2.76% through Feb. 6, compared with 10.75% 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.
Ark Innovation’s subpar long-term returns aren’t driving away investors. The $8 billion fund registered a net investment inflow of $67 million during the past five days and an inflow of $1.28 billion over the last year, according to ETF research firm VettaFi.
What Draws Investors to Wood
You might wonder why so many investors have stuck with Wood. The fact that she had one spectacular year certainly helps. Ark Innovation skyrocketed 153% in 2020.
Also, Wood has become something of a rock star in the investment world, appearing frequently in the media. She explains financial concepts in ways that novice investors can understand.
Wood does have her detractors. Morningstar analyst Robby Greengold issued a scathing critique of Ark Innovation last year.
“ARKK shows few signs of improving its risk management or ability to successfully navigate the challenging territory it explores,” he wrote.
Wood, of course, begged to differ. “I do know there are companies like that one [Morningstar] that do not understand what we're doing,” she said in an interview with Magnifi Media by Tifin.
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