Famed investor Cathie Wood, chief executive of Ark Investment Management, has said throughout the year that declines in the prices of her technology stocks simply represent buying opportunities.
And she was true to her word on Tuesday, when Ark exchange-traded funds snagged shares of 27 companies.
That included streaming platform Roku (ROKU), videoconferencing service Zoom Video Communications (ZM), semiconductor titan Nvidia (NVDA) and online sports gambling platform DraftKings (DKNG).
Also on the buy list: Communications-tools provider Twilio (TWLO), Cologuard cancer-detection system producer Exact Sciences (EXAS) and robotics-software firm UIPath (PATH).
Roku represented the biggest purchase -- 250,537 shares, worth $17 million as of Tuesday’s close.
Wood's Underperformance
Ark funds have tumbled in recent months, as their technology stock holdings suffered from weak earnings. Wood has noted that she has a five-year investment horizon.
The five-year track record of Ark Innovation ETF beat that of the S&P 500 until May 9. But the five-year annualized return of Ark Innovation totaled 6.39% through Sept. 13, behind the S&P 500’s 11.46% return.
Ark Innovation has dropped 55% this year, and it’s down 73% from its February 2021 peak. Raging inflation and soaring interest rates helped put the kibosh on tech earnings.
Investors started moving out of the $8.3 billion Ark Innovation in August, and it had a net outflow of $154.2 million over the three months through Sept. 13, according to VettaFi, an ETF research firm.
Over the past month, however, the fund enjoyed a net inflow of $10.5 million.
Deflation and Recession
Meanwhile, the 8.3% surge in consumer prices reported for the 12 months through August did nothing to change Wood’s economic views. She still believes we’re suffering deflation and are in the midst of a recession.
Federal Reserve Chairman Jerome Powell has misread the environment in comparing this period to the late 1970s and early ‘80s, Wood said in a webinar. That’s when then-Fed Chairman Paul Volcker pushed interest rates way higher to quell inflation.
“Powell believes that he too is slaying the inflation dragon,” Wood said. “But we don’t believe the Fed’s task is anything like the late ‘70s and early ‘80s.”
Back then, the economy took 15 years to “work up an inflation frenzy,” she said. “This is more like a 15-month problem.”
So, “to use the same resolve this time will prove to be a mistake,” Wood said. “We think we’re already in a recession.”
She considers consumer-price gauges a lagging indicator. Gold is the best leading indicator for inflation, she said. And it has traded in a range of $1,700 to $2,075 over the past two years, peaking in August 2020, Wood noted.
