Why does Cathie Wood think investors' fear about stocks is at "Great Depression" levels? Because it is for her portfolio, unlike with the S&P 500.
ARK Innovation ETF, Wood's flagship ETF, is down 16.73% this year, says an Investor's Business Daily analysis of data from Morningstar Direct and MarketSurge. That makes it the second-worst actively trade U.S. diversified stock fund this year.
But that's only the start of the pain for Wood and investors that own her fund. ARK Innovation is sinking while the rest of the market, including the S&P 500, is pushing toward all-time highs.
No wonder Wood grumbled in a recent note on X (Twitter): "The search for cash and safety in the equity markets today is as intense as that during the Great Depression in the early 1930s," she wrote on May 24. "When fear dissipated, the market broadened out and rewarded risk-taking once again."
ARK Innovation: It's Worse Than It Looks
Digging more into the ARK Innovation portfolio shows why Wood is so distressed. It's performing even worse on a stock-by-stock basis.
ARK Innovation holds 35 stocks, including some S&P 500 members. And of those, 24 stocks, or nearly 70% of the positions, are down on the year. A few of the drops are especially painful. Three of ARK Innovation's stocks are down 60% or more just this year. And another seven are down less than 60%, but more than 30%.
And again, this is happening in a year when most S&P 500 investors are making money hand-over-fist.
What's Hurting ARK The Most?
Pacific Biosciences of California, a researcher of high-tech treatments for medical conditions, has seen its shares sink nearly 81% this year. That's the worst showing of any stock in the ARK Innovation portfolio.
Luckily, it's not a major position anymore. Pacific Biosciences only accounts for 0.6% of the portfolio. But its fundamentals look dismal, especially at a time investors are looking for quality companies. Pacific Biosciences is expected to lose 93 cents a share on an adjusted basis this year. And it's seen losing even more money every year until at least 2028.
Making matters even worse for ARK Innovation is that it's largest position is ailing, too. Shares of electric vehicle maker Tesla account for more than 11.4% of ARK Innovation's portfolio. That's the ETF's largest position by far. And yet, shares are down nearly 28% just this year.
Will ARK Innovation Pull Out Of Its Funk?
ARK Innovation's poor results could be temporary. It's famous for bouncing back.
Last year, the ETF lagged much of the year until rallying back on strength of cryptocurrency stocks. The highly volatile stocks in the ARK Innovation portfolio can move fast.
But critics of ARK Innovation and Wood's approach long argued there's inadequate risk management. So when the stocks in the portfolio don't work, it's painful.
So right now, Wood is just another active fund manager struggling to keep up with the S&P 500.
Worst ARK Innovation Stocks This Year
| Company | Ticker | Weight (%) | YTD % ch. |
|---|---|---|---|
| Pacific Biosciences of California | 0.59% | -80.7% | |
| Verve Therapeutics | 0.17% | -62.2% | |
| Ginkgo Bioworks Holdings | 1.31% | -60.2% | |
| 10x Genomics | 1.89% | -59.5% | |
| Unity Software | 2.78% | -52.5% |
