Cathie Wood, director of Ark Investment Management, frequently adjusts her core positions, adding to a holding when stocks fall and selling when they rise.
Last week he made some notable purchases. This week he was selling as the S&P 500 index hit its 39 level.He record close of the year on Thursday.
Investors and analysts are divided in their opinions of Wood, arguably the country's best-known investor after Warren Buffett. Defenders argue she is a technology guru, while critics say she is simply a mediocre fund manager.
Cindy Ord/Getty Images for Bloomberg Businessweek
Wood (Mama Cathie to her followers) rose to fame after a massive 153% return in 2020 and clear explanations of her investment strategy in numerous media appearances.
But its long-term performance is not exactly a challenge for Buffett. Wood's flagship Ark Innovation ETF (SHEET) With $5.9 billion in assets, it produced annualized returns of 14% over the past 12 months, negative 27% over the past three years and positive 2% over five years.
That's nowhere near the S&P 500. The index posted positive annualized returns of 30% over one year, 11% over three years, and 16% over five years.
Cathie Wood's Simple Strategy
Its investment philosophy is easy to understand. Ark ETFs typically buy shares of startups in the high-tech categories of artificial intelligence, blockchain, DNA sequencing, energy storage and robotics.
Wood argues that companies in these categories will change the world. Of course, these stocks are quite volatile, so the values of Ark funds tend to swing widely.
Renowned investment research firm Morningstar is highly critical of the Wood and Ark Innovation ETF.
Related: Cathie Wood buys $40 million worth of shares in four tech companies in crisis
Investing in young companies with diminishing earnings “requires a talent for forecasting, something Ark Investment Management lacks,” Morningstar analyst Robby Greengold wrote in a note. “The results range from tremendous to horrendous.”
Morningstar portfolio strategist Amy Arnott calculated that Ark Innovation destroyed $7.1 billion of shareholder wealth from its inception in 2014 through 2023. That put the ETF in third place on her list of wealth destruction for mutual funds and ETFs over the past decade.
David Loeb's critique of Wood
Star investor David Loeb, CEO of Third Point, doesn't have such a positive opinion of Wood either. After she wrote a comment defending her investment philosophy in 2022, he went on a twitter rampage.
“Anyone teaching a value investing class or an investment psychology class should use this memo as a treatise on studying the mindset of stonk hodlers,” he wrote. “Stonk hodlers” is slang for investors who hold (hodl) stocks (stonks) for too long.
“Note the disparaging comments about Luddites who regard archaic measures of value like cash flow as short-term traders,” Loeb continued.
Related: Cathie Wood scoops up $8 million worth of failing tech stock
Wood defended himself in July 2024. Posting on Ark website. He acknowledged that “the macro environment and some stock picks have challenged our recent performance.”
But its “commitment to investing in disruptive innovation has not wavered,” Wood said. Many of Ark’s stocks are in “deep and rare value territory,” he said.
And if interest rates fall, as they have begun to do, their “disruptive innovation strategies should benefit disproportionately, as they did in the fourth quarter of 2023 and during the coronavirus crisis,” Wood said.
Some of its clients seem to agree with the criticism. Over the past 12 months, Ark Innovation ETF suffered a net investment loss of $2.4 billion, according to ETF research firm VettaFi.
Cathie Wood sells her shares in streaming platform Roku
Ark Funds sold 189,990 shares of the streaming platform Year (OF THE YEAR) on Monday, valued at $14.1 million at the close of that day.
This move likely represents just a reduction in positions, as Roku remains Ark Innovation's second-largest holding. The stock is up 46% over the past three months.
Morningstar analyst Matthew Dolgin doesn't share Wood's enthusiasm for Roku. He's not impressed with its business model.
Related: Cathie Wood Net Worth: The Wealth and Income of the CEO of Ark Invest
“Roku’s strategy is to remain a leading streaming device provider by maintaining low prices and accepting losses in its device segment,” he wrote in a commentary. “It intends to generate revenue from Roku user accounts.”
Could it work? “We are skeptical that this is a viable strategy,” Dolgin said. “That’s because we don’t see competitive advantages that could lead the company to sufficient profits after a history of making losses.”
Dolgin does not assign any advantage to Roku, meaning he sees no sustainable competitive advantages for the company.
Cathie Wood leaves Roblox, Robinhood and Palantir
In other operations this week, Ark funds sold 117,884 shares of the video game platform Roblox (Rbx) valued at $5.5 million at Thursday's close.
The stock is Ark Innovation's third-largest holding and is up 27% over the past three months.
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Ark Fintech Innovation ETF (ARKF) Sold 62,718 shares of online stock brokerage Robinhood Markets (HOOD) valued at $1.4 million at Wednesday's close.
The stock is Ark Innovation's sixth-largest holding and has gained 11% over the past month.
And Ark Innovation dumped 52,895 shares of the data analytics software provider Palantir (PLTR) valued at $1.9 million at Thursday's close.
The stock is Ark Innovation's seventh-largest holding and has risen 41% in the past three months.
Related: Veteran fund manager who correctly predicted stock crash updates his outlook
