When it comes to celebrities among money managers, Cathie Wood, director of Ark Investment Management, is near the top.
Known to her devotees as Mama Cathie, Wood rose to fame thanks to a stupendous 153% return in 2020 and clear presentations of her investment philosophy in ubiquitous media appearances.
But its long-term returns are less than stellar. Wood's flagship ETF, Ark Innovation (ARKK) , with $7.6 billion in assets, has generated a 29% return over the past 12 months. But the annualized return is negative 27% over the past three years and just positive 2% over five years.
This is nothing to brag about, as the S&P 500 posted positive returns of 31% over one year, 9% over three years, and 13% over five years. Wood's goal is to achieve at least 15% annual returns over five-year periods.
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Cathie Wood's Investment Philosophy
His investment strategy is not difficult to understand. Ark ETFs typically buy stocks of young small companies in the high-tech categories of artificial intelligence, blockchain, DNA sequencing, energy storage and robotics. She sees those areas as game-changers for the global economy.
Related: Cathie Wood Ditches Top crypto stocks
These stocks are quite volatile, of course, so the Ark funds are subject to rollercoaster rides. And Wood frequently swaps his main names.
Investment research titan Morningstar is quite critical of the Wood and Ark Innovation ETF. “ARK Innovation has a dubious ability to successfully navigate the challenging territory it explores,” Morningstar analyst Robby Greengold wrote last year.
The potential of Wood's five high-tech platforms listed above is “compelling,” he said. “But Ark's ability to detect the winners among them and navigate their countless risks is less so. The strategy’s booms and busts have culminated in lackluster total returns and extreme volatility since its inception in 2014.”
It's not an investment portfolio 101. “The strategy invests closely in stocks with negligible current earnings, lofty valuations, and highly correlated stock prices,” Greengold said. “Its extreme volatility underscores its highly uncertain future.”
Wood has defended himself against Morningstar's criticism. “I know there are companies like that (Morningstar) that don't understand what we are doing,” he told Magnifi Media by Tifin in 2022.
“We don't fit into their style boxes. And I think style barriers will become a thing of the past, as technology blurs the lines between sectors.”
But some of Wood's clients apparently agree with Morningstar. During Ark Innovation's rally over the past 12 months, he recorded a net investment outflow of $1.4 billion.
Cathie Wood Buys More Than 200,000 Shares of Top Stock
On Thursday, Ark funds bought 216,682 shares of the best-selling American electric vehicle manufacturer, Tesla. (TSLA) valued at $35.2 million at Thursday's close.
More Tesla:
- Elon Musk's Tesla issues a harsh warning to workers
- Elon Musk's latest Tesla announcement could revolutionize the entire electric vehicle industry
- Tesla reveals its latest move to offset falling demand as shares extend decline
Tesla shares have sunk 34% so far this year amid weak earnings, price cuts, the closure of its German factory after a fire and controversy surrounding CEO Elon Musk's compensation.
Investors are also unimpressed by Tesla's 2024 delivery forecast amid slowing demand for electric vehicle sales growth.
Wood has repeatedly bought Tesla shares when they have fallen in recent years, expressing support for Musk and his mission to provide clean internal combustion engine (ICE) cars.
Tesla is the second largest holding in the Ark Innovation ETF, after Coinbase Global (CURRENCY) .
On the selling side, Ark funds dumped 1.4 million shares of online stock brokerage Robinhood Markets. (HOOD) , valued at $20.6 million at Thursday's close. Wood has been selling shares regularly since mid-February after buying them earlier in the year.
Robinhood shares have soared 71% since February 5 as investor trading activity has increased amid the stock bull market. So maybe Wood was making a profit.
That said, TheStreet Pro technical analyst Notes by Bruce Kamich that the point-and-figure charts still point upward for the company's stock. He sees an upside price target of $24 to $34. The stock was trading at $18.20 on Friday.
Of course, the P&F chart targets are not guaranteed and do not suggest “when” a price target might be achieved. Kamich also noted that a key momentum indicator, the moving average convergence and divergence (MACD) oscillator, “is above the zero line but correcting lower.”
The next action is a bit surprising: Caterpillar (CAT) , the largest construction equipment manufacturer in the world. ARK Robotics and Autonomous technology ETF (ARQQ) acquired 4,700 shares of the company, valued at $1.6 million at Thursday's close.
It's unclear what an old-school industrial stock has to do with Wood's portfolio of young tech stocks. Maybe it's a protection against his technological positions. In any case, shares have soared 53% over the past year amid strong demand for its products. Again, Wood may be taking profits.
Related: A veteran fund manager picks his favorite stocks for 2024
