Sunday, 20 October 2024
by BD Banks
Cathie Wood, fund manager of Ark Invest, one of the most closely followed asset managers, often seizes the opportunity to lock in gains if one of her stocks surges.
That’s exactly what she did this week.
Investors and analysts are split on Cathie Wood, arguably the most famous investor after Warren Buffett, the legendary billionaire behind Berkshire Hathaway.
Supporters hail her as a tech visionary, while critics argue she’s a mediocre money manager with subpar performance.
Affectionately dubbed “Mama Cathie” by fans, Wood became famous with a staggering 153% return in 2020, gaining popularity through her accessible media appearances.
Related: Cathie Wood’s net worth: The Ark Invest CEO’s wealth & income
But her longer-term performance isn’t Buffett-esque. Berkshire Hathaway’s annualized returns averaged about 20% since inception, approximately double the S&P 500’s return over the same time period.
However, Wood’s flagship Ark Innovation ETF (ARKK) , with $5.6 billion in assets, is down 10% in 2024, and returns have been negative 26% for the past three years and only 3% for five years.
That pales in comparison to the S&P 500. The benchmark index posted positive annualized returns of 36% for one year, 11% for three years, and 16% for five years.
Cathie Wood focuses on disruptive innovation and invests in high-growth tech sectors like artificial intelligence, genomics, and blockchain. Her strategy emphasizes long-term potential and cutting-edge technologies despite short-term volatility.
Wood maintains that companies in those categories will be game changers, presumably with game-changing returns. However, high-growth stocks tend to be quite volatile, so the Ark funds’ values often fluctuate widely.
Morningstar, one of the most popular companies evaluating mutual fund and exchange-traded fund performance, is critical of Wood and Ark Innovation ETF.
Related: Cathie Wood buys $15 million of soaring mega-cap tech stocks
Investing in emerging companies with slim earnings “demands forecasting talent, which ARK Investment Management lacks,” wrote Morningstar analyst Robby Greengold. “Results range from tremendous to horrendous.”
In a July 2024 post on Ark’s website, Wood defended her strategy, admitting that “the macro environment and some stock picks have challenged our recent performance.”
However, she emphasized that her “commitment to investing in disruptive innovation has not wavered,” noting that many of Ark’s stocks are now in “rare, deep value territory.”
Despite Cathie Wood’s confidence, some customers are seemingly unconvinced. Over the past 12 months, the Ark Innovation ETF saw a net outflow of $2.55 billion, according to ETF research firm VettaFi.
On Oct.11-16, Ark Funds unloaded 391,668 shares of trading app provider Robinhood Markets (HOOD) . That chunk of stock was worth roughly $10.5 million as of the Oct. 18 close.
Robinhood Markets went public on July 29, 2021, with its initial public offering priced at $38 per share. Following the IPO, Robinhood stock experienced a significant surge, reaching an all-time high closing price of $85 in August 2021.
Fund manager buys and sells:
However, this peak was short-lived. Once Covid-stimulus payments ended, removing a source of money for young investors who favored Robinhood, and businesses reopened, reducing the time available to actively trade stocks, Robinhood’s stock price collapsed.
Robinhood’s stock price didn’t stop falling until it hit a low of around $7 in mid-2022, down 92% from its peak.
Since then, however, the stock has performed much better, surging 110% this year and trading at $26.80 on Oct. 18.
One reason for the rebounding stock price is that Robinhood reported strong second-quarter earnings on Aug. 7, driven by increased cryptocurrency and options trading revenue.
The company earned 21 cents per share and had a record $682 million in revenue, both of which beat Wall Street’s estimates.
Since reporting quarterly results, its shares are up over 50%. So, Cathie Wood may simply be locking in some of her recent profits. As of Oct. 18, ARK Innovation owns $270 million worth of Robinhood stock.
Robinhood will release its Q3 earnings on Oct.30.
Related: Veteran fund manager sees world of pain coming for stocks