Friday, 15 November 2024
by BD Banks
Following President-elect Donald Trump’s recent election win, Cathie Wood’s ARK funds saw a notable rise.
ARK Invest’s flagship fund, ARK Innovation ETF (ARKK) , is up 15.87% since Nov. 6, while the S&P 500 Index gained 3.5% in that stretch.
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It is still earnings season. Wood often sells shares of companies that surge after earnings reports, which enables her to secure profits and rebalance her portfolios.
Investors and analysts have varying opinions on Cathie Wood. Supporters see her as a visionary in tech investing, while critics say she’s an average fund manager.
Wood’s followers nicknamed her “Mama Cathie,” driven by her transparent, accessible discussions of strategy in the media. Wood gained widespread attention with an impressive 153% return in 2020.
However, Wood’s longer-term performance isn’t so hot.
Related: Cathie Wood’s net worth: The Ark Invest CEO’s wealth & income
The flagship ARK Innovation ETF, with $5.4 billion under management, has returned 6.63% year-to-date, with an annualized three-year return of -21.96% and a five-year return of 4.45%.
In comparison, the S&P 500 is up 26.96% this year through Nov. 8, with a three-year annualized return of 10.22% and a five-year return of 15.94%.
Wood’s investment strategy is simple: ARK ETFs typically buy shares in emerging, high-tech companies across fields like artificial intelligence, blockchain, DNA sequencing, energy storage, and robotics.
Wood says companies in these areas will revolutionize industries, though the stocks are notoriously volatile, leading to substantial swings in the ARK funds’ values.
Investment research firm Morningstar has expressed strong criticism of Wood and the Ark Innovation ETF.
“Investing in young companies with slim earnings ‘demands forecasting talent, which ARK Investment Management lacks,'” wrote Morningstar analyst Robby Greengold. He described the ETF’s performance as ranging from “tremendous to horrendous.”
Related: Cathie Wood buys $15.7 million of tumbling tech stock
Wood defended herself in a July posting on Ark’s website. She acknowledged that “the macro environment and some stock picks have challenged our recent performance,” while affirming her “commitment to investing in disruptive innovation.”
Wood also stated that many of ARK’s investments are now in “rare, deep value territory” and anticipates her innovation-focused funds will benefit “disproportionately, as they did in the fourth quarter of 2023 and during the coronavirus crisis.”
Some investors seem to echo Morningstar’s concerns. The ARK Innovation ETF saw a net outflow of $2.67 billion over the past year, according to data from ETF research firm VettaFi.
From Nov. 6 to Nov. 11, ARK Funds sold 2,287,064 shares of Unity Software (U) over four consecutive trading days.
That chunk of stock was valued at roughly $48 million.
This move came after Unity Software reported Q3 results on Nov. 7.
Unity reported that third-quarter revenue and adjusted profit beat expectations.
For the quarter ended Sept. 30, the videogame-software company posted revenue of $429 million, down 2% year over year. The figure surpassed the company’s guidance of $415 million to $420 million.
Its net loss for the quarter was $125 million, consistent with third-quarter 2023 and down from $126 million in Q2 2024.
Unity is best known for its gaming engines, which are used in games including “Pokémon Go,” “Monument Valley” and “Call of Duty: Mobile.”
Morgan Stanley said in September that the company’s game engine has maintained a 70% market share in mobile and “proven how deep its moats truly are,” as competitors have been unable to gain share at Unity’s expense.
Unity has struggled this year, cutting jobs, posting losses and making leadership changes.
Wood sold 2.6 million shares of Unity in Q2 and 4.6 million shares in Q3, according to Stockcircle.
Unity is not in ARK Innovation ETF’s top 10 holdings as of Nov. 13. The ARK funds had 6,665,871 shares of Unity as of the end of Q3, according to 13F filings.
However, several analysts have raised their price targets on Unity shares after its recent report as they see growth opportunities.
More Tech Stocks:
Barclays raised its price target on Unity to $18 from $16 and affirmed an equal-weight (effectively neutral) rating, saying the “vibes from Unity sound upbeat.”
Stifel raised its target to $28 from $25 with a buy rating, seeing “tangible avenues for improvement” heading into 2025. thefly.com reported.
Unity Software closed at $19.13 on Nov. 13 and was down 53% year-to-date through the close.
Related: Veteran fund manager sees world of pain coming for stocks