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There are times when Katie Wood, president of Ark Investment Management, cuts a position to zero or close to it.
And that seems to be what it has been doing in recent weeks with well-known technology stocks.
The investment community has mixed reviews of Wood, who may be the country’s most famous investor after Warren Buffett. Admirers say she’s a technology visionary, while critics say she’s just an average money manager.
Cindy Ord/Getty Images for Bloomberg Businessweek
Wood (or Mama Kathy to her followers) has gained widespread fame after posting a stunning 153% return in 2020 and clearly articulated presentations of her investment strategy in frequent media appearances.
But its longer-term performance isn’t that great. Wood’s flagship fund, Ark Innovation ETF (Binder) Emaar Properties, with assets worth $5.7 billion, has achieved annual returns of 8% over the past 12 months, negative 27% over the past three years, and positive 0.31% over the past five years.
That’s insignificant compared to the S&P 500. The index has posted positive annual returns of 29% over one year, 10% over three years, and 16% over five years. And Arc Innovation’s numbers are well below Wood’s goal of at least 15% annual returns over five-year periods.
Katie Wood’s Direct Strategy
Its investment philosophy is straightforward. Ark’s ETFs typically buy shares of startups in high-tech categories such as artificial intelligence, blockchain, DNA sequencing, energy storage, and robotics.
Wood says companies in these categories are game changers. These stocks are naturally highly volatile, so ARK funds’ values often fluctuate widely.
Related: Cathie Wood Net Worth: Ark Invest CEO’s Wealth and Income
Morningstar, a research firm, doesn’t seem to be impressed with the Wood & Ark Innovation Fund. In March, Morningstar analyst Robbie Greengold wrote that investing in startups with weak earnings “requires a knack for forecasting, which Ark Investment Management lacks.”
The potential of the five technology platforms Wood mentioned is “compelling,” he said, “but the company’s ability to spot winners and manage the many risks it faces is far less so… It has not proven to be worth the risks it is taking.”
This is not your father’s investment portfolio. “The results range from phenomenal to horrific” for Wood’s young and often unprofitable stocks, Greengold says.
Wood defended herself against Morningstar’s criticism. “I know there are companies like that out there,” she said. [Morningstar] “Those who don’t understand what we do,” she told Magnifi Media by Tifin in 2022.
Related: Katie Wood Buys $28 Million in Troubled Tech Stocks
“We don’t fit into their stereotypes. I think their stereotypes will become a thing of the past, as technology blurs the lines between different sectors.”
Some of Wood’s clients seem to agree with Morningstar. Over the past 12 months, the Ark Innovation ETF has seen net investor inflows of $2.3 billion, according to exchange-traded fund research firm VettaFi.
Katie Wood Gets Rid of Stock
From August 13 to August 22, Ark funds dumped 86,379 shares of video conferencing service Zoom Video Communications (Z M) The cat was valued at $5.9 million at the close of trading on August 22.
Wood’s shares have been on a rollercoaster ride, soaring 20% over the past month. For most of the past few years, Zoom was a top-10 company in the Ark Innovation ETF. Now it’s zero.
Zoom Video’s business has seen a huge surge during the pandemic, and Wood probably thinks the company’s glory days are over amid the intense competition in the video conferencing industry.
The fund manager buys and sells:
- A major Wall Street firm picks which stocks to buy when the Fed cuts rates
- Warren Buffett Buys Cheap Stocks
- Katie Wood Buys $2.4 Million in Falling Big Tech Stocks
But in this case, Morningstar believes Wood has picked a winner. Analyst Dan Romanoff sees Zoom as having a competitive advantage that will last at least 10 years. He puts the stock’s fair value at $89. The stock was trading at $70.25 on Friday.
“Zoom’s mission is to ‘make video communications frictionless,’” he wrote in his commentary. “And it does that with a unified, video-centric communications platform that includes video, audio, chat, and content sharing.”
Romanov noted that Zoom recently introduced a telephony system and a call center solution. “They offer a premium peer-to-peer technology, with proprietary routing technology,” he said.
“Zoom is a recognized leader in the meeting software market and is disrupting and expanding the $100 billion collaboration software market with…a superior user experience.”
Related: Veteran Fund Manager Sees a World of Pain Coming for Stocks
