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Famed investor Cathie Wood, president of Ark Investment Management, occasionally trades stocks of mature technology companies despite her usual focus on smaller companies.
If you’re an experienced investor, you’ve probably heard of Wood. She is perhaps the most famous female financial manager in the country after Warren Buffett.
Wood (Mama Kathy to her acolytes) rose to fame after a massive 153% return in 2020 and articulate presentations of her investment philosophy in numerous media appearances.
But its long-term performance is less impressive. Wood’s leading Ark Innovation ETF (Ark) with assets of $6.2 billion, produced annualized returns of 7.49% over the past 12 months, negative 27.26% over the past three years, and positive 1.11% over five years.
This is very dismal compared to the S&P 500. The index has generated positive returns of 26.4% for one year, 9.27% for three years, and 15.31% for five years. Ark Innovation’s numbers are also well short of Wood’s goal of achieving annual returns of at least 15% over five years.
Cathie wood direct strategy
Her investment philosophy is very simple. Ark ETFs typically buy stocks of startups in high-tech categories such as artificial intelligence, blockchain, DNA sequencing, energy storage, and robotics. Wood asserts that companies in these categories will change the world.
Naturally, these stocks are very volatile, so Ark Funds will often fluctuate up and down. Wood frequently adds to and subtracts from her upper nouns.
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Investment research giant Morningstar offers a harsh assessment of the Wood and Ark Innovation ETF. Investing in startups with meager earnings “requires talent forecasting, which ARK Investment Management lacks,” Morningstar analyst Robbie Greengold wrote last March.
The potential of Wood’s five high-tech platforms mentioned above is “compelling,” he said. “But the company’s ability to spot winners and manage myriad risks is less important…. It has not proven to be worth the risks it is taking.”
This is not your father’s investment portfolio. “Wood relying on her instincts to build the portfolio is a handicap,” Greengold said. “The highly correlated share prices of its holdings belie its clear diversification across many sectors.”
Wood defended herself from Morningstar’s criticism. “I know there are companies like this [Morningstar] “They don’t understand what we do,” she told Magnifi Media by Tifin in 2022.
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“We don’t fit into their style boxes. I believe that stylish boxes will become a thing of the past, as technology blurs the lines between sectors.
However, some of Wood’s clients appear to agree with Morningstar. During Ark Innovation’s rally over the past 12 months, it experienced a net investment inflow of $2.2 billion, according to ETF research firm VettaFi.
Wood’s Ark buys popular financial technology
On May 23, the Ark Fintech Innovation ETF was released (ARKF) Bought 100,167 shares of PayPal Power Bank (PYPL) It was worth $6.2 million as of that day’s close and had changed little as of May 31.
The stock has fallen 80% since its peak in July 2021, to $62, though it has rebounded 7% in the past six months. It fell 12% in May. This decline largely stems from the intense competition PayPal faces from companies like Block (Field) Master card, credit card (Master’s,) And the visa (Fifth) .
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Given its long-term decline, Wood would likely view PayPal stock as a buy.
She doesn’t take much risk. PayPal is only 29y The largest holding among the 35 companies is in Ark Fintech, representing 1.03% of the portfolio.
Morningstar analyst Brett Horn shares Wood’s bullish view. “PayPal has posted a strong start to the year,” he wrote after the company’s first-quarter earnings report. “The main positive result was the modest acceleration in PayPal-branded volume growth.”
In other trading, Ark funds disposed of 1,771,788 shares of online financial brokerage Robinhood Markets. (Capture) This week it had $38.7 million as of Thursday’s close.
The fund manager buys and sells:
- Cathie Wood bought $26 million worth of distressed technology stocks
- Wall Street noticeably revised expectations for the S&P 500 after a record high
- Druckenmiller predicted Nvidia’s rise. Now he has a new goal
The stock price has more than doubled over the past six months to $20.60, as a rising stock market has led to more trading from retail investors. Some of this trading, of course, takes place on the Robinhood platform, which boosts its revenue.
Wood may have seen the stock’s jump as a profit-making opportunity. Robinhood is the seventh largest company owned by Ark Innovation.
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The author owns PayPal and Mastercard shares.
