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Is Cathie Wood, president of Ark Investment Management, a deep-pocketed technology visionary or a mediocre money manager who’s had a few lucky years?
Market views are divided on this issue. Wood’s fame is undisputed. She may be the most famous money manager in the country after Warren Buffett.
Wood (Mama Kathy to her followers) rose to fame after a massive 153% return in 2020 and articulate presentations of her investment philosophy in numerous media appearances.
Patrick T. Fallon/AFP via Getty Images
But its long-term performance is less impressive. Wood’s leading Ark Innovation ETF (Bound) with $6.1 billion in assets, produced annualized returns of negative 2.01% over the past 12 months, negative 28.35% over the past three years, and negative 0.24% over five years.
This is unfortunate compared to the S&P 500. The index has generated positive annual returns of 26.61% for one year, 11.24% for three years, and 15% 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 the values of Ark funds 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’s reliance 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.
Related: Cathie Wood Creates New Position in Top Tech Stocks
“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.
But 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 $2.1 billion, according to ETF research firm VettaFi.
Cathie Wood stock sales
During the week of June 17, the Ark Innovation ETF sold 222,826 shares of Zoom Video Communications stock. (ZM) , a video conferencing company. The value of this stash was estimated at $13 million as of Thursday’s closing.
The stock has soared during the coronavirus pandemic, which has sent workers home, forcing them to use services like Zoom for meetings.
But the need for these services has declined since the pandemic ended and many workers returned to their offices. Zoom stock has fallen 52% over the past five years and 9% over the past month alone.
The fund manager buys and sells:
- Veteran fund manager sounds alarm on stocks
- Cathie Wood sells $11 million worth of high-flying fintech stock
- Veteran analyst just bought this under-the-radar housing stock
The company remains Ark Innovation’s 13th companyy The largest contract. So perhaps Wood was just selling to protect herself in case the stock’s decline didn’t stop.
Zoom announced a big jump in profits for the quarter ending April 30. The company had earnings of $216.3 million, or 69 cents per share, compared with $15.4 million, or 5 cents per share, the previous year. Its revenues were $1.14 billion, an increase of 3.2% over the previous year.
But analysts are concerned about the demand for Zoom’s products. Its results show that new products “that are key to restoring growth are not yet contributing enough to offset the recession,” John Butler, an analyst at Bloomberg Intelligence, wrote in a commentary. Quoted from Bloomberg News.
“Weak KPIs in the enterprise segment may also reflect challenges in scaling amid competition from Microsoft Teams,” he added.
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