While Cathie Wood, chief executive of Ark Investment Management, specializes in small- and midcap technology stocks, sometimes she goes for the megacaps.
The idea presumably is to provide ballast for her funds, which consist mostly of riskier stocks. Sometimes she’ll even buy when the stocks are rising, and that’s what she did Tuesday.
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Investors and analysts are split in their views of Wood, possibly the country’s best-known investor after Warren Buffett. Boosters view her as a technology genius, while critics contend she’s just a mediocre money manager.
Wood (Mama Cathie to her acolytes) soared to fame after a whopping return of 153% in 2020 and clear explanations of her investment strategy in frequent media appearances.
But her longer-term performance won’t make you forget Buffett. Wood’s flagship Ark Innovation ETF (ARKK) , with $5.5 billion in assets, produced annualized returns of 15% for the past 12 months, negative 25% for the past three years and positive 3% for five years.
That pales in comparison to the S&P 500. The index posted positive annualized returns of 35% for one year, 11% for three years, and 16% for five years.
Cathie Wood has simple investing strategy
Wood’s investment philosophy is simple. Ark ETFs usually purchase emerging-company stocks in the high-tech categories of artificial intelligence, blockchain, DNA sequencing, energy storage, and robotics.
Wood says companies in those categories are game changers. Of course, these stocks are often volatile, so Ark funds’ values can oscillate sharply.
Renowned investment research firm Morningstar has launched strong criticism of Wood and Ark Innovation ETF.
Related: Cathie Wood sells two rocking tech stocks
The potential of Wood’s five high-tech platforms listed above is “compelling,” Morningstar analyst Robby Greengold wrote in a commentary. “But the firm’s ability to spot winners and manage their myriad risks is less so. ... It has not proved it is worth the risks it takes.”
Morningstar portfolio strategist Amy Arnott calculated that Ark Innovation destroyed $7.1 billion of shareholder wealth from its 2014 inception through 2023. That put the ETF No. 3 on her wealth destruction list for mutual funds and ETFs over the past decade.
Short seller rips Cathie Wood
Fraser Perring, a short-seller who founded Viceroy Research, unleashed a harsh assessment of Wood in 2022.
“I wouldn’t even put your money with Cathie Wood,” he told New York magazine. “She is part of the problem. ... She’s a capital depleter. With the amount of capital she’s evaporated, how can people even suggest she’s successful? She’s successful at failing.”
Wood defended herself in a July 2024 posting on Ark’s website. She acknowledged that “the macro environment and some stock picks have challenged our recent performance.”
Related: Cathie Wood's net worth: The Ark Invest CEO's wealth & income
But her “commitment to investing in disruptive innovation has not wavered,” Wood said. Many of Ark’s stocks are in “rare, deep value territory,” she said.
And with interest rates falling, her “disruptive innovation strategies should benefit disproportionately, as they did in the fourth quarter of 2023 and during the coronavirus crisis,” Wood said.
Some of her customers seem to side with the critics. Over the past 12 months, Ark Innovation ETF suffered a net investment outflow of $2.5 billion, according to ETF research firm VettaFi.
Cathie Wood’s mega-cap moves this week
On Tuesday, Ark Innovation ETF bought 76,505 shares of technology/retail powerhouse Amazon (AMZN) . This block was valued at $14 million as of that day’s close.
The stock has climbed 18% to $189 since Aug. 5. So Wood didn’t exactly get a bargain, though the stock did pull back 9.8% from Sept. 24 to Tuesday’s close.
Morningstar analyst Dan Romanoff is bullish on Amazon too. He assigns it a wide moat, meaning he sees it with competitive advantages lasting at least 20 years. He puts fair value at $195.
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“Amazon dominates its served markets, notably for e-commerce and cloud services,” he wrote in a commentary. “We see strong revenue and free cash flow growth for years to come.”
Also Tuesday, Ark Next Generation Internet ETF (ARKW) snagged 2,365 shares of social media titan Meta Platforms (META) . The kitty was valued at $1.4 million as of Tuesday’s close. Meta shares have jumped 16% over the past month.
Morningstar analyst Malik Ahmed Khan also has a positive view on the stock, though he says it’s a bit overvalued. He gives Meta a wide moat and puts fair value at $560. It traded Friday at $587.
“We view Meta as the clear leader in social media,” he wrote in a commentary. “The firm’s application lineup, which includes Facebook, Instagram, WhatsApp, and Messenger, has close to 4 billion monthly active users, giving Meta unmatched scale in the sector.”
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