Cathie Wood, chief of Ark Investment Management, often uses earnings season to sell shares of companies that surge after strong earnings reports.
That's exactly what she did this week. This strategy enables her to lock in gains and rebalance her portfolios.
Investors and analysts have mixed views on Cathie Wood. Supporters see her as a visionary in tech investing, while critics argue she’s an average fund manager.
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Known among followers as “Mama Cathie,” Wood drew significant attention with a stellar 153% return in 2020, bolstered by the clear, accessible discussions of her strategy across media platforms.
However, her longer-term performance isn’t so hot.
ARK Invest's flagship fund, the ARK Innovation ETF (ARKK) , with $5.8 billion under management, has returned -8% year-to-date, with an annualized three-year return of -26.5% and a five-year return of positive 1.8%.
Meanwhile, the S&P 500 has gained 22.6% this year, with an annualized three-year return of 8.9% and a five-year return of 15.3%.
Cathie Wood’s investment strategy explained
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 believes companies in these areas will revolutionize industries, though the stocks are notoriously volatile, leading to substantial swings in the Ark funds’ values.
Morningstar, however, is openly skeptical of Wood’s approach and the ARK Innovation ETF. Investing in young, minimally profitable companies “demands forecasting talent, which ARK Investment Management lacks,” wrote Morningstar analyst Robby Greengold. “Results range from tremendous to horrendous.”
Related: Cathie Wood's net worth: The Ark Invest CEO's wealth & income
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” but affirmed her “commitment to investing in disruptive innovation.”
According to Wood, many of Ark’s holdings are in “rare, deep value territory,” and she expects her innovation-focused funds to benefit “disproportionately, as they did in the fourth quarter of 2023 and during the coronavirus crisis.”
Some investors appear to share Morningstar’s doubts. Over the past year, ARK Innovation ETF saw a net outflow of $2.65 billion, data from ETF research firm VettaFi show.
Cathie Wood sells 1.3 million Palantir shares
From Oct. 30 to Nov. 5, Ark Funds sold 1,304,856 shares of Palantir (PLTR) over five consecutive days surrounding the data-analytics company's Q3 earnings announcement.
That chunk of stock was valued at roughly $57.1 million as of the Nov. 5 close.
Palantir shares surged 23% on Nov. 5, setting a record close after the company posted strong Q3 results and raised its revenue guidance.
The company earned an adjusted 10 cents a share, exceeding analysts’ 9-cent consensus estimate, for the September quarter. Revenue jumped 30% year-over-year to $726 million, beating the $701 million forecast.
Palantir also raised full-year revenue guidance to between $2.805 and $2.809 billion, up from the previous estimated range of $2.742 to $2.75 billion.
“We absolutely eviscerated this quarter, driven by unrelenting AI demand that won’t slow down," Chief Executive Alex Karp said. "This is a U.S.-driven AI revolution that has taken full hold. The world will be divided between AI haves and have-nots. At Palantir, we plan to power the winners.”
More Tech Stocks:
- Veteran trader makes surprising call between Palantir, Nvidia stock
- Cathie Wood buys $15.7 million of tumbling tech stock
- Nvidia to reap billions in big tech AI spending
The data-analytics software company specializes in AI-driven solutions for government and enterprise clients like Morgan Stanley, Airbus and Merck.
D.A. Davidson analyst Gil Luria raised Palantir’s price target to $47 from $28 with a neutral rating. The investment firm called Palantir well-positioned to benefit from rising enterprise interest in AI applications, thefly.com reported.
Palantir stock nearly tripled (up 198%) year-to-date through Nov. 5.
Related: Veteran fund manager sees world of pain coming for stocks
