Cathie Wood, the well-known fund manager of Ark Invest, frequently takes advantage of stock surges to secure profits.
This week was no exception. She just sold a major tech stock.
Cathie Wood’s investment style has sparked a divide between her supporters and critics.
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Proponents see her as a trailblazer, applauding her bold investments in cutting-edge sectors like artificial intelligence and renewable energy. They argue that her forward-looking strategy positions her to capture the growth of transformative trends, setting her apart as a visionary in finance.
Critics, however, claim her performance doesn’t match the hype. They argue that her aggressive bets, while impressive in short bursts, lack consistent long-term results.
While her bold moves delivered a remarkable 153% return in 2020, they point to recent underperformance as evidence that she is more of a risk-taker than a reliable money manager.
Related: Cathie Wood unloads $10.5 million in surging fintech stock
Her flagship Ark Innovation ETF (ARKK) , with $5.8 billion in assets, is down about 9% in 2024 (as of Oct. 25), with a three-year return of negative 26% and only 3% over five years.
That pales in comparison to the S&P 500. The index is up nearly 22% so far in 2024. It's also up 38.7% over the last 12 months, 10% a year for the three years, and 16% a year for five years.
Despite these results, Wood remains a prominent figure in finance, buoyed by her frequent media appearances and a loyal fan base that affectionately refers to her as "Mama Cathie."
What’s Cathie Wood’s investment strategy?
Cathie Wood focuses on disruptive innovation and investing in high-growth tech sectors like artificial intelligence, genomics, and blockchain. Her strategy emphasizes long-term potential that she believes will be transformative.
However, these high-growth stocks are highly volatile, leading to frequent fluctuations in Ark funds' values.
Related: Cathie Wood's net worth: The Ark Invest CEO's wealth & income
Investment research firm Morningstar has been critical of Wood and her flagship Ark Innovation ETF.
According to Morningstar analyst Robby Greengold, Ark's investment approach in young companies with limited earnings “demands forecasting talent, which ARK Investment Management lacks.” He noted that the fund’s results have swung dramatically between exceptional and disastrous.
While the potential of the high-tech platforms Wood focuses on is "compelling," Greengold questioned the firm’s ability to pick winners and manage the associated risks consistently. He concluded that Ark has yet to prove that its aggressive approach is worth the risks.
Additionally, Morningstar portfolio strategist Amy Arnott calculated that from its inception in 2014 through 2023, Ark Innovation wiped out $7.1 billion in shareholder wealth, placing it third on her list of mutual funds and ETFs with the highest wealth destruction over the past decade.
Related: Analyst adjusts Meta stock price target with earnings on tap
In a July 2024 post on Ark’s website, Cathie Wood defended her strategy, acknowledging that “the macro environment and some stock picks have challenged our recent performance.”
Nonetheless, she reaffirmed her “commitment to investing in disruptive innovation,” highlighting that many of Ark’s holdings are now in “rare, deep value territory.”
Despite Wood’s confidence, some investors appear unconvinced. Over the past 12 months, the Ark Innovation ETF experienced net outflows of $2.55 billion, according to ETF research firm VettaFi.
Cathie Wood sells 85,456 shares of Tesla
On Oct. 24, Ark Funds unloaded 85,456 shares of Tesla worth roughly $22.26 million as of the Oct. 24 close.
Cathie Wood has been a strong Tesla advocate for years. In 2018, she predicted Tesla's pre-split shares would hit $4,000 by 2023, a forecast seen as overly optimistic by most analysts. However, Tesla reached the split-adjusted equivalent in 2021, proving her right.
In April, Wood said she still has a price target of $2,000 a share for Tesla Inc. despite the company’s troubles earlier this year.
Wood praised Tesla for leading innovation in autonomous driving. She predicted that the robotaxi could drive up to $10 trillion in revenue by 2030 and that the robotaxi could “save lives.”
Tesla’s stock surged over 20% after its Q3 2024 earnings, beating profit expectations and outlining ambitious growth plans.
The company reported adjusted earnings per share of 72 cents, largely beating analysts’ forecast of 58 cents, making a “record Q3” for Tesla, chief executive Elon Musk said. However, revenue of $25.18 billion slightly missed the $25.37 billion expected.
Tesla also expects to see vehicle growth of 20% to 30% next year, Musk said in the earnings call.
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In early October, Tesla introduced its self-driving Cybercab. Musk aims to produce at least 2 million units per year by 2026.
Wood’s sale aligns with her strategy of trimming positions as they grow. Despite this move, Tesla remains one of ARK’s largest holdings.
The stock is Ark Innovation ETF's top holding, with a market value of $851.8 million, representing 15% of the fund's $5.8 billion in assets under management as of Oct. 25.
Related: Veteran fund manager sees world of pain coming for stocks
