Famed money manager Cathie Wood has bought a slew of Coinbase (COIN) shares in recent months, trying to take advantage of their decline.
Coinbase is the largest U.S. cryptocurrency exchange and has suffered from weakness in the crypto market over the past year, including a plunge by bitcoin. Coinbase stock has dived 86% in the past 12 months.
Wood, chief executive at Ark Investment Management, again purchased Coinbase shares Jan. 5. Ark funds snagged 172,276 shares, valued at $5.8 million as of that day’s close.
Since the beginning of December alone, Wood has snatched about 800,000 Coinbase shares, valued around $27 million as of the Jan. 5 close. All the buying has made Coinbase the No. 14 holding in Wood’s flagship Ark Innovation ETF (ARKK).
She apparently is less thrilled with Silvergate Capital (SI), a bank heavily involved with crypto. On Jan. 5, it reported an $8.1 billion run by digital-asset depositors in the fourth quarter of 2022.
Ark Fintech Innovation ETF (ARKF) dumped 403,990 Silvergate shares Jan. 5, valued at $5.1 million as of that day’s close. This leaves the fund with only 3,434 Silvergate shares, recently valued at just $37,465.
Wood’s Performance Underwhelms
Meanwhile, her performance hasn’t exactly wowed the investment world over the past two years, as Wood’s young technology stocks have slumped amid high inflation and weak earnings.
Ark Innovation ETF has given up 65% during the past 12 months and is down 81% from its February 2021 peak.
Wood has defended her strategy by noting that she has a five-year investment horizon. But the five-year annualized return of Ark Innovation was negative 3.5% through Jan. 5, compared with the S&P 500’s positive return of 8.69%.
The fund’s performance also doesn’t come close to Wood’s goal for annualized returns of 15% over five-year periods.
Ark Innovation’s subpar results may finally be starting to push investors away. The $5.9 billion fund registered a net investment outflow of $404 million in the past month, according to ETF research firm VettaFi. But it still notched a $1.26 billion inflow over the past year.
You might wonder why so many investors have stuck with Wood, despite her mediocre returns. The fact that she had one spectacular year certainly helps. Ark Innovation skyrocketed 153% in 2020.
Wood has also become something of a rock star in the investment world, appearing frequently in the media. She explains financial concepts in ways that novice investors can understand.
Wood Defends Her Strategy
Wood has her detractors. Morningstar analyst Robby Greengold issued a scathing critique of Ark Innovation last year.
“ARKK shows few signs of improving its risk management or ability to successfully navigate the challenging territory it explores,” he wrote.
Wood, of course, begged to differ. “I do know there are companies like that one [Morningstar] that do not understand what we're doing,” she said in an interview with Magnifi Media by Tifin.
Despite her investment setbacks, Wood is positively buoyant for her strategy of investing in young, “disruptive” tech companies. These companies are involved with gene sequencing, robotics, energy storage, blockchain technology and, especially, artificial intelligence.
The declines in her stocks have created a “once in a century [investment] opportunity,” Wood said in an audio commentary near the end of last year. “Innovation solves problems, and we have a lot more of them now.”
That includes companies facing pressure on their profit margins and individuals worried about their jobs. “In periods like this, businesses and consumers are willing to change, to embrace innovative solutions,” she said.
