Celebrity money manager Cathie Wood has talked the talk in support of cryptocurrencies for quite some time, predicting in January that bitcoin will hit $1 million by 2030.
She continues to walk the walk too. As cryptocurrency conglomerate FTX has melted down into rubble, the chief executive of Ark Investment management has been snapping up shares of Coinbase Global COIN like nobody’s business.
Coinbase is the country’s largest cryptocurrency exchange. Its stock is hitting the trash bin, plunging 82% year to date, as digital currency trading dries up amid the industry’s turmoil. Coinbase lost $544.6 million in the third quarter.
But unlike FTX, Coinbase doesn’t operate like a company formed by a few buddies after they graduated from college. Coinbase is a legitimate entity, as far as we know anyway, with audited financial results.
It could be that cryptocurrency trading will rebound, pushing Coinbase’s financial performance and stock price up as well, though the opposite outcome seems just as possible.
Wood is obviously betting on the first scenario. Ark funds have loaded up with more than 1.3 million shares of Coinbase since the beginning of November, a stash recently worth $57 million.
Coinbase represents the 15th biggest holding in Wood’s flagship Ark Innovation ETF (ARKK), totaling $244.3 million. Ark funds hold about 4.7% of Coinbase’s total outstanding shares, according to Bloomberg.
Wood’s Underperformance
Meanwhile, Ark’s ETFs have tumbled this year, as their tech holdings suffered from weak earnings. Wood has defended herself by noting that she has a five-year investment horizon.
And the five-year track record of Ark Innovation ETF could indeed give investors comfort up to May 9. The fund’s five-year return beat that of the S&P 500 until then. But the five-year annualized return of Ark Innovation totaled only 0.84% through Nov. 21, far behind the S&P 500’s 10.67% return.
The fund’s performance also falls well below Wood’s goal for annualized returns of 15% over five-year periods.
Ark Innovation has dropped 63% so far this year, and is down 78% from its February 2021 peak.
But the $7.3 billion fund’s underperformance hasn’t pushed investors away. Ark Innovation has registered a net inflow of $433 million from investors over the last month, according to ETF research firm VettaFi.
Fans and Critics
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 ETF skyrocketed 153% in 2020.
Also, Wood has become something of a rock star in the investment world, appearing frequently in the media. She is clearly intelligent and articulate, explaining financial concepts in ways that novice investors can understand.
Still, Wood has her detractors. On March 29, Morningstar analyst Robby Greengold issued a scathing critique of Ark Innovation.
“ARKK shows few signs of improving its risk management or ability to successfully navigate the challenging territory it explores,” he wrote.
Wood countered Greengold’s points in an interview with Magnifi Media by Tifin. “I do know there are companies like that one [Morningstar] that do not understand what we're doing,” she said.
