Celebrity money manager Cathie Wood of Ark Investment Management, bought shares of her favorite young technology stocks last year as they slid.
Ark’s chief executive has been a particularly big buyer of electric vehicle titan Tesla (TSLA) since October.
It has suffered from production problems, and there is concern that sales growth will slow. Investors also are worried that Chief Executive Elon Musk is preoccupied with his newly-bought Twitter. Tesla shares plunged 65% in 2022.
Wood pounced on them Dec. 30, with Ark Innovation ETF (ARKK) purchasing 221,748 shares, worth $27.3 million as of the Dec. 30 close. Tesla is the No. 3 holding in Ark Innovation, Wood’s flagship fund, behind No. 1 Zoom Video Communications and Exact Sciences.
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Wood’s Returns Disappoint
Meanwhile, Wood’s investment performance underwhelmed last year, as tech stocks fell. Ark Innovation ETF plummeted 67%, and is down 80% from its February 2021 peak.
Wood has defended herself by noting that she has a five-year investment horizon. But the five-year annualized return of Ark Innovation was negative 2.9% through Dec. 30, a far cry from the S&P 500’s positive return of 9.42%.
The fund’s performance also doesn’t come close to Wood’s goal for annualized returns of 15% over five-year periods.
Ark Innovation ETF’s subpar returns may finally be starting to push investors away. The $6 billion fund registered a net investment outflow of $358 million in the past month, according to ETF research firm VettaFi. But it still notched a $1.17 billion inflow for 2022 as a whole.
Wood Has Her Appeal
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.
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. 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.
