Cathie Wood is the head of Ark Investment Management and has made a name for herself in the investment space for the seemingly casual and simple playbook. She also has the habit of mopping up stocks of tech companies that are just breaking the inertia of the startup matrix.
However, as soon as the stock starts making significant gains, she sells it off and smiles at the bank. Nonetheless, Wood seldom leaves poor-performing stocks redundant on her investment portfolio. Instead, she sells them off at the earliest opportunity.
They Like Me, No They Don’t
There are diverse opinions about Wood’s prowess in the investment community. Some have qualified her as second only to the Oracle of Omaha, Warren Buffett.
While there’s no denying that Wood trails Buffet in popularity, some folks in the investment community see her as a mediocre investor who cannot make far-reaching predictions about stocks.
An Investor Promoted By Online Algorithms
As her social media followers call her, Mama Cathie made waves after making 153% returns on some investments in 2020. Around that time, presentations in which Wood shared her investment philosophy went viral on many platforms.
However, as mentioned earlier, Wood is not very good with long-term prospects. Her flagship Ark Innovation ETF (ARKK) is a testament to this. The $6.3 million assets have yielded a misery return of just. 0.06% in five years.
S&P 500 Better Investment than ARKK?
Even the S&P 500 did not perform as poorly as Wood’s long-term ARKK. During a certain 12-month valuation period, the investment earned negative annualized returns of 1.45% and 27.68% in three years.
On the contrary, the S&P 500 recorded a positive annual return of 27.46%, 10.3% for three years, and a minimum return of 15% over five years.
A Summary of Cathie Wood’s Investment Strategy
Cathie Wood often mentions that her investment strategy is a no-brainer. She hunts for high-emerging tech companies, gaining ground in domains like robotics, energy storage, DNA sequencing, blockchain, and artificial intelligence. Wood believes companies in these specializations are inevitable game-changers.
The value of Ark’s funds tends to fluctuate regularly, thanks to the volatile nature of its investments.
The Game Is Called “Breaking Even”
So, to stabilize the Ark’s funds and minimize losses, Wood would often offload some sluggish stocks and sometimes onboard active fresh blood.
Morningstar, a prominent research entity, recently conducted a scathing review of Wood and Ark Innovation ETF’s investment choices. In March, Robby Greengold, a Morningstar analyst, wrote that Wood is going out of her bounds by investing in young startups with obscure futures.
Morningstar Had Very Harsh Words for Wood
Greengold believes that investing in companies with slim earnings and a very short history of existence requires well-polished “forecasting talent.” He then affirms that Ark Investment Management clearly lacks that talent.
Greengold, however, acknowledges the high potential of startups in Wood’s high-tech investment domains. Even some brilliant high schoolers see the prospect of these emerging industries. So, Greengold said of Wood’s gambles, “[Ark Investment Management’s] ability to spot winners and manage their myriad risks is less so…. It has not proved it is worth the risks it takes.”
Wood Takes the Poise of a Wall and Deflects the Negative Comments
Wood responded directly to Morningstar’s harsh review as she suggests it is a stereotypical view of what they do at Ark Investment Management.
She told Magnifi Media by Tifin, “I do know there are companies like that one [Morningstar] that do not understand what we’re doing.” Wood also added, “We do not fit into their style boxes. And I think style boxes will become a thing of the past, as technology blurs the lines between and among sectors.”
Investors Prefer to Play It Safe
Despite Wood’s ideological resolution, she has more than Morningstar’s disagreeableness to deal with. According to VettaFi, an ETF research firm, investors have withdrawn about $2.1 billion of their contributions to the Ark Innovation ETF in the past 12 months.
That was probably what drove Wood to offload some slow-performing stock as a ploy to regain investors’ confidence. Between July 9 and 12, Ark Innovation sold off 438,037 shares of Zoom Video Communications (ZM).
Zoom Share Was a Sure Bet in 2021
The ZM shares sold by Ark Innovation were valued at $25.2 million. Investigations later revealed that Zoom stock dropped 19% in 2024 alone and fell 90% from its 2021 peak.
The 2021 peak of Zoom shares was due to the sudden boom in the use of videoconferencing technology. During the COVID-19 lockdown, many workers had meetings in their pajamas. However, with many workers returning to their office cubicles, subscriptions to virtual meeting technology have returned to their previous averages.
All Hope Is Not Lost
Interestingly, despite Ark Innovation’s huge Zoom stock sale, Wood still seems to be clutching onto the company’s promising prospects. So far, Zoom is still one of the biggest holdings in Ark Innovation’s portfolio, with the remaining Zoom shares still in their coffers amounting to $102.5 million.
In a May 20 Q1 earnings report, Zoom reported a 3.2% increase in its overall value to $1.14 billion. Likewise, operational profits climbed from $9.7 million to $203 million.
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Zoom Receives Accolades for Recent Growth
Morningstar’s Dan Romanoff was quite impressed with Zoom’s performance in the first quarter of 2024. According to him, “The company reported good results above our expectations on the top and bottom lines.”
Romanoff equally suggests that Zoom will gain steadily over a long-term rebound period. He said, “We see Zoom executing well so early in its lifecycle in a classic land-and-expand strategy.”
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