Cathie Wood exits $23 million in growth tech stocks

Cathie Wood, head of Ark Investment Management, frequently adjusts her top positions, adding a holding when stocks fall and selling when they rise.

Last week he made some notable purchases. This week he sold off as the S&P 500 hit 39^th record close of the year on Thursday.

Investors and analysts are divided in their opinions of Wood, possibly the country’s best-known investor after Warren Buffett. Boosters claim he’s a tech guru, while detractors claim he’s just a mediocre money manager.

Cathie Wood, one of the country’s most prominent — and controversial — fund managers.

Cindy Ord/Getty Images for Bloomberg Businessweek

Wood (Mama Cathie to her followers) exploded to fame after a stunning 153% return in 2020 and clear explanations of her investment strategy in numerous media appearances.

But its long-term performance doesn’t exactly challenge Buffett. Wood’s flagship Ark Innovation ETF (ARKK) with $5.9 billion in assets, it has produced annualized returns of 14% over the past 12 months, negative 27% over the past three years and positive 2% over five years.

That’s nowhere near the S&P 500. The index posted positive annualized returns of 30% for one year, 11% for three years and 16% for five years.

Cathie Wood’s Simple Strategy

Her investment philosophy is easy to understand. Ark ETFs typically buy shares of emerging companies in the high-tech categories of artificial intelligence, blockchain, DNA sequencing, energy storage and robotics.

Wood argues that companies in those categories will change the world. Of course, these stocks are quite volatile, so the values ​​of Ark funds often fluctuate widely.

The renowned investment research firm Morningstar is highly critical of the Wood and Ark Innovation ETF.

Related: Cathie Wood buys $40 million in four out-of-date tech stocks

Investing in young companies with thin earnings “requires forecasting talent, which Ark Investment Management lacks,” Morningstar analyst Robby Greengold wrote in a comment. “The results range from extraordinary to horrific.”

Morningstar portfolio strategist Amy Arnott calculated that Ark Innovation destroyed $7.1 billion in shareholder wealth from its inception in 2014 through 2023. She placed the ETF at No. 3 on her list of wealth destroyers for funds mutual funds and ETFs over the past decade.

David Loeb’s criticism of Wood

Star investor David Loeb, the chief executive of Third Point, isn’t so fond of Wood either. After she wrote a comment defending her investment philosophy in 2022, he let it fly on Twitter.

“Anyone teaching a value investing or investment psychology class should use this memo as a treatise for studying the mindset of stonk hodlers,” he wrote. “Stonk hodlers” is slang for investors who hold (hodl) on stocks (stonks) for too long.

“Note the disparaging comments on Luddites who view archaic measures of value such as cash flow as short-term traders,” Loeb continued.

Related: Cathie Wood rips $8 million off busted tech stock

Wood defended himself in a July 2024 post on the Ark website. She acknowledged that “the macro environment and some stock picks have challenged our recent performance.”

But “her commitment to investing in disruptive innovation hasn’t wavered,” Wood said. Many of Ark’s shares are in “rare, deep value territory,” she said.

And if interest rates fall, as they have, “its disruptive innovation strategies should benefit disproportionately, as they did in the fourth quarter of 2023 and during the coronavirus crisis,” Wood said.

Some of her clients apparently agree with the critics. Over the past 12 months, the Ark Innovation ETF has experienced a net outflow of $2.4 billion, according to ETF research firm VettaFi.

Cathie Wood is exiting streaming platform Roku

Ark Funds sold 189,990 shares of the streaming platform’s stock Roku (ROKU) on Monday, valued at $14.1 million at that day’s close.

The move likely only represents a reduction in position, as Roku is still Ark Innovation’s second-largest holding. Shares are up 46% over the past three months.

Morningstar analyst Matthew Dolgin doesn’t share Wood’s enthusiasm for Roku. Not impressed with its business model.

Related: Cathie Wood net worth: The Ark Invest CEO’s wealth and income

“Roku’s strategy is to remain a leading provider of streaming devices by keeping prices low and accepting losses in its device segment,” he wrote in a commentary. “They then intend to monetize Roku user accounts.”

So could it work? “We are skeptical that this is a viable strategy,” Dolgin said. “That’s because we don’t see competitive advantages that could turn the firm to sufficient profitability after a history of making losses.”

Dolgin ascribes no moat to Roku, meaning he sees no sustainable competitive advantage for the company.

Cathie Wood dives into Roblox, Robinhood, Palantir

In other trades this week, Ark funds sold 117,884 shares of the video game platform’s stock Roblox (RBLX) valued at $5.5 million at Thursday’s close.

The stock is Ark Innovation’s third-largest holding and has climbed 27% over the past three months.

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Ark Fintech Innovation ETF (ARKF) sold 62,718 shares online securities brokerage Robinhood Markets (HOOD) valued at $1.4 million at Wednesday’s close.

The stock is Ark Innovation’s sixth-largest holding and has gained 11% in the past month.

And Ark Innovation unloaded 52,895 shares of the data analytics software provider’s stock Palantir (PLTR) valued at $1.9 million at Thursday’s close.

The stock is Ark Innovation’s seventh-largest holding and is up 41% over the past three months.

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