It has been a dramatic turnaround in fortune for Wood, whose stock picks surged at the height of the pandemic.
Cathie Wood’s flagship ARK Innovation fund is headed for its worst month ever as April goes from bad to worse for the star stock picker.
With one trading day to go, the ETF is down 26%, easily eclipsing the previous steepest monthly decline in January. The fund is down nearly 70% from its all-time high in 2021 after key holdings like Zoom Video Communications Inc. and Teladoc Health Inc. fell from their pandemic-inspired records.
It’s a dramatic reversal in fortune for Wood, whose stock picks surged at the height of the pandemic as a closed world embraced virtual birthday parties and online doctor appointments. With many economies returning to normal and the Federal Reserve tightening monetary policy, the so-called high-growth companies in the ARK Innovation basket have plummeted.
Additionally, the fund’s outperformance against the S&P 500 Index is also fading. While the ARK Innovation ETF (ticker ARKK) has returned 109% over the last five years versus 97% for the US benchmark, that’s a far cry from nearly four times better as of the end of the year. last year.
This week has been particularly brutal, with a record 40% selloff on Teladoc following a sell warning. In fact, Teladoc on Thursday became the portfolio’s biggest drag in 2022. Of 37 stocks, only Signify Health Inc. is in the green for this year. Wood’s main holding, Tesla Inc., is experiencing its worst month since March 2020.
“The debate over whether Cathie Wood is just up and down beta, or is she really capable of providing alpha, will continue,” said Russ Mould, chief investment officer at AJ Bell. Alpha refers to an investment idea that produces returns above benchmarks, while beta denotes movements caused by volatility.
Still, Wood in an interview with CNBC on Friday said he “hasn’t lost confidence in Tesla” despite selling nearly $9 million worth of shares on Thursday. She said that Elon Musk’s electric vehicle company will likely remain the largest holding of her fund. But when she was asked if she was done selling Tesla, she said “never say never.”
As for Teladoc, Wood said he expects the healthcare firm’s share price to rise 10-fold despite its drop on Thursday. She said that she is in the same league as Jeff Bezos’s Amazon.com Inc., and that she is impressed with the company’s ability to attract top talent.
Despite ARKK’s slow performance, investors seem to keep faith with Wood. The fund has so far attracted inflows of $231 million in April despite its performance, and there have been no major redemptions in recent months.
Wood’s repeated message is that his investment horizon is at least five years and that the potential of the innovative companies ARK is targeting is enormous. The fund has often used pullbacks on its high-conviction names to add to positions, even as some on Wall Street worry about concentration risk.
(Updates with comments from Cathie Wood on CNBC beginning in the seventh paragraph)
–With the assistance of Isabelle Lee.