Cathie Wood’s arch suffers losses and continues to attract investors

  • Cathie Wood’s flagship ETF is down more than 50% this year as investors turn away from growth stocks.
  • But its suite of funds still attracted $167 million in inflows in 2022.
  • Investors aren’t giving up on Wood, even as his focus on disruptive technologies drives dismal returns.

After the disappointing performance of her flagship fund ARKK last year, Cathie Wood sought to reassure investors that it would rebound in 2022.

“Innovation stocks appear to have entered high-value territory,” she wrote in December 2021. “Our current strategies could deliver a compound annual rate of return of 30-40% over the next five years.”

Six months later, ARKK begins to look like a sinking ship.

The innovation-focused ETF saw all of its gains wiped out in a hellish 2022, collapsing 55.3% on broader growth and the sell-off of tech stocks.

The fund has rebounded just over 20% since May 11 on the back of the brief rebound in tech and crypto stocks, but that wasn’t enough to reassure some of Wood’s most vocal critics.

“I don’t think this is a ‘dead cat bounce’ for ARKK,” wrote prominent value investor Whitney Tilson in a recent newsletter. “[But] Wood is a poor stock picker and a worse risk manager.”

Many retail marketers seem to disagree with this statement. Wood’s suite of nine ETFs has brought in $167 million in investments this year, according to Bloomberg, meaning investors aren’t giving up on Ark despite its ongoing struggles.

Wood’s regular appearances on Bloomberg TV, CNBC and other market-focused platforms have earned her a legion of fans — many of whom refer to her as “Cathie Bae” on Reddit’s stock-picking forums.

“There’s something to be said for Cathie Wood’s charisma and ability to keep audiences engaged,” Robby Greengold, a Morningstar analyst who focuses on Ark and Fidelity International, told Insider in a recent interview. “Some people even see her as a kind of messiah figure.”

Wood is also ready to make bold bullish calls on risk assets.

For the past year, she has predicted that Tesla will reach a market capitalization of $5 trillion by 2026 and claimed that the price of bitcoin will reach $1 million by the end of the decade. This has helped it attract younger investors who entered the market during the boom cycle of the past two years.

Wood and his colleagues also tend to ignore poor performance by reiterating that they invest with a long-term perspective. In January, Ark’s head of research told Insider that he was only interested in a stock’s potential return over the next five years.

“You shouldn’t invest in stocks if you’re looking to make three-month returns,” Brett Witlen said. “From a business perspective, it’s actually a great position for us – the innovation is now on sale.”

But charisma and optimism alone won’t lift Wood’s funds from a 50% drop. And Morningstar’s Greengold said investors won’t stick around forever if the losses keep piling up.

“Some of those inflows could just be investors buying the dip on hope,” he told Insider. “For every trader calling Cathie Wood the messiah, there could be another who lost thousands of dollars on ARKK.”

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