Cathie Wood sells AI stock, buys 182,000 shares of beat-up tech stock

Feb 28, 2024

Cathie Wood, head of Ark Investment Management, ranks near the top of her class in terms of fame among money managers and luminaries such as Warren Buffett.

Known to her devotees as Mama Cathie, Wood rocketed to prominence thanks to a stupendous return of 153% in 2020 and clear presentations of her investment philosophy in ubiquitous media appearances.

Wood’s flagship Ark Innovation ETF  (ARKK) , with $8.1 billion in assets, has generated a respectable return of 30% for the past 12 months. But her longer-term returns are less stellar: The annualized return is negative 27% for the past three years and a mere positive 2% for five years.

That’s nothing to brag about, as the S&P 500 posted positive returns of 30% for one year, 12% for three years, and 15% for five years. Wood’s goal is at least 15% annual returns over five-year periods.

Cathie Wood is one of the country's most famous investors.

<p>ARK Investment Management</p>
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<div><figcaption>Cathie Wood is one of the country’s most famous investors.</p>
<p>ARK Investment Management</p>
<h2>Cathie Wood’s Market Philosophy</h2>
<p>Wood’s investment strategy isn’t hard to fathom. Ark’s ETFs generally buy young, small stocks in the high-technology categories of artificial intelligence, blockchain, DNA sequencing, energy storage, and robotics. She views those sectors as game changers for the global economy.</p>
<p><strong><a data-ylk=Related: Data shows Cathie Wood’s Ark is one of the worst funds

These stocks are quite volatile, of course, so the Ark funds are subject to rollercoaster rides. And Wood frequently trades in and out of her top names.

Investment research titan Morningstar isn’t enamored with Wood and Ark Innovation ETF.

“ARK Innovation has dubious ability to successfully navigate the challenging territory it explores,” wrote Morningstar analyst Robby Greengold.

The potential of Wood’s five high-tech platforms listed above is “compelling,” he said.

“But Ark’s ability to spot the winners among them and navigate their myriad risks is less so. The strategy’s booms and busts have culminated in middling total returns and extreme volatility since its 2014 inception.”

Greengold disapproves of Wood’s investment style. “Her reliance on her instincts to construct the portfolio is a liability,” he said.

It’s not an investment 101 portfolio. “The strategy narrowly invests in stocks with paltry current earnings, elevated valuations, and highly correlated stock prices,” Greengold said. “Their extreme volatility underscores their highly uncertain futures.”

Wood has defended herself from Morningstar’s criticism. “I do know there are companies like that one [Morningstar] that do not understand what we’re doing,” she told Magnifi Media by Tifin.

“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.”

Wood’s Trades Friday and Monday

Ark funds sold a combined 5,086 shares of semiconductor and artificial intelligence titan Nvidia  (NVDA)  on Friday and Monday, valued at $4 million as of Monday’s close. Wood has sold the company’s shares throughout February.

Fund manager buys and sells:

The stock has surged more than 240% over the past 12 months amid AI mania. Nvidia is the largest producer of highly powerful and energy-efficient graphic processing units (GPUs) used to train and run AI apps.

Wood likely took some serious profits on her position. She said last year that Nvidia lacks excitement, calling it “obvious” and “expensive.”

Also Friday and Monday, Ark funds unloaded 59,702 shares of Coinbase Global  (COIN) , the country’s largest cryptocurrency exchange, valued at $11.6 million as of Monday’s close.

The stock has more than tripled over the past 12 months as cryptocurrencies soared. So, Wood may have felt it was time to take some profits there, too.

Nevertheless, Coinbase still represents the biggest holding in Ark Innovation ETF. And Wood is a major cryptocurrency advocate. The stock has slid 23% from its reference price in an April 2021 direct listing.

Ark funds also shed 677,950 shares of online securities brokerage Robinhood Markets  (HOOD) , valued at $10.6 million as of Monday’s close. Wood has been selling the stock since Feb. 13, after buying it from Jan. 30 to Feb. 13.

Robinhood shares have doubled since Nov. 9 amid strong earnings as stock trading bloomed. So again, she may have wanted to take profits. The stock has dropped 58% from its initial public offering price in July 2021.

On the buy side, Ark funds purchased 182,020 shares of Roku  (ROKU) , the biggest U.S. streaming platform, valued at $11.7 million.

The stock has plunged one-third since Feb. 15 amid news that Walmart was buying TV maker Vizio, a major Roku competitor. Strong competition in the streaming industry overall is weighing on Roku, too.

Related: Veteran fund manager picks favorite stocks for 2024

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