Cathie Wood Invests $40 Million in Struggling Tech Stocks

Cathie Wood, the head of Ark Investment Management, is known for doubling down on her stock positions when they decline, and this week was no exception.

Opinions on Wood are divided; some see her as a tech investment guru, while others view her as an average money manager. Wood gained fame with a 153% return in 2020 and her clear investment strategy explanations in the media. However, her long-term performance has been less impressive. The Ark Innovation ETF (ARKK), with $5.6 billion in assets, has shown annualized returns of 2% over the past year, -28% over three years, and 0.4% over five years, compared to the S&P 500's 27%, 10%, and 15% respectively.

Cathie Wood’s Investment Strategy

Wood's investment philosophy is straightforward: Ark ETFs typically invest in emerging tech companies in fields like AI, blockchain, DNA sequencing, energy storage, and robotics. She believes these companies will revolutionize the world, though their stocks are highly volatile, causing Ark funds to fluctuate significantly.

Morningstar, a renowned investment research firm, is critical of Wood and the Ark Innovation ETF. Analyst Robby Greengold argues that investing in young companies with minimal earnings requires forecasting talent, which Ark lacks. Morningstar portfolio strategist Amy Arnott noted that Ark Innovation has destroyed $7.1 billion in shareholder wealth since its inception in 2014, ranking it third on her list of wealth-destroying mutual funds and ETFs over the past decade.

Criticism from David Loeb

David Loeb, CEO of Third Point, is also critical of Wood. After she defended her investment philosophy in 2022, he criticized her on Twitter, suggesting her approach is more about holding onto stocks too long rather than value investing.

Wood defended herself in a July 2024 post on Ark’s website, acknowledging recent challenges but reaffirming her commitment to investing in disruptive innovation. She believes many of Ark’s stocks are in "rare, deep value territory" and expects her strategies to benefit if interest rates fall.

Despite criticism, some of Wood’s customers remain loyal. However, the Ark Innovation ETF saw a net outflow of $2.4 billion over the past year, according to ETF research firm VettaFi.

Recent Purchases by Cathie Wood

Wood sometimes invests in blue-chip tech stocks to stabilize her portfolio. On September 9, Ark Autonomous Technology & Robotics ETF (ARKQ) purchased 20,147 shares of Amazon (AMZN), valued at $3.5 million.

Other notable purchases this week include:

•  93,258 shares of Advanced Micro Devices (AMD), valued at $14 million.

•  359,386 shares of DraftKings (DKNG), valued at $13.9 million.

•  53,708 shares of Coinbase Global (COIN), valued at $8.4 million.