Cathie Wood’s flagship ETF is down over 50% this year as investors rotate away from growth stocks. But her suite of funds has still pulled in $167 million of inflows in 2022. Investors aren’t abandoning Wood, even as her focus on disruptive tech leads to dismal returns. Loading Something is loading.
After her flagship fund ARKK performed disappointingly last year, Cathie Wood sought to reassure investors that she’d bounce back in 2022.
“Innovation stocks seem to have entered deep value territory,” she wrote in December 2021. “Our strategies today could deliver a 30 to 40% compound annual rate of return during the next five years.”
Six months later, ARKK is starting to look like a sinking ship.
The innovation-focussed ETF has seen all its gains wiped out in a hellish 2022, crashing 55.3% during the broader growth and tech stock sell-off.
The fund has rallied just over 20% since May 11 thanks to tech and crypto stocks’ brief rebound, but that’s not been enough to reassure some of Wood’s most vocal critics.
“I don’t think this is a ‘dead-cat bounce’ for ARKK,” the prominent value investor Whitney Tilson wrote in a recent newsletter. “[But] Wood is a terrible stock picker and an even worse risk manager.”
Many retail traders seem to disagree with that statement. Wood’s suite of nine ETFs has brought in $167 million worth of investment this year, according to Bloomberg, meaning that investors aren’t abandoning Ark despite its ongoing struggles.
Wood’s regular appearances on Bloomberg TV, CNBC, and other markets-focussed platforms has 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 her ability to keep the audience engaged,” Robby Greengold, a Morningstar analyst who focuses on Ark and Fidelity International, told Insider in a recent interview. “Some people even look up to her as a sort of messiah figure.”
Wood is also willing to make audaciously bullish calls on risk-on assets.
In the past year, she’s predicted Tesla will reach a $5 trillion market cap by 2026 and claimed bitcoin’s price will hit $1 million by the end of the decade. That has helped her to appeal to younger investors who entered the market during the boom cycle of the past two years.
Wood and her colleagues also tend to shrug off poor performance by reiterating that they’re investing with a long-term perspective. In January, Ark’s research chief told Insider he’s only interested in a stock’s potential for returns over the next five years.
“You shouldn’t be investing in equities if you’re looking to make returns in three months,” Brett Witlen said. “From a commercial perspective, this is actually a great position for us to be in – innovation’s now on sale.”
But charisma and bullishness won’t pull Wood’s funds out of a 50% decline by themselves. And Morningstar’s Greengold said that investors won’t stick around forever if the losses continue to pile up.
“Some of those inflows might just be investors buying the dip in 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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