It was a dramatic change in the fortunes of Wood, whose stock selections soared at the height of the pandemic.
ARK’s flagship innovation fund Cathy Wood is heading for its worst month ever as April turns from bad to worse for the one-time stock picker.
As trading continued for one day, the ETF was down 26%, easily surpassing the previous largest monthly drop in January. The fund is down nearly 70% from its all-time high in 2021 after major holdings such as Zoom Video Communications Inc. tumbled. and Teladoc Health Inc. From her records inspired by the epidemic.
It’s a dramatic change in the fortunes of Wood, whose stock choices soared at the height of the pandemic as the closed world embraced virtual birthday parties and online doctor’s appointments. With many economies returning to normal and the Federal Reserve tightening monetary policy, so-called high-growth companies have fallen into the ARK Innovation basket.
Moreover, the fund’s outperformance against the S&P 500 is also disappearing. While the ARK Innovation ETF (ARKK stock ticker) has returned 109% in the past five years versus 97% for the US benchmark, that’s far from nearly four times better as of the end of last year.
This week has been particularly tough, with record sales of 40% in Teladoc after a sales warning. In fact, Teladoc on Thursday became the largest portfolio hindrance in 2022. Of 37 equity portfolios, only Signify Health Inc. She is in the green for this year. Testify Tesla Inc. , Wood’s largest holding company, had its worst month since March 2020.
“The debate over whether Cathy Wood is just running beta and beta, or is really capable of providing alpha, will continue to rage,” said Ross Mold, chief investment officer at AJ Bell. Alpha refers to an investment idea that produces record returns, while beta refers to moves caused by volatility.
However, Wood said in an interview with CNBC Friday that she “hasn’t lost any faith in Tesla” despite the sale of nearly $9 million in stock on Thursday. She said Elon Musk’s electric car company would likely remain her fund’s largest holding. But when asked if she had finished selling Tesla, she said, “Never say never.”
As for Teladoc, Wood said she expects the health care company’s stock price to rise tenfold despite its decline Thursday. She’s in the same league as Jeff Bezos’s Amazon.com, and has been impressed by the company’s ability to attract top talent, she said.
Despite ARKK’s sluggish performance, investors seem to be holding on to Wood. The fund has so far attracted $231 million in inflows in April despite its performance, and there have been no major redemptions in recent months.
Wood’s repeated message has been that its investment horizon is at least five years, and that the potential for innovative companies targeted by ARK is huge. The fund has often used pullbacks in high-convincing names to increase positions, even as some on Wall Street fret about focus risks.
(Updates with comments by Cathy Wood on CNBC starting in seventh paragraph)
– With help from Isabel Lee.