Cathie Wood, the head of Ark Investment Management, frequently capitalizes on declines in stock prices post-earnings reports to amplify her portfolio. This week, she utilized the earnings season as an opportunity to modify her positions accordingly.
Opinions on Wood are varied among investors and analysts. Her admirers commend her as a visionary in technology investment, whereas detractors regard her as a subpar fund manager.
Wood has gained notoriety under the moniker “Mama Cathie” due to her impressive 153% return in 2020, coupled with her ability to articulate her investment strategies clearly across various media outlets. Nonetheless, her long-term performance presents a more intricate picture.
ARK Invest’s prime fund, the ARK Innovation ETF (ARKK), which manages $5.8 billion in assets, has produced a year-to-date return of -10.9%. Over three years, the annualized return stands at -27.8%, and over five years, it is 1.3%. In comparison, the S&P 500 has risen by 21% this year, with an annualized return of 9.2% over three years and 15.3% over five years.
In a post from July 2024 on ARK’s website, Wood justified her stance by acknowledging that “the macro environment and some stock picks have challenged our recent performance.”
Wood’s investment strategy focuses on groundbreaking technologies, including areas like artificial intelligence, genomics, and blockchain, emphasizing long-term growth despite the tech market’s volatility. She maintains that these disruptive sectors promise substantial future returns, although ARK’s focus on high-growth stocks can result in significant fund value fluctuations.
Fraser Perring, a short-seller and founder of Viceroy Research, harshly criticized Wood in 2022, describing her as a “capital depleter” to New York magazine. Morningstar portfolio strategist Amy Arnott noted that Ark Innovation had destroyed $7.1 billion in shareholder wealth since its inception in 2014, ranking third on her list of wealth destruction for mutual funds and ETFs over the past decade.
Wood defended her strategy in July 2024, asserting her unwavering commitment to investing in disruptive innovation. She noted that many of ARK’s investments are now in “rare, deep value territory” and predicted that if interest rates decrease, her “disruptive innovation strategies should benefit disproportionately.” Despite her defense, the ARK Innovation ETF suffered a net outflow of $2.4 billion over the past year, as reported by ETF research firm VettaFi.
On October 30, Ark Funds acquired 111,080 shares of Advanced Micro Devices (AMD) after its shares declined following the release of earnings results. The stock purchase, valued at approximately $15.7 million as of the close on November 2, came after AMD reported third-quarter earnings meeting expectations with an adjusted earnings per share of 92 cents and revenue slightly exceeding forecasts at $6.82 billion. Despite this, AMD shares fell by over 10% due to a weak fourth-quarter revenue guidance.
AMD anticipates fourth-quarter sales around $7.5 billion, slightly below the market prediction of $7.54 billion. This year, AMD unveiled its MI235X AI chip and increased its AI chip sales forecast to $5 billion. CEO Lisa Su noted strong interest in the MI325X, with production shipments set to begin this quarter.
AMD’s PC sales in its client segment increased by 23% to $1.9 billion, supported by high-end laptop sales featuring AMD chips for advanced AI capabilities. However, the gaming division saw a 68% drop in sales due to reduced demand for custom console chips.
Despite the lower-than-expected fourth-quarter forecast, AMD remains a significant competitor to Nvidia in the AI chip industry, with expectations for continued demand growth as companies like Amazon expand their AI investments.
Lisa Su, AMD’s chief executive, commented on the promising growth opportunities in their data center, client, and embedded businesses driven by high demand for more computing capabilities. As of November 1, AMD had closed at $141.86, marking a 3.7% decline year-to-date and was not among ARK Innovation ETF’s (ARKK) top 10 holdings.
