Cathie Wood, a star fund manager on Wall Street and CEO of Ark Investment Management, was able to make a comeback last year. Her Ark stock fund, which focuses on technology stocks, experienced a sharp decline for two years before rebounding and achieving one of the best performance in the industry.
According to data from Morningstar, Wood's $8 billion Ark Innovation ETF (ARKK) saw a 68% increase in 2023, ranking in the top 1% among similar funds. Prior to this, the average annualized loss of the fund between 2021 and 2022 was 50%, and investor sentiment towards the high growth companies it supports has significantly deteriorated in these two years.
Wood said, "I believe we did pay the price we paid in 2021 and 2022, and now we have passed this stage."
Wood's Optimistic Vision
ARKK Fund achieved over 150% growth in 2020 due to investments in companies such as Tesla. However, later on, due to the Federal Reserve raising interest rates to a 40 year high, this highly concentrated investment portfolio suffered a heavy blow in the following two years, losing 23% of its net worth in 2021 and another 67% in 2022.
Currently, Wood optimistically predicts that the Federal Reserve will cut interest rates in 2024 and inflation rates will fall to deflationary levels, which will help her innovation based ARKK fund investment strategy flourish.
Wood said, "To be honest, I think what happened to us in 2021 and 2022 is meaningless because innovation is here. Get ready for the golden time."
However, the current situation from the beginning of this year to the present is that ARKK has fallen by over 10% since early January, dragged down by major heavyweight stocks such as Tesla.
Despite this, Wood still increased his position in Tesla against the trend. When Tesla announced lower than expected results for the fourth quarter last Thursday (January 25th) and warned of a significant slowdown in sales this year, Wood chose to increase his holdings and bought approximately $32.48 million worth of stocks during the sharp drop in Tesla's stock price.
She continued to increase her position last Friday (26th) and bought 182541 Tesla shares, valued at approximately $33.45 million at closing price. Ark Investment purchased a total of $65.93 million worth of Tesla stocks last week.
Wood has always been confident in Tesla's autonomous driving technology, believing that it is the core of the company's expected robot taxi service to be launched in the future. She stated last year that Tesla's stock price is expected to reach its target price of $2000 per share by 2027, with approximately 67% of its corporate value attributed to autonomous taxi services.
Extremely unstable performance
"I think Ark Fund has been influenced by overconfidence forecasts, which often do not take into account enough scenarios. It has been proven that they are overly optimistic about bear market predictions," said Robby Greengold, a strategist at Morning Star
The company's data shows that in the past four years, ARKK funds have either ranked among the top or absolutely bottom among similar funds. The fund's 5-year annualized return rate is 2.8%, lagging behind almost all medium-sized growth and technology funds.
At present, Morning Star still ranks ARKK as a "one star fund" (out of five stars).
Since March 2021, the company's cash outflows have been approximately $9 billion, with outflows of approximately $470 million in 2023.