On Tuesday, Casey Wood's flagship fund, Ark Innovation Fund (ARKK), fell further to its lowest point in five months due to a sharp drop in the stock price of its largest holding target, Tesla, after announcing a new round of layoffs. As people become increasingly concerned about Tesla's prospects, the "Wooden Sister" who has continuously increased her holdings in Tesla in the past few months has once again become a controversial figure in the industry.
As more and more funds flow out of ARKK, many market participants have begun to question whether this "internet celebrity" fund manager, who missed Nvidia's sharp rise this year but continued to buy on Tesla and hit the South Wall without turning back, can shoulder the past reputation of being the "female stock god" on Wall Street?
Market data shows that although the decline in the US stock market has converged after two consecutive days of sharp declines, ARKK still fell sharply by 2.8% on Tuesday, reaching a new low since November last year.
From the comparison of trends this year, the poor performance of ARKK is evident - this actively managed ETF has fallen more than 16% this year, while the S&P 500 index has risen by 6% and the Nasdaq 100 index has risen by more than 5%.
Undoubtedly, the performance of ARKK has been severely dragged down by Tesla to some extent. Although Tesla's stock price continues to weaken, the stubborn Mu Jie has been buying and selling again this year - making Tesla ARKK's top heavy holdings, accounting for nearly 10% of the fund's investment portfolio.
On Tuesday, Tesla's stock price fell for three consecutive trading days, breaking a new closing low since April 26, 2023. The cumulative decline so far this year has reached 36.7%, and the $500 billion mark has become precarious after continuous evaporation.
In addition to Tesla, some of ARKK's other heavily held stocks have also shown unusually lackluster performance recently: its second largest heavy held stock, Coinbase, has risen by about 20% so far this year, but due to a significant decline in Bitcoin, Coinbase has fallen by 9% and 8% in the past two trading days, respectively; Other heavily held stocks, Roku and UiPath, also fell on Tuesday.
Sister Mu, "Even if she hits the south wall, she won't turn back."
From the perspective of capital flow, the recent sharp drop in ARKK has prompted many Ark investors to withdraw. ARKK has been experiencing capital outflows for the fourth consecutive month and has withdrawn a total of $1.4 billion this year.
This situation is in stark contrast to its peak, during the technology stock bull market during the pandemic, the fund attracted up to $3 billion in inflows in just one month.
Interestingly, despite Tesla's declining stock price, "Wood Sister" still seems unwilling to turn back. On Tuesday, the three funds under Mu Jie's umbrella, ARKK, ARKQ, and ARKW, each had their own "only buying operation" and still added positions in Tesla - although the latest number of shares bought was not many.
This week, in an interview with the media, Mu Jie stated that due to Tesla's dominant position in autonomous driving and robotics projects, she still firmly believes in the long-term prospects of this electric vehicle manufacturer.
Ms. Mu pointed out, "Tesla is carrying out the world's largest artificial intelligence project through autonomous driving, which has more real-world driving data than other companies. We believe that by 2030, the entire ecosystem of autonomous taxis will generate revenue of $8 trillion to $10 trillion, and platform suppliers like Tesla will receive half of that revenue."
Sister Mu also mentioned Tesla's potential in humanoid robots. She pointed out that Tesla will become one of the leaders in the field of humanoid robots with Optimus, and many jobs in car factories require quite precise operations on bolts and nuts. Currently, robots cannot do this, but when humanoid robots are ready, they will help car factories expand their scale faster.
Industry insiders mock her as a "good salesperson"
However, it is obvious that whether the sluggish performance of the company can convince people of Mu Jie's investment philosophy requires a big question mark.
The rate for ARKK is 0.75%. Although this purchase rate is not considered high for active funds, compared to many passive funds, such as tracking the NASDAQ 100 Index Invesco QQ Trust Series (QQ) - with a rate of only 0.2%, it is clearly much more expensive. Obviously, ARKK's performance this year is far from outperforming this benchmark technology stock index.
George Cipoloni, portfolio manager at Penn Mutual Asset Management, sarcastically stated, "Casey is an excellent 'marketer'. She has set some very high return targets, attracting a lot of capital inflows, but ARKK did not achieve these expected goals."
In fact, the current overall environment of the US stock market is also quite unfavorable for Ms. Mu to some extent.
The reason why Mu Jie and ARKK Fund rose to fame during the pandemic is because she made big bets on companies in the pinnacle of technological innovation fields such as artificial intelligence, genomics, and gaming. She manages most of the funds in the Ark Fund series, leaning towards industries that make investors willing to pay higher valuations in anticipation of explosive growth in the future.
But this strategy is currently facing pressure as overvalued companies that have failed to achieve profitability are losing their appeal in an environment of high interest rates.
The following comparison chart may also describe Sister Mu's dilemma relatively intuitively: the ratio of large technology companies to those that failed to make profits perfectly follows the rising pace of the yield of the 10-year treasury bond bonds of the United States. Although both belong to technology stocks, many speculative stocks that Mu Jie holds heavily are not a good choice at the moment.
Chris Zaccarelli, Chief Investment Officer of the Independent Advisor Alliance, said, "One of the manifestations of excess liquidity and irrational prosperity is speculative stocks hitting new highs, but vice versa. As liquidity emerges from the market, people become fearful, and speculative stocks lead the decline."