ark’s flagship etf is collapsing, but wood is doubling down, increasing his stake in his company and betting on tech outfits like tesla, zoom and coinbase to finally bounce back.
cathie wood became a cult hero in 2020 for a generation of investors raised on the mantra that stocks only go up, but this year has been a quick and painful reality check for her ark invest and her loyalists disciples.
An early acolyte of Elon Musk and Tesla, Wood expertly led Ark through the turbulent first months of the pandemic, and his flagship Ark Innovation ETF jumped 157% in 2020. When Musk first converted Once the world’s richest person at the start of 2021 after Tesla multiplied by more than eight times the previous year, Wood was riding high as an evangelist for “disruptive innovation,” with investors piling up their funds.
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ark’s problems started soon after. big holdings like zoom, roku and teladoc health struggled in 2021 after benefiting from an excess of exuberance towards stocks to stay home in 2020, and ark innovation etf fell 23% last year even as the s&p 500 gained a 27%.
This year’s bear market has been much worse, and ark’s concentrated portfolio of tech stocks is bearing the brunt. the ark innovation etf has plunged 60% this year, nearing its lowest point in march 2020, with the company’s assets under management across all its etfs down from a high of more than $60bn in February 2021 to $16 billion at the end of April. based on that asset drop and share declines for publicly traded asset managers like t. Rowe Price and Wisdomtree, Wood is coming off Forbes’ list of America’s Richest Self-Made Women this year.
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Her estimated net worth of $140 million is well down from last year’s $400 million and well below the $215 million cutoff for this year’s top 100. Forbes estimates that his majority stake in his company is worth about $125 million. the rest comes from our estimates of her own cash invested in ark funds and in separate investments in cryptocurrencies (she has predicted the price of bitcoin will exceed $1 million by the end of the decade) and her personal real estate.
wood’s public persona has not been punished by the change in fortune. Last December, she predicted that Ark would return 40% annually for the next five years. As her losses deepened, she doubled her bets in April at a conference in Florida, saying Ark would bounce back and earn 50% a year. set a $4,600 price target for tesla stock by 2026, implying a valuation of nearly $5 trillion and a gain of 500% from its current price, and last week, wood said he even plans to start a “fund crossed” that would invest in private companies.
None of the bravery has helped in the short term. When the S&P 500 entered a bear market on Monday, down 22% from its high, the Ark Innovation ETF also closed at a low. Coinbase, Robinhood, and Roku have lost more than half of their value this year, and even Ark’s crown jewel, Tesla, is down 39%. wood has been buying more of zoom, down 44% this year and more than 80% since its peak in fall 2020, and the video communications company is now the largest holding company of ark innovation etf.
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morningstar downgraded ark innovation etf’s rating from neutral to negative in late march, citing poor risk management, its increasingly concentrated portfolio, wood’s reliance on his instincts, and a seeming lack of succession planning. the company for 66 years. -old wood. Ark quietly promoted two analysts to associate portfolio managers in late May, though Wood still serves as CEO, chief investment officer and face of the company.
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She, for her part, doesn’t back down. “We have continued confidence in Ark’s long-term outlook and ability to expand its strategies into additional geographies, markets and lines of business,” an Ark spokesperson said in a statement. “Most importantly, this confidence is exemplified by cathie wood increasing her share ownership in ark… along with ark founder and CEO, 97% of ark employees recently increased their ownership holdings staff at the company, highlighting his conviction in our belief that ark is on the right side of change and that we and our investors will be handsomely rewarded.”
In a roller coaster valley, wood’s investors haven’t gotten off the ride either. The Ark Innovation ETF has seen more than $1 billion in inflows this year, though the other eight Ark ETFs have had outflows that largely offset that amount. the ark innovation etf has spawned a host of products that extend or short its holdings, an ecosystem that morningstar analyst robby greengold cites as a potential source of continued investment in the fund, and risk-taking investors have continued to try to buy the drop .
“This could be people doubling up, people not willing to insure their losses,” Greengold says. “and i think there is probably something to be said for cathie wood’s charisma and her continued presence in publicly available webinars, youtube videos and also in the media. seems to inspire a lot of confidence in retail investors.”
that has been true for some time. shares of ark innovation etf have declined in value since the end of 2019, but the fund’s $7.9 billion in assets as of last Friday is far more than the $1.9 billion it had at the time, according to ycharts . the additional assets come from investors who bought on a frenzy from 2020 and lost money all along the way. many are giving him the time and confidence to come back for them.
For now, he still has a big enough war chest to be patient in hoping for a change, with a fortune of nearly $150 million that is nothing to scoff at. His business generates a lot of revenue, he charges a modest 0.75% annual fee on his assets, and he also partners with foreign issuers like Japan’s Nikko Asset Management using Ark’s strategies for around $10 billion in additional assets classified as non discretionary.
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