Cathie Wood, the renowned figure at ARK Invest, has long been celebrated for her bold investment strategies and market outlook. Her past successes, including a remarkable performance during the 2020 bull market where ARK Innovation ETF outperformed the S&P 500 by a wide margin, have placed her in the spotlight of financial stardom.
However, recent market conditions have uncovered a chink in Wood’s armor. In stark contrast to her prior triumphs, the performance of ARKK has been lackluster this year, with gains barely crossing 2%, lagging far behind the S&P 500’s robust growth of nearly 7%. The discrepancy becomes even more glaring when compared to other tech-focused funds such as Invesco QQQ and Spear Alpha ETF which have surged by almost double and more than quadruple, respectively.
The One that Got Away
The incredible surge in performance over the past year owes much to the AI frenzy, notably exemplified by Nvidia’s meteoric rise of over 400% since the start of 2023. In 2024 alone, Nvidia has seen its value soar by more than 60%. Regrettably, Wood divested ARKK’s holdings in Nvidia early last year, missing out entirely on this extraordinary rally.
In an unexpected turn, Wood’s heavy investment in Tesla, another AI frontrunner, has not yielded favorable results. With Tesla continuously failing to meet earnings expectations and recording a near 20% loss so far this year, this move has contributed to dragging down ARKK’s overall performance. In fact, six of ARKK’s top ten holdings are currently in negative territory, with three facing double-digit losses.
While Coinbase, presently the largest holding in ARKK’s portfolio, has delivered a 26.99% gain year-to-date, Wood’s decision to sell a significant portion of its Coinbase shares prematurely has cost the fund potential further gains. Notably, Coinbase’s value has surged by 21% since the previous Tuesday.
Institutional Exodus
As disillusionment grows among investors missing out on the market-wide rallies, substantial capital outflows have been witnessed. Since the beginning of 2024, ARKK has experienced a net outflow of $845 million in assets under management, representing almost 10% of the fund’s total assets evaporating in less than two months.
Navigating the Bear Terrain
For those skeptical of Wood’s investment choices, inverse ETFs offer a direct way to place bets against a stock without the complexities associated with options trading. The AXS Short Innovation Daily ETF, aiming to mirror the inverse performance of ARKK, serves as a prime example of this strategy.
Conversely, investors maintaining a bullish outlook on Wood and her fund seeking to amplify their exposure can opt for leveraged funds such as the AXS 2X Innovation ETF. This ETF, designed to deliver double the daily return of ARKK, was honored with the ‘Best ETF Launch’ title at Benzinga’s 2023 Fintech Awards.
Photo by Drew Beamer on Unsplash.
