Cathie Wood is a generational fund manager. Her flagship ARK Innovation ETF is currently up 88% since the start of 2020, and even touched over 200% at its 52-week high.
Her determination and courage to buy into companies that are future disruptors and leaders of innovation have brought her fame, fortunes (and disdain) beyond her wildest imaginations.
With names such as Tesla, Zoom, Teladoc and Roku, Cathy rode Covid-bubble to the moon and back. She invested in 3D printing companies with no revenue growth, gene-editing companies with no clear path to profitability, and “tech” companies that seemed to grow only under the guise of the pandemic. These were some of the wisest investments any person could’ve made…
in 2020.
Now, the market has pulled back a bit from the mania spurred on by the Fed’s easy monetary policy. The result? Her fund is now down over 20% year-to-date.
Clearly, her strategy is no longer working and her fund is currently better off shorted these days, than bought. ($SARK, anybody?)
So, what does the future hold for Ms. Cathie Wood and her ARKK Innovation Fund? Let’s Explore.
Her success, up to this point, is clearly a result of her highly confident bet in Mr. Elon Musk and his electric car start-up, Tesla (NASDAQ: TSLA). Her fund currently holds over 1.2 million shares of the EV giant, and while she has sold potentially over a million shares in the the last year, she is still prepared to hold the company’s stock for years into the future.
As she always says, her fund has a “5-year” time horizon.
The thing is, Tesla is currently sitting at 7% of her portfolio. The stock’s recent volatility over the last few years has been one of the key drivers for her success (and potential downfall). With the market cap currently close to a trillion dollars, its hard to imagine Tesla rising to compete with Apple or Microsoft without pulling back a little first. After all, is Tesla really going to be worth more than Apple or Microsoft (eventually, maybe… but is it?)
A lot of her models, and price targets, on Tesla include tons of speculating into their “robo-taxi” services. While I understand that investing is a forward-looking game, predicting the cash flows for a “robo-taxi” business, way before Mr. Musk has even developed a fully autonomous vehicle, is beyond insane.
Add to that, most of her holdings follow the same sort of wild financial modeling. Square is the future of banking, Roku is the future of connected streaming and Zillow is… the future?
Some of her holdings don’t even make sense to me. Her 7th biggest holding is Spotify. Why? They were once a disruptive force in the music streaming industry, but these days, is she in the name because of the future podcasting prospects? It’s definitely not for the 0.5% operating margins.
DocuSign is another name that I can’t wrap my head around. It is obviously a disruptor in the… signature industry… but it’s sales in 2020 were obviously elevated due to the pandemic. What kind of future valuation could Cathie really put on them, that wasn’t already priced in during its peak? Maybe she is predicting autonomous drones that will fly over to your house and use DocuSign to automate your signature through your brain waves… maybe I should stop before she uses my idea in her next model.
At the end of the day, it just seems as if Cathie is a momentum trader that puts money into slick brands with stories that make you go “woahhh.”
“Oh, this company, Tetronix (NASDAQ: TRNX), manufactures little tiny computers that go into the brain and helps people with severe neurodivergent illnesses. Time to buy three million shares.”
Who cares if the company she invests in loses millions of hers, and other investors money, year after year. It’s all about the fuuuuuuuuture.
Now, I’ll stop being Dr. Pessimism.
Being down 30-40%, after being up almost 200%, is part of the game. Cathie isn’t a scrub. She is an experienced money manager who has played the game for years now and is well versed in the ups and downs of investing in disruptors.
Nonetheless, investing in such names only works out, in the long run, if they actually turn out to be cash printing monsters, a.k.a Tesla. How many Tesla-type companies are currently sitting in her portfolio? Do you think she’ll find more of them again?
That answer should probably make your decision into, whether or not, you trust Cathie Wood to manage your money for the next 20 years.
#ARKK #ROKU #TSLA #TDOC #ZM #CATHIEWOOD #ARKW #ARKG
theinstitutional.org 
Leave a Reply