by Prominent money manager Cathie Wood, CEO of Ark Investment Management, does what she does: buying depressed stocks in her favorite companies.
Ark-fond bought shares in the electric car giant on Wednesday Tesla (TSLA) – Get a free report and Coinbase Global (COIN) – Get a free reportthe largest US cryptocurrency exchange.
The purchases add to Ark’s acquisition of the shares in recent months. Tesla is the No. 3 holding and Coinbase is No. 14 in Wood’s flagship Ark Innovation ETF (SHEET) – Get a free report.
Tesla shares have fallen recently amid concerns about the company’s production woes in Shanghai, CEO Elon Musk’s sale of Tesla stock to fund his takeover of Twitter and concerns that he is being distracted from his Tesla duties by the Twitter commotion.
Coinbase stock has fallen amid the myriad woes facing the cryptocurrency industry, including the collapse of the FTX exchange and its affiliated investment firm, Alameda Research.
The Ark funds on Wednesday captured 74,862 shares in Tesla, valued at $11.7 million at the end of the day. The stock has fallen 55% so far this year.
Tesla’s Outlook
The outlook for Tesla is mixed. It’s #1 in the US in an industry that should only grow in the years to come.
But larger competitors, such as General Motors (GM) – Get a free report and Volkswagen (VWAPY) , may well catch up. And with a forward price-earnings multiple of 61, according to Morningstar, Tesla may still be overvalued.
Ark funds snapped up 296,578 shares of Coinbase on Wednesday, worth $11.9 million by the end of the day. The stock has fallen 84% in 2022.
Coinbase seems to have a bright future, given that digital currency trading is likely to grow. But as the events of the last few months have shown, this is a very volatile industry and anything can happen.
Meanwhile, Wood’s investment performance has deteriorated this year. The Ark Innovation ETF has fallen 63% so far in 2022 and is down 78% from its February 2021 peak.
Wood has defended her strategy by noting that she has an investment horizon of five years. But Ark Innovation’s five-year annualized return was just 0.07% through Dec. 14, compared with the S&P 500’s return of 10.48%.
The fund’s results also do not come close to Wood’s target of an annual return of 15% over five-year periods.
Wood’s Sticky Investors
But the fund’s lower return of $7.1 billion has not pushed investors away. Ark Innovation has recorded net inflows of $1.44 billion from investors so far this year through Dec. 13, according to ETF research firm VettaFi.
You might wonder why so many investors have stuck with Wood, despite her mediocre returns. The fact that she had a spectacular year certainly helps. The Ark Innovation ETF soared 153% in 2020.
Wood has also become something of a rock star in the investment world, appearing frequently in the media. She explains financial concepts in ways that beginners can understand.
Wood has his detractors. Earlier this year, Morningstar analyst Robby Greengold offered a scathing critique of Ark Innovation.
“ARKK shows little sign of improving its risk management or ability to successfully navigate the challenging territory it is exploring,” he wrote.
Wood countered Greengold’s point in an interview with Magnifi Media of Tifin. “I know there are companies like that [Morningstar] who don’t understand what we do, she said.
