Cathie Wood Watch: Ark Dives Further Into Tesla

Production issues, delivery problems and signs of slowing demand have weighed on the electric car giant.

Famed money manager Cathie Wood of Ark Investment Management has been snapping up shares of her favorite young technology stocks as they tanked over the past year.

Tesla  (TSLA) – Get Free Report is a case in point. Since October, the Ark chief executive has been going guns a blazing into the electric vehicle titan. And she bought some more of it Jan. 3.

Tesla has suffered from production issues, delivery problems and signs of slowing demand.

Investors also are concerned that Chief Executive Elon Musk isn’t paying enough attention to the company amid his preoccupation with Twitter.

Tesla stock plunged 73% over the past year.

Ark funds snatched 176,112 shares Jan. 3, valued at $19 million as of that day’s close. Looking at Ark’s daily trading logs, it appears that the funds have taken in 652,852 shares of Tesla since the beginning of December alone. That chunk was valued at $70.6 million as of the Jan. 3 close.

Tesla is the No. 3 holding in Ark Innovation ETF  (ARKK) – Get Free Report, Wood’s flagship fund, behind No. 1 Zoom Video Communications ZM and Exact Sciences EXAS.

Wood’s Returns Sag

Meanwhile, Wood’s investment performance hasn’t exactly wowed the investment world over the past year, as her tech stocks have slumped. Ark Innovation ETF has plummeted 67% over the past year, and is down 81% from its February 2021 peak.

Wood has defended herself by noting that she has a five-year investment horizon. But the five-year annualized return of Ark Innovation was negative 3.5% through Jan. 3, a far cry from the S&P 500’s positive return of 9%.

The fund’s performance also doesn’t come close to Wood’s goal for annualized returns of 15% over five-year periods.

Ark Innovation’s subpar returns may finally be starting to push investors away. The $5.9 billion fund registered a net investment outflow of $268 million in the past month, according to ETF research firm VettaFi. But it still notched a $1.17 billion inflow over the last year.

What Draws Investors to Wood

You might wonder why so many investors have stuck with Wood, despite her mediocre returns. The fact that she had one spectacular year certainly helps. Ark Innovation skyrocketed 153% in 2020.

Also, Wood has become something of a rock star in the investment world, appearing frequently in the media. She is clearly intelligent and articulate, explaining financial concepts in ways that novice investors can understand.

Still, Wood has her detractors. Morningstar analyst Robby Greengold issued a scathing critique of Ark Innovation last year.

“ARKK shows few signs of improving its risk management or ability to successfully navigate the challenging territory it explores,” he wrote.

Wood, of course, begged to differ. “I do know there are companies like that one [Morningstar] that do not understand what we’re doing,” she said in an interview with Magnifi Media by Tifin.

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