Cathie Wood, chief of Ark Investment Management, often seizes the moment to buy her favorite stock when the prices fall.
That’s what she did this week–she bought a stock that has plunged nearly 30% in the past five days.
Wood’s flagship fund, the Ark Innovation ETF ARKK, underperformed the market in 2024.
Although it briefly outpaced the S&P 500 and Nasdaq Composite in January and early February, (ARKK) is down more than 2% year-to-date as of Feb. 25, while the Nasdaq Composite and S&P 500 have returned -1.3% and 1.2%, respectively.
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Opinions on Wood vary. She is a visionary to her supporters, especially with a remarkable 153% return in 2020. However, her longer-term performance has raised doubts about her aggressive approach.
As of Feb. 25, Ark Innovation ETF, with $6.3 billion under management, has delivered an annualized three-year return of negative 6.18% and a five-year return of 1.19%.
In comparison, the S&P 500 index has a three-year annualized return of 12.46% and a five-year return of 15.53%.
The Ark Innovation ETF has faced a net outflow of $2.6 billion over the past year.
Cathie Wood’s investment strategy explained
Wood’s investment strategy is straightforward: Her Ark ETFs typically buy shares in emerging high-tech companies in fields such as artificial intelligence, blockchain, biomedical technology and robotics.
Wood says these companies have the potential to reshape industries, but their volatility leads to major fluctuations in Ark funds’ values.
Related: Cathie Wood’s net worth: The Ark Invest CEO’s wealth & income
Morningstar’s analyst Amy Arnott calculated last year that Ark Innovation ETF destroyed $7.1 billion of shareholder wealth from its 2014 inception through 2023. That put the ETF as No. 3 on her wealth destruction list for mutual funds and ETFs during that period.
The analyst has not updated the list for 2024 yet.
Still, some analysts say that things might change as Donald Trump returns to the U.S. presidency.
Todd Sohn, ETF and technical strategist at Strategas Securities, noted that since Trump’s reelection in November, Ark Innovation ETF and Ark Next Generation Internet ETF (ARKW) have seen significant gains.
Since Nov. 5, the two ETFs have returned 16% and 20% respectively.
“We still strongly believe that ARKW is about as good a proxy for Trump 2.0 as one might find, with heavy exposure to bitcoin, crypto derivatives, Tesla and defense,” Cohn told MarketWatch.
Wood recently expressed optimism about a shift to looser regulation under Trump’s presidency.
“What the new administration is doing is changing fear with optimism,” Wood told Bloomberg in January. It’s “highly underestimated how important deregulation is going to be to unleashing animal spirits. We are pretty excited about this.”
Not all investors share Wood’s confidence. Data from ETF research firm VettaFi shows that the Ark Innovation ETF has faced a net outflow of $2.6 billion over the past 12 months, including $16.3 million in just the last five days.
Cathie Wood bought $27 million of Tempus AI
On Feb. 25, Wood’s Ark funds bought 445,958 shares of Tempus AI (TEM) .
That chunk of stock was valued at roughly $27 million as of Feb. 25’s close.
Wood has been actively buying Tempus AI’s stock over the past three months. In November, her Ark funds bought 774,000 shares, followed by 1.9 million shares in December and another 618,000 shares in January.
Related: Billionaire Bill Ackman buys $2.3 billion of beat-down tech stock
Nancy Pelosi, the former Speaker of the House, also bets on this stock.
In January, Pelosi bought 50 call options (a bet that a stock will rise) for Tempus AI valued between $50,000 and $100,000. The stock rallied more than 40% in two days following the disclosure.
Tempus AI is a health technology company founded in 2015. It is embedding AI into diagnostics to empower physicians and researchers to make personalized, data-driven decisions.
The stock is down almost 30% in the past five days as its Q4 earnings and revenues missed Wall Street’s estimates. Despite that tumble, the stock has climbed 84% year-to-date.
JPMorgan says it continues to believe in Tempus AI’s “unique combination” of diagnostics and data but adds that the shares are fully valued after the recent stock run.
The firm downgraded Tempus AI to neutral from overweight with a price target of $55, up from $50, according to thefly.com.
Wood recently said health care is the “most underappreciated application of AI.”
“We’ve got 37 trillion cells in our body, and they’re going to be sequenced as we’re looking for cures,” Wood told CNBC on Feb. 4.
Fund manager buys and sells:
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“I think the most underappreciated application of AI is health care. I think healthcare is responsible for an incredible amount of storage out there right now. Data is the name of the game.”
As of Feb. 26, Tempus AI ranked 8th among Ark Innovation ETF’s holdings, accounting for 4.52% of the portfolio.
Related: Veteran fund manager unveils eye-popping S&P 500 forecast
