Famed investor Cathie Wood, CEO of Ark Investment Management, continued to increase her investment in Tesla on January 13th. Tesla is the leading electric vehicle maker in the U.S. and is run by controversial entrepreneur Elon Musk.
Ark Innovation ETF purchased 168,989 shares of Tesla on January 13th, valued at $20.7 million at the close of that day.Despite Tesla’s 65% drop over the last year due to production and demand concerns, as well as investor’s concerns about Musk’s heavy usage of Twitter, Tesla remains the third largest holding in Wood’s flagship Ark Innovation ETF, behind Exact Sciences and Zoom Video Communications.
Cathie Wood’s investment returns have been underwhelming in the past year, as her investments in technology stocks have decreased. The Ark Innovation ETF has dropped 55% over that period, and 77% from its peak in February 2021.
Wood has defended her strategy by stating that she has a five-year investment horizon, but the five-year annualized return of Ark Innovation was negative 0.2% as of January 13th, compared to the S&P 500’s positive return of 9.4%.
Cathie Wood’s investment returns
Additionally, the fund’s performance falls short of Wood’s goal for annualized returns of 15% over five-year periods. Due to the subpar returns, investors may be starting to withdraw from the fund. The $6.9 billion fund saw a net investment outflow of $287 million in the past month, according to ETF research firm VettaFi, but still had an inflow of $1.06 billion over the past year.
You may be wondering why so many investors have continued to support Wood. One factor is that she had an exceptional year in 2020, with Ark Innovation’s returns skyrocketing 153%. Additionally, Wood has gained a reputation as a notable figure in the investment world, often appearing in media and explaining financial concepts in a way that is easy for novice investors to understand.
However, she does have her critics, with Morningstar analyst Robby Greengold issuing a negative evaluation of Ark Innovation last year, stating that the fund showed little indication of improving its risk management or ability to navigate the challenging industries it invests in. Wood disagreed with this assessment in an interview, stating that some companies like Morningstar do not understand her investment strategy.
Another reason that may draw investors to Wood and her fund is her focus on innovation and disruptive technologies. The Ark Innovation ETF invests in companies that are at the forefront of technological advancements and have the potential to disrupt traditional industries.
Wood’s investment philosophy is to identify these emerging trends early on and invest in the companies that are leading the charge. This approach has proven successful in the past, with the fund delivering strong returns in 2020 by investing in companies such as Tesla and Square.
