CNBC just aired a long interview with Cathie Wood, who runs seven different ARK ETFs. All of them have suffered significant losses from their highs. ARK Innovation ETF (ARKK) has been more than cut in half.
Wood's primary response is that her firm does exceptional research, and she is confident that her stocks will recover and go even higher. She did extremely well with Tesla (TSLA) and believes that she will find other stocks that will perform in a similar manner. Over a period of five years or so, she thinks that her stock-picking will prove itself.
Many market participants are highly critical of Wood, and there is even an ETF setup to short her picks (SARK) , but is she really as bad as many people think?
To a large degree, she is a victim of two things - poor timing and poor position management. She received huge cash inflows just as valuations in many of her favorite growth stocks became extreme. In the ETF context, there is little choice but to put that money to work right away. She was paying top prices in an overheated market because people were throwing money at her.
The average retail trader doesn't have that problem, and in addition, the smaller trader has much greater flexibility and can cut positions aggressively in poor market conditions. Wood is trading huge amounts, and even liquid stocks can be hard to manage.
Wood is fundamentally-driven, so she tends to see lower prices as an opportunity rather than a warning sign that things can fall even further, and if she has outflows, that complicates matters even more.
She also has made some poor picks but doesn't seem to acknowledge that to a great degree. That is what most of her critics focus on, and in the short term, they are obviously correct.
Wood basically was caught at the top of the growth cycle, and now she is fighting to stay alive until the cycle turns. It will likely take years for many of her picks to prove themselves, and they are sure to be some duds as well.
Her grand theory is likely correct - there are some exceptional innovated stocks that will do extremely well over the next five years regardless of inflation, but the issue is execution. Is her research really as exceptional as she claims, and does she have the ability to manage positions when she is faced with a long period of poor performance and potential ETF outflows?
I wish her well. I want to see her succeed and will be following her and her stock picks closely. I may even buy a few of them myself and then manage them very aggressively with my own methodology.
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