Darling to Demoted
ARK Innovation ETF (ARKK) and its infamous CEO Cathie Wood was the poster boy for tech growth as the 10-year bull market in technology shifted into high gear.
That was then and this is now.
Oh, how one full year makes a world of difference in the tech universe.
ARKK is not touted anymore as the tech fund that could do no wrong.
We, as investors, cannot recreate the world we desire by a click of a button but must roll with the punches and embrace a paradigm shift into a new normal of economic uncertainty, stagnation, de-globalization, supply chain bottlenecks, weak emerging currencies, and most important, higher interest rates.
It just so happens that the best trade out there all along has been long the US dollar to the detriment of tech stocks. Tech usually does well when the US dollar is weak.
ARK’s underperformance is finally creating a change as Wood is relinquishing her role as portfolio at 3D Printing ETF (PRNT) and ARK Israel Innovative Technology ETF (IZRL).
Recent criticism has been fierce accusing the fund of being a one-woman show with much of the hopes and dreams pinned on Wood.
Much of this has to do with her earlier success in Tesla (TSLA) which I would like to give her credit for.
However, since then, she has ridden the coattails of popularity to become a tech growth evangelist no matter what conditions.
She has often cut a polarizing figure in the world of tech investing.
ARK’s centralization of management could prove to be their downfall.
The demotion for Wood won’t be taken lightly and this also could be a way to throw the next guy under the bus as tech stocks go from bad to worse.
There have been headscratchers lately.
ARKK bought more of Zoom Video Communications Inc. (ZM) last month and I find that more of a beggar’s belief than anything else.
A pandemic darling shouldn’t be confused with a small company with no competitive advantages against big tech.
Another bizarre decision was to buy Ginkgo Bioworks Holdings Inc. (DNA), which has fallen 69% this year. The company invests in early-stage biotech companies and has lost around $1.5 billion in the first half of 2022. The company in 2021 lost $1.8 billion as well, but Wood continues to pour capital into this start-up.
The Nasdaq is now rescinding the premium they used to generously deliver for loss-making companies but fast-growing companies.
Woods hypers herself up as investing in disruptive tech, but many of her companies aren’t that disruptive and she is not aware of market cycles or market timing.
For the past year, she has proved that she is a specialist in being wrong.
ARKK needs to be careful of a meltdown instead of flashing the cash on pandemic darlings because they are cheap today.
There is a reason that many of these speculative tech firms are now cheap, it’s because they aren’t growing enough or making enough money. She still doesn’t understand that.
Expect more demotions for Wood as her pixie dust has run dry.
Buy the inverse of ARKK called AXS Short Innovation Daily ETF (SARK) after bear market rallies.
