Is Cathie Wood is a Victim of Her Own Success?

Fund manager Cathie Wood has been having a tough time of it lately as many of the tech stocks she favors have fallen sharply in this year’s market swoons. 

Wood runs seven different ARK ETFs and “all of them have suffered significant losses from their highs,” Real Money Columnist James “Rev Shark” Deporre wrote recently.  “And ARK Innovation ETF  (ARKK) – Get ARK Innovation ETF Report has been more than cut in half.”

Wood’s primary response is that her firm does exceptional research, and she’s confident that her stocks will recover and go even higher.

“She did extremely well with Tesla  (TSLA) – Get Tesla Inc Report and believes that she will find other stocks that will perform in a similar manner,” Deporre said. “Over a period of five years or so, she thinks that her stock-picking will prove itself.”

To a large degree, Wood 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,” Rev Shark noted. “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.”

According to Deporre, 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’s also made some poor picks but doesn’t seem to acknowledge that to a great degree,” he noted. “That’s what most of her critics focus on, and in the short term, they are obviously correct.”

Wood basically was effectively caught at the top of the growth cycle, and now she is fighting until the cycle turns. “It will likely take years for many of her picks to prove themselves, and there are sure to be some duds as well,” Rev Shark added.