Cathie Wood buys $40 million of four beat up tech stocks

If you follow Cathie Wood at all, you know the chief of Ark Investment Management loves to double down on her stock positions when they decline.

And that’s exactly what she did this week.

Investors and analysts are split in their opinions of Wood, possibly the country’s best-known investor after Warren Buffett. Boosters argue she’s a technology guru, while critics argue she’s merely a mediocre money manager.

Cathie Wood, one of the country's most famous money managers.

PATRICK T. FALLON/Getty Images

Wood (Mama Cathie to her acolytes) exploded to fame after a whopping return of 153% in 2020 and clear explanations of her investment strategy in numerous media appearances.

But her longer-term performance doesn’t exactly challenge Buffett. Wood’s flagship Ark Innovation ETF  (ARKK) , with $5.6 billion in assets, produced annualized returns of 2% for the past 12 months, negative 28% for three years, and positive 0.4% for five years.

That doesn’t come close to the S&P 500. The index registered positive annualized returns of 27% for one year, 10% for three years, and 15% for five years.

Cathie Wood’s investment strategy

Her investment philosophy is easily understood. Ark ETFs usually purchase emerging-company stocks in the high-tech categories of artificial intelligence, blockchain, DNA sequencing, energy storage, and robotics.

Wood maintains that companies in those categories will change the world. Of course, these stocks are quite volatile, so Ark funds’ values often oscillate widely.

Renowned investment research firm Morningstar is highly critical of Wood and Ark Innovation ETF.

Related: Cathie Wood snatches $8 million of battered tech stock

Investing in young companies with slim earnings “demands forecasting talent, which Ark

Investment Management lacks,” Morningstar analyst Robby Greengold wrote in a commentary. “Results range from tremendous to horrendous.”

Morningstar portfolio strategist Amy Arnott calculated that Ark Innovation destroyed $7.1 billion of shareholder wealth from its 2014 inception through 2023. Over the past decade, the ETF was No. 3 on her wealth destruction list for mutual funds and ETFs.

David Loeb’s criticism of Cathie Wood

Star investor David Loeb, chief executive of Third Point, isn’t so high on Wood either.

After she wrote a commentary defending her investment philosophy in 2022, he let fly on Twitter.

“Anyone teaching a value investing class or one on investment psychology should use this memo as a treatise to study the mindset of stonk hodlers,” he wrote. “Stonk hodlers” is slang for investors who hold (hodl) onto stocks (stonks) too long.

“Note the disparaging comments on luddites who look at archaic measures of value like cash flow as short-term traders,” Loeb continued.