Right now, the most popular thing to do is hate on Cathie Wood. Everyone seems obsessed with calling out the underperformance of the Ark Innovation Fund (NYSEARCA:ARKK).
They seem to love poking holes in the investment theory behind many of its top holdings or belittle Wood’s recent performance, but under all of that ridicule is the simple fact that Wood was one of the top post-pandemic fund managers.
Her stocks exploded in value and while it has been a painful correction from the highs, let’s not forget how well she navigated the storm.
I think many would be surprised to see that since the start of 2020, ARKK has still outperformed the Nasdaq and S&P 500.
It’s up about 97% in that time despite falling ~50% from its highs, while the Nasdaq and S&P 500 are up 77% and 52.4%, respectively.
With all that said, let’s look at a few of Wood’s biggest calls in 2021 — both good and bad.
The B Word
Let’s start with the B Word Conference, because that was a pivotal moment in the crypto space. Not just for Bitcoin (CCC:BTC-USD) but all other coins as well.
Cathie Wood was present, along with Elon Musk and Jack Dorsey. At the time, Bitcoin was in a brutal bear market — as were most cryptocurrencies — and they were hitting new lows on the day of this conference, on July 21, 2021.
The trio had reaffirmed their bullish stance, while Wood said she’s excited about Bitcoin’s network effect. That it could “change the world in ways that we cannot imagine right now, solving even more problems and creating more opportunities, as well.”
The low was in.
Seemingly overnight, sentiment change and Bitcoin prices rallied 135%. Talk about an incredible moment, really.
Cathie Wood Calls For Bitcoin to Go to $500,000
Cathie Wood is no stranger to big predictions. Obviously she doesn’t hit all of them, but when she clobbers a grand slam amid all the doubt on Wall Street, it makes her famous. Well, Wall Street-famous anyway.
She has called for Bitcoin to go to $500,000 before, but she again reiterated the stance in September 2021.
Part of that is based on “the assumption that institutional investors will start increasing their holdings of Bitcoin and other cryptocurrencies.”
Bitcoin was in a bit of a rut at that point, down almost 19% in a peak-to-trough decline in just three days. However, it actually bottomed on Sept. 21 — the day she made this call — and then rallied 75% from that low to the high in November.
Wait, Bitcoin to $560,000
$500,000 sounds nice, but how about $560,000?
That’s where Cathie Wood said Bitcoin could rally to if “institutional investors move into Bitcoin and allocate 5% of their portfolios.” That’s a bit more specific than the previous note, as is the price target.
That call came in early December and again, while it’s bold, Wood is no stranger to bold calls. At the time, it would have represented a near-1,000% rally. Now it’s a bit more than that, given the cryptocurrency’s decline.
For better or for worse, Wood has continued to make big calls even when they don’t look promising to play out.
While many are bullish on Bitcoin, they are likely hesitant to call for a rally that implies a more than 10-fold move. Does that make her wrong? No, but it does make it hard when they are big, oftentimes multi-year rallies.
Cathie Wood: Tesla to $3,000 as the Base Case
Another bold call centers around Tesla (NASDAQ:TSLA).
Now to be fair, Cathie Wood has been one of the few investors to have absolutely nailed Tesla.
She called for the stock to hit $4,000 a share, and while many will say the stock still has another $3,000 to go, keep in mind Tesla has undergone a 5-for-1 stock split since that call. In other words, she nailed it and is one of the few to do so.
In any regard, in October 2021, Wood called for Tesla stock to go to $3,000 a share (and yes, that’s after the stock split). She was clear to say that the $3,000 price target is her “base case” target, implying there is a bull case to be had as well.
Cathie Wood also called for Tesla to take a 20% stake or more of the auto market. Clearly, she remains quite bullish despite already having nailed the move over the last few years.
Selling Tesla
We all know ARKK is the flagship fund from Cathie Wood & Co. and that its top holding is Tesla.
Despite her positive talk about the company though, the fund’s stake in the company is not growing.
According to Barron’s, “Tesla made up 10.2% of Ark Innovation’s portfolio on Sept. 30 but just 8.4% by Dec. 28.” And it’s not due to stock losses. During that stretch, Tesla stock gained about 40%, while most other growth stocks moved lower. That should lead to a larger weighting in Tesla, not a lower weighting.
Now there’s nothing wrong with trimming the big winners and rotating into what an investor believes will be another big winner down the road.
However, Tesla has been one of the best-performing stocks and so far, it appears that ARKK would have held up better if it stuck with Tesla and avoided some of the recent underperforming holdings.
Cathie Wood Sells Apple Too
There’s a reason the saying on Wall Street is to “sell your losers and let your winners run.”
Now that’s exactly the same when it comes to being a portfolio manager for a firm like Ark. However, there’s something to be said about the observation in this light.
We just noted how she was trimming Tesla, but that’s the only winner they reduced. The Ark Fintech Innovation ETF (NYSEARCA:ARKF) also cut its stake in half in Apple (NASDAQ:AAPL), while reducing its stake in Alphabet (NASDAQ:GOOGL) too.
Considering that these sales took place in May 2021, the extended runs by both stocks provide a bit of a sting to investors.
Bullish on Coinbase
Another not-so-great call was getting bullish on Coinbase (NASDAQ:COIN) in April.
Coinbase came public in mid-April to quite a bit of fanfare and as Bitcoin was near new all-time highs. With Wood being a big Bitcoin bull, it’s no surprise she was bullish on one of the platforms that made it possible to buy and sell cryptocurrencies.
A day after Coinbase’s debut, “Two Ark funds sell $178 [million] worth of Tesla shares” and “Three Ark funds add $246 [million] worth of Coinbase shares.”
Since April 15, Tesla stock is up more than 35%, while Coinbase stock is down about 35%. Obviously Cathie Wood shifts around positions a lot and she has no doubt traded around these two names, but Coinbase’s underperformance has been noteworthy.
Not All the Arks Are Down
Cathie Wood and the flagship ARKK fund are constantly in the headlines and in the news. Investors follow the ETF closely, particularly as it’s a proxy for growth stocks. However, not every Ark fund has been under as intense of selling pressure.
For instance, the ARK Autonomous Technology & Robotics ETF (NYSEARCA:ARKQ) was up 1% in 2021. I know, I know — that’s terrible when compared to the broader market.
Let’s keep in mind though, there are plenty of poorly performing growth funds. That said, the ARKQ drastically outperformed ARKK last year, which fell 24%.
It’s not much for bulls to hang their hats on, but it’s a start.
“PRNT-ing” Profits With Cathie Wood
Another good call from Cathie Wood was putting together the 3D Printing ETF (BATS:PRNT).
The PRNT ETF finished higher by 8% last year, so while it underperformed the major indices, it had a pretty decent year as far as total returns go. It had a particularly good year when compared to the flagship ARKK fund and growth stocks in general.
With HP Inc (NYSE:HPQ), Microsoft (NASDAQ:MSFT), Ansys (NASDAQ:ANSS) and a handful of German companies in the top 10, it’s not surprising that this ETF has held up better than some of Ark’s other names.
However, the point is pretty simple: No strategy works in every environment. There will be times when growth stocks perform incredibly well and other times where it’s a huge drag.
The fact that ARKK has still outperformed the Nasdaq since the start of 2020 despite being decimated from the highs speaks volumes for Cathie Wood & Co. While she’s had some bad calls over the last year — who hasn’t? — she has had more good than bad and some of her long-term predictions — the ones she faced the most controversy over — have turned out to be spot on.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
