Investor Daniel Loeb unleashes criticism of Ark’s Cathie Wood

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Star investor Daniel Loeb, managing director of Third Point, isn’t too impressed with his counterpart Cathie Wood, managing director of Ark Investment Management.

Ark’s exchange-traded funds (ETFs) have slipped this year as weak earnings hurt their holdings in tech start-ups.

Wood’s flagship Ark Innovation ETF (ARKK) – Get Free Report has plunged 66% so far in 2022 and is down 80% from its February 2021 peak.

Wood defended herself by noting that she had a five-year investment horizon. But Ark Innovation’s five-year annualized return totaled a negative 1.95% through Dec. 20, a far cry from the S&P 500’s positive 9.28% return.

The fund’s performance also falls short of Wood’s target for 15% annualized returns over five-year periods.

Has the exodus of investors started?

Ark Innovation’s below-average returns may finally start to drive investors away. The $6.4 billion fund saw a net investment outflow of $391 million in the past month, according to ETF research firm VettaFi.

But it still saw an inflow of $1.4 billion for the entire year to date.

You might be wondering why so many investors have stuck with Wood, despite its lackluster returns. The fact that she had a spectacular year certainly helps. Ark Innovation ETF soared 153% in 2020.

Additionally, Wood has become something of a rock star in the investment world, frequently appearing in the media. She is clearly intelligent and articulate, explaining financial concepts in a way that novice investors can understand.

Accusation of Stonk Hodler

Loeb, however, does not sing his praises. After Wood wrote a comment defending his investment philosophy, he let loose on Twitter.

“Anyone teaching a value-oriented investing course or the psychology of investing 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) stocks (stonks) too long.

“Note the disparaging comments about Luddites who view archaic measures of value like cash flow as short-term traders,” Loeb continued.

Third Point’s stock holdings reported to regulators have returned negative 21.1% this year through October, compared to a negative 17.7% for the S&P 500, Seeking Alpha reports. Since Third Point’s inception in December 1996, the annualized return has been 13.4%, compared to 8.5% for the S&P 500.

As for Wood’s comment, critics “describe stocks in ARK’s strategies as ‘conceptual capital’ and suggest that our investment team can’t tell companies that are profitable from those that aren’t or are looking to invest. in unprofitable businesses,” she wrote.

“In our view, the companies we invest in are sacrificing short-term profits to capitalize on the exponential growth and highly profitable opportunities created by a number of innovation platforms.”

Additionally, “companies that cater to short-term investors and leverage their balance sheets to pay dividends or generate profits with share buybacks don’t appear to be investing enough to catch these waves of innovation,” he said. said Wood.

“As a result, we believe many are likely to be disrupted or even destroyed.”

Loeb is not the first investment professional to criticize Wood. Earlier this year, Morningstar analyst Robby Greengold published a scathing review of Ark Innovation.

“ARKK shows little sign of improving its risk management or its ability to successfully navigate the difficult territory it explores,” he wrote.

Wood countered Greengold’s arguments in an interview with Magnifi Media by Tifin. “I know there are companies like this [Morningstar] who don’t understand what we’re doing,” she said.

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