- Cathie Wood's flagship ETF has fallen over 60% from its February 2021 high, and has erased its post-pandemic gains.
- Ark Innovation's stocks are down 70% from five-year highs on average, Bespoke Investment Group noted.
- Cathie Wood's funds surged in the pandemic, but have since fallen amidst the tech selloff and tighter money conditions.
Cathie Wood's flagship Ark Innovation fund has fallen more than 60% from its February 2021 high, wiping out all of its post-pandemic gains, according to Bespoke Investing Group.
Every stock in the ARKK exchange-traded fund is down for the year, except for one, Signify Health, the financial markets research firm said in a note published Tuesday. Most of the holdings peaked last year.
"With the average ARKK stock down 70% from its 5-year high, it's going to take a huge rally in the 'growth' space to get back to prior levels," Bespoke's strategists said.
"The average stock in the ETF now needs to rally 348% to get back to prior highs," they added.
The Ark Innovation ETF touched a peak of $159.70 on February 16, 2021, and was trading at $58.08 at last check Wednesday.
Wood's funds shot to prominence in the pandemic, when tidal waves of cheap cash drove up the kind of cutting-edge, speculative technology stocks her funds invest in. Ark Invest ETFs follow five key "disruptive innovation" themes, such as artificial intelligence and blockchain.
Since then, Wood's funds have struggled as tech stocks pulled back in the face of tighter money conditions and rising interest rates. They declined amidst a violent rotation out of speculative high-growth tech stocks and into safer value stocks, which has been magnified by the Federal Reserve's aggressive policy shift.
The flagship Ark Innovation fund experienced a devastating end to 2021 and a poor start to 2022, following a stellar 2020. The ETF soared more than 150% in 2020 during the COVID-19 pandemic, but plunged by more than 20% the following year. It is down about 39% in 2022 so far.
In early April, Morningstar analyst Robby Greengold downgraded Ark Innovation to "negative" from "neutral", saying Wood had saddled the portfolio with greater risk by slashing its number of stocks to 35 from 60 less than a year ago, which amplifies the stock-specific risk.
"Wood's reliance on her instincts to construct the portfolio is a liability,' Greengold said.
"This is a high-risk, benchmark-agnostic portfolio that invests across technology platforms the team thinks will revolutionize how sectors across the globe operate. The firm favors companies that are often unprofitable and whose stock prices are highly correlated."
Electric-vehicle maker Tesla is Ark Innovation's largest holding at over 10%. Its drop of 18.4% from its November 2021 high was the smallest in the portfolio. Some of the other holdings have fallen over 80% from highs. Berkeley Lights had the steepest drop, down over 94%.
Ark Invest is still bullish on Tesla, saying earlier in April that it expects the stock to quadruple by 2026 — an upside of 356% from current levels. Its conviction rests on the the company's ability to successfully develop and roll out a network of self-driving robo taxis.
