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Tesla Stock Rebound Boosts Cathie Woods ARK Innovation But That's Not Enough.

Tesla Stock Rebound Boosts Cathie Woods ARK Innovation But That's Not Enough.


Good news for tech/momentum investing guru Cathie Wood? The recent surge of the Nasdaq Composite Index to record highs and a strong recovery in Tesla shares ahead of the company's annual shareholder meeting have boosted Wood's flagship exchange-traded fund, ARK Innovation, which is up more than 5% so far in June.

The bad news? That's not enough to erase the fund's losses so far this year. ARK Innovation is still down nearly 15% so far in 2024, a drop that hurts all the more considering Wood missed out on the big tech rally. Consider that the Nasdaq is up more than 17% so far this year.

The fund has been hit hard this year by a steep drop in Tesla's stock price — the stock is the ETF's largest position with an 11% weighting — and Wood is an outspoken Tesla bull and fan of CEO Elon Musk.

But Tesla's troubles aren't the only problem for ARK Innovation, as several other stocks in the top 10 have also stumbled this year.

Roku, the fund's third-largest holding, has plummeted 40% so far this year. Roblox is down more than 20%. Square's parent company Block and Shopify are both losing more than 15%. And shares of artificial intelligence automation software company UiPath have fallen in half this year amid a weak outlook and the departure of its CEO.

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ARK Invest and Wood did not respond to requests for comment on ARK Innovation's recent performance. Woods' bold approach has produced below-market returns, at least in the short term, as failures outweighed successes.

It also hurts that ARK Innovation doesn't have much exposure to current AI darlings like Nvidia and Super Micro Computer.

To be fair, ARK Innovation has large stakes in some stocks that have generated big gains this year.

Palantir Technologies, a top 10 holding of ARK Innovation, soared nearly 40%. Two other large holdings, crypto trading platform Coinbase and trading app Robinhood, also soared along with the price of bitcoin.

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And other cryptocurrencies. Coinbase shares have soared nearly 50% this year, while Robinhood shares have risen more than 85%.

But the 2024 winners won't be enough to make up for the many losers in the portfolio, a problem that has plagued many of Woods' other funds.

The ARK Next Generation Internet ETF and the ARK Fintech Innovation ETF are both up this year, but their returns still lag those of the S&P 500 and Nasdaq. The ARK Autonomous Technology & Robotics ETF is expected to fall about 4% in 2024.

And then there's the ARK genomic revolution.

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ETFs. It fared even worse than the ARK Innovation ETF, plummeting nearly 20% as some of the biotech stocks the fund holds fell sharply.

Of course, volatility for the ARK Fund is nothing new. Longtime fans of Woods' stock-picking strategy are accustomed to huge gains and heartbreaking declines. ARK Innovation more than doubled in 2020, lost about a quarter of its value in 2021, and fell another two-thirds in 2022, only to bounce back with a gain of more than 65% last year. ARK Innovation is not for the faint of heart.

Write to Paul R. La Monica at [email protected]




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