Celebrity money manager Cathie Wood has been speaking in support of cryptocurrencies for some time, predicting in January that bitcoin will reach $1 million by 2030.
She also continues to walk. As cryptocurrency conglomerate FTX melts into rubble, the CEO of Ark Investment Management has shares of Coinbase worldwide COIN like no one matters.
Coinbase is the country’s largest cryptocurrency exchange. The stock is trashed, down 82% so far as digital currency trading dries up amid the industry turmoil. Coinbase lost $544.6 million in the third quarter.
But unlike FTX, Coinbase doesn’t operate like a company founded by some friends after they graduate from college. Coinbase is, to our knowledge, a legitimate entity with audited financial results.
Cryptocurrency trading could recover, boosting Coinbase’s financial performance and stock price as well, though the opposite outcome seems just as possible.
Wood is clearly betting on the first scenario. Ark funds have loaded more than 1.3 million shares of Coinbase since early November, a stock recently worth $57 million.
Coinbase represents the 15e largest stake in Wood’s flagship Ark Innovation ETF (ARKK) – Get a free report, totaling $244.3 million. Ark funds hold about 4.7% of Coinbase’s total outstanding shares, according to Bloomberg.
Meanwhile, Ark’s ETFs have plummeted this year as their technology holdings suffered from weak earnings. Wood has defended herself by noting that she has a five-year investment horizon.
And Ark Innovation ETF’s five-year track record could indeed reassure investors through May 9. The fund’s five-year returns outperformed the S&P 500 up to that point. But Ark Innovation’s five-year return through Nov. 21 totaled just 0.84%, far behind the S&P 500’s return of 10.67%.
The fund’s performance is also well below Wood’s target of an annualized return of 15% over five-year periods.
Ark Innovation is down 63% year-to-date and 78% down from its February 2021 peak.
But the $7.3 billion fund’s underperformance hasn’t pushed investors away. According to ETF research firm VettaFi, Ark Innovation recorded net inflows of $433 million from investors last month.
Fans and critics
You may be wondering why so many investors have stuck with Wood despite her mediocre returns. The fact that she’s had a spectacular year certainly helps. Ark Innovation ETF skyrocketed 153% in 2020.
Wood has also become something of a rock star in the investment world, appearing regularly in the media. Clearly intelligent and articulate, she explains financial concepts in a way novice investors can understand.
Still, Wood has her detractors. On March 29, Morningstar analyst Robby Greengold delivered a scathing critique of Ark Innovation.
“ARKK shows little sign of improving risk management or its ability to successfully navigate the challenging territory it is exploring,” he wrote.
Wood refuted Greengold’s points in an interview with Magnifi Media by Tifin. “I do know that there are such companies [Morningstar] who don’t understand what we do,” she said.