Can Cathie Wood return in 2022?

ARK Invest founder, CEO and primary stock picker Cathie Wood wants to party as if it is 2020, and it’s easy to see why she might still want to write that year on her checks. Her collection of growth-oriented exchange-traded funds (ETFs) dominated the market last year. That Ark Innovation ETF (ARKK -5.98% ), her flagship fund with more than $ 21 billion in assets, turned its head with a 150% increase last year. So far in 2021, the ETF has proven lethal with a fall of 19%, which on Thursday hit a fresh low of 52 weeks.

Flashy means go into disfavor all the time. This situation is unique because Woods’ transparency finds that death unfolds in real time. ARK sends out email blasts after each trading day to all willing recipients, specifying the stocks that Wood bought and sold earlier in the day across all of her ETFs.

When the funds shook last year (and boy, were they rocked), it was a masterclass for growth investors. It has been a comedy of error in 2021 as we see her routinely add some of her fading positions.

Image Source: Getty Images.

The long way back

Wood thinks she’s buying the dip, but she does not. She catches falling steak knives. I and Williams-Sonoma. During an earthquake.

Half of the ETF’s six largest holdings have fallen between 37% and 52% this year, and Wood has largely increased these positions on the way down. Teladoc (TDOC) -4.31% ) is Ark Innovation ETF’s second largest shareholding, representing 5.8% of its assets. The telehealth leader was the picture of health last year when the pandemic forced people to receive medical care from the same rooster where they checked WebMD for answers: the Internet. This year has proven challenging with declining organic growth and accelerating competitive threats.

Teladoc is the stock that has fallen 52% in 2021. Draw the starting line at the peak in February and we are talking about a dive of 69%. Wood has been buying shares in Teladoc all the way down. How else do you think a stock that has thrown more than two-thirds of its peak value is still the portfolio’s silver winner?

Without a quantity of cash or secondary offerings, an ETF must sell shares to buy something else. This harsh year is exacerbated by the fact that Wood is also making some costly dumping decisions. Tesla (TSLA -6.18% ) is one of her better performers, and it happens to be Ark Innovation ETF’s largest position with almost 10% of the portfolio.

The company that made electric cars cool has been hot this year, up 54% from Thursday’s closing. One would expect a fund with a tenth of its portfolio in a market-beating hot rod to win this year, but you already know how that race goes. Obstacles. All the way down.

The Ark Innovation ETF has actually sold Tesla shares in recent months. Wood’s fund has eased its stake in the world’s most valuable automaker 18 times since Sept. 9, during which time the stock has risen a fatefully 44%. To add insult to injury, revenue from Tesla’s rising shareholding has led to sinkholes in her portfolio.

Coming right after an odd year

I’ve been tough on ARK Invest here, but I do not think Wood’s performance in 2020 was a stroke of luck. Her ETFs have a strong chance of returning in 2022. She has correctly found disruptive growth stocks and new trends in the past, and just because the last few months have not been kind to her investment style does not mean that she has lost touch.

It’s easy to see that Teladoc (now trading for less than what it paid for Livongo Health last year) is one of her biggest winners in 2022. Despite being a Tesla driver and shareholder, I would nor be surprised to see it go from the leader. delays next year. Every speedster has to make a pit stop when the tires start to lose their tread.

Wood continues to be an ace stock picker with a long enough winning track record to forgive the hard part of buying and sell decisions this year. I would not bet she jumped back in 2022.

This article represents the opinion of the author, who may disagree with the “official” recommendation position for a Motley Fool premium advisory service. We are motley! Questioning an investment dissertation – even one of our own – helps us all think critically about investing and make decisions that help us become wiser, happier and richer.