“We Are Soul Searching”: Cathie Wood Is Confused Why ARKK Is Plunging As NASDAQ Soars

Allow us to introduce you to the confusion you have to deal with when your “active” strategy is to pick whatever is trendy that week and buy it on all dips, FOMO-style, without one iota of concern for financials or management’s integrity. 

Enter Cathie Wood. Wood is apparently doing some much needed “soul searching”, with her flagship ARKK Innovation Fund continuing to falter heading into the final few weeks of 2021, according to a new report.

We have pointed out repeatedly over the last few weeks that ARKK has lagged the major indexes badly for 2021, with a delta between its performance and that of the NASDAQ nearing 40%.

But it’s not “underperformance”, it’s “soul searching”, according to Wood. At least that’s what she told Bloomberg late on Thursday. 

Ark Investment Management is “going through soul-searching” as its growth-focused funds fall out of favor amid expectations of tighter Federal Reserve policy, said founder Cathie Wood. 

In an interview with Bloomberg on Thursday, Wood also said: “I’ve never been in a market that is up — has appreciated — and our strategies are down.”

Maybe that should tell you something, Cathie.

She continued: “When we go through a period like this, of course we are going through soul-searching, saying ‘are we missing something?’” 

A better question might be: ‘Are we missing everything?’.

But the soul searching hasn’t slowed down ARK’s PR efforts any. Wood didn’t have any trouble taking to CNBC this week upon the launch of her 9th ETF – this one supposedly focused on ESG and “transparency”.

We reported that Wood defended several of her positions on Thursday morning in a TV appearance. Wood first defended cryptos, stating that she “doesn’t follow the consensus that crypto markets are due for a correction,” according to Bloomberg.

She made the argument partially due to the fact that institutions are moving into the crypto space.

“Institutional managers have to look at new asset classes that are evolving that have low correlations…so we think that the move actually, by institutions into Bitcoin, if we were to choose Bitcoin and that seems to be their first stop, could add $500,000 to Bitcoin’s price if they moved into the tune of roughly 5% over time,” Wood said.

She also continued to tout her investment in Tesla, claiming that Elon Musk’s criticisms of President Biden’s Build Back Better plan were justified. We’d ask whether she saw Musk’s overnight Tweet “joking” about quitting his jobs, but we’re sure she doesn’t care, either way.

On Thursday, Wood continued to argue that Tesla is undervalued and justified her $3,000 price target by saying “that other companies are having difficulty overcoming especially when it comes to battery technology and artificial intelligence, which will lead to autonomous and that’s now where Tesla is undervalued”. Zero Hedge contributor Quoth the Raven wrote last week about how Tesla has been one of the sole saving graces of an otherwise laggard group of companies that make up ARKK.

Finally, Wood offered up her reasoning for adding shares of Twitter: “What we’re seeing is that this platform, which used to be dominated by tweens, teens and celebrities in 2012 when we first evolved our research ecosystem, has now evolved to knowledge workers.”

Recall, we noted Wood was launching her 9th ETF this week, despite her flagship fund faltering this year. The launch comes while Wood’s flagship fund, as many have pointed out, is falling behind major index benchmarks at a dizzying rate, despite the success of Tesla over the last year. 

Let’s see how much further ARKK needs to plunge before Wood replaces “soul searching” with “learning how to DCF model” and “spending time looking for companies that actually generate cash”.

Our guess is much, much lower.