Crazy Cathie's Missed Opportunity: NVIDIA's AI Surge Leaves ARK Watching from the Sidelines
MAG 7 REDUX?
Remember all the media headlines about the Magnificent 7 carrying the stock market from earlier this year?
We’ve touched on the Magnificent 7 in previous issues pointing out that the majority of investors (both retail and professional) are increasingly putting their faith (and money) into just seven stocks. Increasing concentration of risk is what is required for blow off tops. Just saying….
It reminds us of the dot-com era when stocks like CISCO were all the rage.
Except this time around, this concentration blind chasing of just a handful of stocks is now even more severe than in the late 1990’s/early 2000’s.
Actually, it turns out the Magnificent 7 are yesterday’s news. Now, it’s all about “Magnificent 2” as just two stocks — Meta and NVIDIA — are driving most of the “growth” returns. According to Goldman Sachs, “Nvidia is the most important stock on planet earth from an index correlation, factor, and retail momentum perspective.”
The most important stock on the planet? It sounds an awful lot like the infamous Fortune article from the dot-com bubble that proclaimed that “no matter how you cut it, you’ve got to own Cisco.” Sure enough, in the following weeks, CISCO crashed more than 80%. But I digress…
It turns out today’s rally in Magnificent 2 (at the expense of the rest of the market) caught off guard even the biggest “exponential growth” shills evangelists:
Cathie Wood Can Only Watch as Nvidia Rides AI Wave She Foresaw
Despite Wood’s professed faith in the disruptive technologies of tomorrow, the main strategy at ARK Investment Management hasn’t held shares of its biggest winner, Nvidia, since early 2023, according to data compiled by Bloomberg. Meanwhile, its smaller ETFs have recently trimmed their already modest holdings in the Jensen Huang-led firm that’s just added $256 billion in market value in Thursday trading alone.
But it seems like missing out on NVIDIA is the least of Cathie’s worries. Over the past three years, Wood has underperformed her benchmark (the Nasdaq QQQ) by an eye-bleeding 95%.
A hundred bucks invested with crazy Cathie now gets you a cappuccino. Hahaha!
According to a new Morningstar ranking, her flagship fund, the ARK Innovation ETF, has been THE biggest wealth-destroying fund of the past decade, incinerating $14.3 billion in investor wealth. Yikes!
Here’s Morningstar with more details:
ARK, home of the flagship ARK Innovation ETF ARKK, tops the list for value destruction. After garnering huge asset flows in 2020 and 2021 (totaling an estimated $29.2 billion), its funds were decimated in the 2022 bear market, with losses ranging from 34.1% to 67.5% for the year. Many of its funds enjoyed a strong rebound in 2023, but that wasn’t enough to offset their previous losses. As a result, the ARK family wiped out an estimated $14.3 billion in shareholder value over the 10-year period—more than twice as much as the second-worst fund family on the list. ARK Innovation alone accounts for about $7.1 billion of value destruction over the trailing 10-year period.
It wasn’t that long ago when the popular press hailed Cathie Wood as a “superstar fund manager that you’ll beg her to take your money.” Yes, really. And by Bloomberg, no less.
But I suppose they didn’t tell you to what end.
By the way, for some historical context — as I was writing this, one of our clients sent me this. Appropriate!
Since human nature doesn’t change, market cycles repeat.
