Why Are ARKK Investors Jumping Ship? Cathie Wood's Poor Picks Lag Behind The Competition

As head of ARK Invest, Cathie Wood is one of the few celebrities in the financial world. She's made a name for herself with big bets and brash predictions like Bitcoin BTC/USD topping $1 million by 2030. These bets have often paid off, 2020's bull run saw her flagship fund, ARK Innovation ETF ARKK, triple the performance of the S&P 500.

But Wood's recent track record has been lackluster. So far this year ARKK is up just over 2%, compared to almost 7% for the S&P. And it gets worse when stacked up against other tech-focused funds. The indexed Invesco QQQ QQQ is up nearly 8%. A more one-to-one comparison, the actively managed Spear Alpha ETF SPRX, is up over 14%.

Missed The Boat

The monster returns of the last year have been mostly driven by the AI craze, especially Nvidia NVDA, up over 400% since the beginning of 2023. In 2024 alone, Nvidia is up more than 60%. Wood sold ARKK's shares last January, missing the entire ride.

Instead, Wood's biggest AI backing is Tesla TSLA, which has continued to miss earnings and is down nearly 20% on the year. In fact, 6 of ARKK's top 10 holdings are losers this year so far, 3 of those in the double digits.

Coinbase COIN is currently the biggest holding and is up 26.99%, YTD. But Wood missed out on some of this by selling a large chunk of its COIN shares. COIN is up 21% from last Tuesday.

Flight Of The Funds

Investors frustrated by missing out on the huge gains seen across the market have been pulling their money out in big ways. So far in 2024, ARKK has a net loss in assets under management of $845 million, roughly 10% of the fund in less than 2 months.

For The Bears

For traders not buying what Wood is selling, inverse ETFs provide a straightforward way to bet against a stock, avoiding the complications that come with option trading. The AXS Short Innovation Daily ETF SARK, which aims to return the inverse performance of ARKK, is a perfect example.

Traders still bullish on Wood and her fund and want to maximize their view can buy a leveraged fund, like the AXS 2X Innovation ETF TARK which aims to return twice the daily return of ARKK. TARK was awarded Best ETF Launch at Benzinga's 2023 Fintech Awards.

Photo by Drew Beamer on Unsplash.