How To Learn From Cathie Wood's Mistakes Or Risk Massive Underperformance

Cathie Wood's investment strategy deserves some attention. Not because it should be modeled, but because investors can learn from the Ark Invest CEO's mistakes and hope to avoid falling into the same traps.

What To Know: Wood's flagship fund, the ARK Innovation ETF ARKK, continues to fall as growth stocks remain under pressure amid uncertainty surrounding Fed rate hikes and ongoing geopolitical tensions, but Wood continues to relentlessly buy in the face of steep declines.

Teladoc Health Inc TDOC shares tanked by 40% following its weak financial results on Thursday. Wood stepped in and bought 609,665 shares of the virtual health company following the sell-off.

Wood continues to reaffirm her expectations for significant price appreciation in the innovation space over a five-year period.

Why It Matters: The Ark Innovation ETF has underperformed the market significantly since its inception, proprietary trader at Bright Trading and PreMarket Prep co-host Dennis Dick said Friday on Benzinga's "PreMarket Prep."

"A lot of people have learned the hard way and she's going to eventually learn the hard way too and she is by her eight-year underperformance of her fund so I'm using it as a teaching tool," Dick said.

Over the last eight years, the Innovation fund is up about 140%, but the Invesco QQQ Trust QQQ is up about 220%, according to data from Benzinga Pro.

Dick acknowledged she could still be right and end up looking like a genius, but he anticipates her looking foolish because of her investing approach.

"This is her mandate," Dick said. "She wants to buy growth at any cost and she's not going to stop with her strategy."

Question: Why do I constantly criticize Cathie Wood?
Answer: We need new investors to learn from her mistakes.
1) Buying with disregard to valuation.
2) Constantly adding to losers.
3) Believing that you are right, and the market is wrong.
4) Unwillingness to change opinion.

— Dennis Dick, CFA (@TripleDTrader) April 29, 2022

He believes she may have just been lucky with her early investment in Tesla Inc TSLA.

"She's not seeing something that we're not seeing. She simply got lucky that she put all of her eggs in one basket off the bat and that basket hit, you know, she bet it all on red and red came in," Dick said.

"So stop giving her credit that she's outperforming the market overall because she's not. She's massively underperformed the markets since her inception."

ARKK Price Action: ARKK has traded between $45.89 and $132.50 over a 52-week period. The ETF was up 1.13% at $49.45 at time of publication.

Watch the full segment on Wood here: