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Cathie Wood maintains tech conviction as ARK funds post severe yearly losses

Yahoo Finance’s Alexandra Semenova joins the Live show to discuss Cathie Wood’s ARK Innovation ETF losing more than $1 billion before this year’s wipeout.

Video Transcript

[AUDIO LOGO]

JULIE HYMAN: Well, one of the other themes of the year has been we've continued to watch Cathie Wood. But are there leaks in her Ark. Her signature investment fund faring poorly in 2022, hitting a fresh five-year low for the fund.

Let's talk about whether it's time for Cathie to rethink that strategy. She's not, spoiler, she's not. Alex Semenova is with us to talk about that.

ALEXANDRA SEMENOVA: Exactly, Julie. You simply cannot talk about 2022 without talking about Ark Invest and Cathie Wood. Her flagship Ark ETF became a bellwether for high-flying technology stocks when it simply exploded in 2020 during the bull market. And of course, it is at the forefront of this year's drawdown, bearing the brunt of Fed rate hikes and the rotation out of risk assets by investors.

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Ark had just begun to draw the ire of investors and strategists around this time this year when it posted a loss of 20% in 2021. People thought that it couldn't get worse. Fast-forward to now, the fund is down 69% year to date and down 80% from its all-time high in February 2021. And each of Ark's funds have posted severe losses in this year.

Wood's bold bets on high-flying technology stocks have destroyed billions of dollars in shareholder wealth. A recent Morningstar analysis found that even before this year's losses, it lost about $1.3 billion for investors since inception in 2014. And yet, despite all of this turmoil, for some reason, it still managed to post $1.3 billion in inflows this year.

A lot of people wonder why Wood continues to attract investors despite all of the losses. And it's mainly because of her conviction in her strategies. Despite what she's experienced this year, she's never wavered from her belief. She continues to make media appearances, go on podcasts, communicate with investors through social media, and reassert her view that these disruptive innovation stocks will continue to explode going forward.

BRIAN SOZZI: And she continues to just reassert her views on Tesla, Alexandra. She's really not-- really not giving up on this company at all, despite the stock being down 70% year to date.

ALEXANDRA SEMENOVA: Absolutely, Brian. So Tesla is obviously a big part of the Ark story as well. She's-- Cathie Wood is incredibly bullish on Elon Musk, on Tesla. And for a long time, Tesla was kind of the only stock keeping Ark afloat.

At the start of the year, it was one of the only stocks in the green. But obviously, that has changed. Cathie Wood-- Cathie Wood's Ark is a big allocator to Tesla. So as we've seen this month selloff in Tesla, that's really battered the stock. Yesterday, when Tesla declined 11%, Ark fell below $30 to a fresh five-year low. So that is going to continue to hit Ark significantly.

JULIE HYMAN: They're both up a little bit today but just a little bit.

ALEXANDRA SEMENOVA: Very, very modest recovery.

JULIE HYMAN: Yeah. One day, one day. It's not a switch in fortunes.

BRIAN SOZZI: Good analysis as always.