Cathie Wood, Managing Director and Chief Investment Officer of ARK Investment Management LLC, speaks at the Sooner Than You Think conference in the borough of Brooklyn in New York on Tuesday, October 16, 2018.
Alex Flynn | Bloomberg | Getty Images
Star manager Cathie Wood’s flagship fund – Ark Innovation – took a hit on Tuesday amid the liquidation of growth stocks.
Ark Innovation fell 4.8% Tuesday at noon, alongside the 2.5% drop in the Nasdaq Composite. The “disruptive innovation” fund is down more than 7.5% this week and more than 10% in 2021, while the S&P 500 is gaining more than 10% this year.
The fund is at 30% of its peak in February this year, after which the ETF spiraled under the threat of rising interest rates.
“The multiple stocks high in tech are very crowded,” Stephanie Link, chief investment strategist at HighTower, in CNBC’s “Halftime Report”. “You have very difficult comparisons going forward. But also valuations. High valuations don’t do well when you see better GDP growth, a little more inflation.”
Some of Ark Innovation’s main holdings have been very successful. Tesla lost more than 3% and Teladoc Health fell 5.8%. Square and Roku fell 5.8% and 6.7% respectively. The Zillow group plunged more than 5%.
It is difficult to pinpoint the exact reason for selling tech stocks this week, with interest rates remaining lower and the sector emerging from a week of explosive earnings. Investors could take profits on their biggest winners since the trough of the pandemic and turn to more exploited things when they reopen.
Plus, the threat of a capital gains tax hike probably doesn’t help sentiment.
Jim Paulsen, chief investment strategist at Leuthold Group, told CNBC investors may be increasingly disappointed that stocks are not doing well amid fantastic earnings news. He suggested that if the “good news” were already fully integrated, a market peak could be near.
Faced with this weakness, investors are drawing money from the Wood’s fund. More than $ 290 million left Ark Innovation last week, according to FactSet. However, more than $ 7 billion has been invested in Wood’s ETF this year.
Wood, as usual, is staying the course during the pressure on his major titles. After a 15% drop in Twitter shares on Friday, Wood added 843,194 Twitter shares to the Ark Innovation ETF and 468,256 shares to the Ark Next Generation Internet ETF. Those positions would be worth around $ 72.4 million based on Twitter’s closing price on Friday.
Wood’s other ETFs also came under strong selling pressure on Tuesday. The Ark Next Generation ETF lost 4.5%, bringing its cumulative losses to over 6.5%. ETF Ark Genomic Revolution and ETF Ark Autonomous Technology and Robotics lost 4.3% and 2.9% respectively on Tuesday. The pair is down 6.8% and 4.5% this week alone. The Ark Fintech Innovation ETF fell 4.25%, bringing its losses for the week to over 5%.
The ETF Ark Autonomous Technology and Robotics is Wood’s only fund in the green for the year.
The wood gained popularity after the Ark Innovation rally by almost 150% in 2020.
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