It’s been a tough year for Cathie Wood. And her naysayers are piling on.
The founder of Ark Investment Management, who could seemingly do no wrong during the pandemic run-up in asset values, has seen soaring inflation and elevated interest rates crush her exchange-traded funds in 2022. The flagship Ark Innovation ETF, once a byword for market-beating returns, has tumbled more than 65% this year because of a bruising selloff in tech stocks like Tesla Inc. and Zoom Video Communications Inc.
Wood’s defense has long been that her firm backs companies poised to change the world and doesn’t invest in mature ones catering to “short-term investors.”
Dan Loeb, a long-time value investor, isn’t impressed.
The billionaire, who runs New York-based Third Point, said in a tweet Wednesday a memo from Wood should be used in classes to study the “mindset of stonk hodlers” — a term used to poke fun at online traders who cling to their positions regardless of what’s happening in the market.
Cliff Asness, who earlier this year derided Wood for a wildly optimistic economic forecast, was quick to support Loeb. The head of AQR Capital Management blamed Wood in a tweet for the “mania” in the market when rates were low and stocks were soaring.
Then it was the turn of Jefferies Financial Group Inc. Chief Executive Officer Rich Handler, who weighed in on ways to use cash flow to grow a business versus pump up revenues and valuation.
Wood’s memo, published earlier this month, defended her firm’s strategy against criticism that it invests in “concept capital” and companies that can’t turn a profit. Wood also took aim at firms that add leverage to their balance sheets to pay dividends or repurchase shares without investing in innovation.
“The companies in which we invest are sacrificing short-term profits to capitalize on the exponential growth and highly profitable opportunities that a number of innovation platforms are creating,” she wrote.
Loeb’s biggest stock holdings in the past quarter include Colgate-Palmolive Co., utility PG&E Corp. and conglomerate Danaher Corp.
