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Investors Keep the Love for 'Mamma Cathie' Wood

That loyalty comes in the face of a 56% skid year to date for Wood's flagship Ark Innovation ETF.
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Investors sure do love their “Mamma Cathie,” “Aunt Cathie,” or as hotshot investor Cathie Wood is nicknamed in South Korea, “Money Tree.”

Even as her flagship Ark Innovation ETF  (ARKK) - Get ARK Innovation ETF Report plunges, the fund’s investors are sticking along for the ride.

Short interest (the number of shares held short) in the $7.8 billion fund has dropped to 9.2% of shares outstanding, down from an April peak of 17%, according to IHS Markit, as cited by Bloomberg

The fund has lost 22% over the last month.

In another sign of investor loyalty to Mamma Cathie, Ark Innovation enjoyed a net inflow of $1.4 billion so far this year, as of the week of May 16, the Wall Street Journal reported.

As Ark funds have tumbled in recent months, Wood has defended herself by noting that she has a five-year investment horizon.

Trailing S&P 500

And the five-year track record of Ark Innovation could indeed give investors comfort until May 9. 

The fund’s five-year return beat that of the S&P 500 until then. But the five-year annualized return of Ark Innovation totaled 8.76% through May 24, far behind the S&P 500’s 12.39% return.

Ark Innovation has plunged 56% so far this year, as Wood’s young, “disruptive” technology companies have hit the skids.

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 And it’s down 74% from its February 2021 peak. Raging inflation and soaring interest rates have helped put the kibosh on tech stocks.

Ark Innovation’s biggest holdings, starting from the top, are video-meeting service Zoom Video Communications  (ZM) - Get Zoom Video Communications Inc. Report, electric vehicle titan Tesla  (TSLA) - Get Tesla Inc. Report, video-streaming platform Roku  (ROKU) - Get Roku Inc. Report and medical diagnostics company Exact Sciences  (EXAS) - Get Exact Sciences Corporation Report.

On Tuesday, Ark funds snagged 26,081 shares of Tesla, valued at $16.4 million as of Tuesday’s close. 

Wood for some months had been selling Tesla shares, but she had said the sales reflected profit-taking and that she still believed in the Austin company.

Wood may see Tesla stock as a good value now, given its 41% drop year to date through Tuesday. 

An Ark spokesperson said the firm doesn’t comment on daily trading activity.

Stagdeflation Coming

Meanwhile, Wood discussed her macroeconomic views in a recent webinar.

While many experts expect a bout of stagflation with sluggish economic growth combined with rising inflation. She sees stagdeflation. That’s slow growth combined with falling inflation.

“We are probably going to see more deflationary forces at the end of all this than inflationary forces,” Wood said. “We are in the early stages of seeing this.” Consumer prices soared 8.3% in the 12 months through April.

Naturally, Wood says this will be a good time for her “disruptive” technology stocks, saying, “During tough times, innovation gains traction.”