In this article, we discuss the 15 worst stock picks of Cathie Wood.
Cathie Wood, the chief ARK Investment Management, is often hailed as the champion of “disruptive innovation” at the stock market. In 2020, as the pandemic pummeled investors, her flagship ARK Innovation ETF (NYSE:ARKK) returned more than 152% and Wood was hailed for backing innovation with capital and making loads of money in the process. Wood had founded ARK in 2014, turning into one of the most successful hedge funds on Wall Street before the decade was over. At the end of September 2021, ARK had a portfolio value of over $41 billion.
However, the past few years have also been characterized by soaring valuations and larger appetites for riskier money management. As inflation has increased, the share prices of companies that operate in high growth sectors have dropped drastically. Wood, whose fund is primarily invested in these firms, has not altered strategy, instead doubling down on bets on high growth areas and picking shares at a discounted price. After the highs of 2020, her flagship fund dropped 24% in 2021. In the first few weeks of 2022, it is down a staggering 20%.
Wood Doubles Down On ‘Deep Value’ Tech Stocks
In a letter to investors, part of a report on the performance of the fund in the fourth quarter of 2021, Wood has refused to acknowledge that the US economy might be headed towards a recession, as several market experts have pointed out, but rather noted that the market might focus on the “risk of recession” in the next three to six months and a surprise drop in inflation. Such a focus, according to Wood, would put tech stocks in “deep value territory” for the next five years, an indication that ARK would continue to pick up shares in tech stocks as their prices fell.
Wood further elaborated in her letter that during a slowdown, consumers are more willing to change their behaviors, leading to increased adoption of new technologies. This, in turn, drives the “deep value” in tech stocks that can be picked up at a fraction of their peak price during these slowdowns for returns that could “triple or quintuple in value over the next five years”. According to Wood, the added complexity of the pandemic, which accelerated the digitization of the world by years, adds further solidity to her argument.
Investors Wary of Innovation Mantra
However, it seems like not a lot of investors are buying what Cathie Wood is selling. Finance news publication Bloomberg reported earlier this month that investors had pulled $352 million from ARK Innovation ETF (NYSE:ARKK) in recent weeks, the biggest outflow from the flagship fund since March. ARK Innovation ETF (NYSE:ARKK) has fallen over 50% since peaking in February 2021. Several stocks in the fund have lost their value by over 70% but Wood remains adamant that these now present a “bargain” with regards to their profitability and revenues.
Some of the top stocks in the investment portfolio of ARK Investment Management at the end of September 2021 included Tesla, Inc. (NASDAQ:TSLA), Coinbase Global, Inc. (NASDAQ:COIN), Shopify Inc. (NYSE:SHOP), Twitter, Inc. (NYSE:TWTR), and Sea Limited (NYSE:SE), among others.
Our Methodology
The companies that featured in the ARK Investment Management portfolio in filings for the third quarter of 2021 were selected and sorted based on the losses in share price in 2021.
Data from around 900 elite hedge funds tracked by Insider Monkey was used to identify the number of hedge funds that hold stakes in each firm.
Cathie Wood of ARK Investment Management
Worst Stock Picks of Cathie Wood
15. 908 Devices Inc. (NASDAQ:MASS)
Number of Hedge Fund Holders: 8
Decline in Share Price in 2021: 71.7%
908 Devices Inc. (NASDAQ:MASS) makes and sells measurement devices for the chemical biochemical industry. The company has featured in the ARK portfolio since late 2020. Even though the stock has slumped in the past few months, Wood has increased her stake in the company. Filings for the third quarter of 2021 show that ARK holds over 2.7 million shares in 908 Devices Inc. (NASDAQ:MASS) worth $89 million, up 13% compared to filings for the second quarter.
As the share price of 908 Devices Inc. (NASDAQ:MASS) falls, hedge funds have been dumping the stock. At the end of the third quarter of 2021, 8 hedge funds in the database of Insider Monkey held stakes worth $152 million in 908 Devices Inc. (NASDAQ:MASS), compared to 13 the preceding quarter worth $166 million.
Alongside Tesla, Inc. (NASDAQ:TSLA), Coinbase Global, Inc. (NASDAQ:COIN), Shopify Inc. (NYSE:SHOP), Twitter, Inc. (NYSE:TWTR), and Sea Limited (NYSE:SE), 908 Devices Inc. (NASDAQ:MASS) is one of the growth stocks feeling the heat of an economic slowdown.
14. Personalis, Inc. (NASDAQ:PSNL)
Number of Hedge Fund Holders: 14
Decline in Share Price in 2021: 71.9%
Personalis, Inc. (NASDAQ:PSNL), a cancer genomics firm, has also witnessed a slight decrease in hedge fund interest as the share of the stock falls. At the end of the third quarter of 2021, 14 hedge funds in the database of Insider Monkey held stakes worth $172 million in Personalis, Inc. (NASDAQ:PSNL), compared to 15 the preceding quarter worth $225 million.
However, Wood has doubled down on her bullish stance on Personalis, Inc. (NASDAQ:PSNL) in the past few months. ARK increased stake in Personalis, Inc. (NASDAQ:PSNL) by 5% during the third quarter and holds over 5.1 million shares in the company worth close to $100 million, representing 0.23% of the portfolio. Personalis, Inc. (NASDAQ:PSNL) has featured in the ARK portfolio consistently since the second quarter of 2019.
13. Organovo Holdings, Inc. (NASDAQ:ONVO)
Number of Hedge Fund Holders: 3
Decline in Share Price in 2021: 73%
Organovo Holdings, Inc. (NASDAQ:ONVO) is a biotech firm focusing on the development of 3D tissues. Latest filings reveal that ARK held 381,586 shares in the company at the end of September 2021 worth $2.5 million. Wood dumped 11% of her stake in the company between June and September. The stock was added to the ARK portfolio in late 2020 but the fund has readily decreased stake in the firm over the past three quarters.
Organovo Holdings, Inc. (NASDAQ:ONVO) has failed to attract significant hedge fund interest with pipeline development. At the end of the third quarter of 2021, 3 hedge funds in the database of Insider Monkey held stakes worth $3.5 million in Organovo Holdings, Inc. (NASDAQ:ONVO), up from 2 the preceding quarter worth $5.4 million.
12. Evogene Ltd. (NASDAQ:EVGN)
Number of Hedge Fund Holders: 6
Decline in Share Price in 2021: 74%
Evogene Ltd. (NASDAQ:EVGN) operates as a computational biology firm. Hedge funds have not been overly positive on the stock in recent months. At the end of the third quarter of 2021, 6 hedge funds in the database of Insider Monkey held stakes worth $13 million in Evogene Ltd. (NASDAQ:EVGN), compared to 7 the preceding quarter worth $18 million.
The hedge fund led by Cathie Wood, however, is the largest institutional stakeholder in Evogene Ltd. (NASDAQ:EVGN). Data from the end of September reveals that ARK held over 4 million shares in the firm worth over $10.6 million. This means that the other five hedge fund holders in Evogene Ltd. (NASDAQ:EVGN) held stakes just a little over $2.5 million. The company has consistently featured in the ARK portfolio since the first quarter of 2018.
Tech stocks like Tesla, Inc. (NASDAQ:TSLA), Coinbase Global, Inc. (NASDAQ:COIN), Shopify Inc. (NYSE:SHOP), Twitter, Inc. (NYSE:TWTR), Sea Limited (NYSE:SE) and Evogene Ltd. (NASDAQ:EVGN) are expected to be under pressure in 2022 and investors shift towards value plays.
11. Skillz Inc. (NYSE:SKLZ)
Number of Hedge Fund Holders: 18
Decline in Share Price in 2021: 75.5%
Skillz Inc. (NYSE:SKLZ) operates in the interactive home entertainment industry. The shares have spiraled downwards in recent months, leading to hedge fund exodus from the stock. At the end of the third quarter of 2021, 18 hedge funds in the database of Insider Monkey held stakes worth $432 million in Skillz Inc. (NYSE:SKLZ), down from 20 in the previous quarter worth $1.1 billion.
Wood has reduced the ARK exposure to Skillz Inc. (NYSE:SKLZ). Between June and September, the hedge fund reduced its stake in Skillz Inc. (NYSE:SKLZ) by close to 24%. This left it with the ownership of 18.8 million shares worth $184 million, representing 0.44% of the portfolio. ARK had first bought a stake in the firm in the first quarter of 2021, increasing it in the next quarter before significantly slashing that position.
10. Gamida Cell Ltd. (NASDAQ:GMDA)
Number of Hedge Fund Holders: 12
Decline in Share Price in 2021: 75.8%
Like most other stocks in the ARK portfolio, Gamida Cell Ltd. (NASDAQ:GMDA), a clinical-stage biotech firm developing therapies for cancer and blood diseases, has not had positive hedge fund coverage in the second half of 2021. At the end of the third quarter of 2021, 12 hedge funds in the database of Insider Monkey held stakes worth $26 million in Gamida Cell Ltd. (NASDAQ:GMDA), compared to 14 the preceding quarter worth $53 million.
ARK first bought a stake in Gamida Cell Ltd. (NASDAQ:GMDA) in the third quarter of 2020, buying over 186,000 shares at an average price of $4.26 per share. The fund then added to that position substantially in the next three quarters, by 72%, 108%, and 2% respectively, before slashing it by over 9% between June and September 2021. It now owns 623,674 shares in Gamida Cell Ltd. (NASDAQ:GMDA) worth $2.4 million.
9. Pluristem Therapeutics Inc. (NASDAQ:PSTI)
Number of Hedge Fund Holders: 6
Decline in Share Price in 2021: 76%
Pluristem Therapeutics Inc. (NASDAQ:PSTI) is an Israel-based biotech firm. It is another company in which Wood has slashed stakes recently. Latest filings show that ARK dumped 32% of the stake it owned in Pluristem Therapeutics Inc. (NASDAQ:PSTI) during the third quarter of 2021, leaving the fund with the ownership of 925, 361 shares at the end of September worth $2.4 million. Pluristem Therapeutics Inc. (NASDAQ:PSTI) has been in the ARK portfolio since the second quarter of 2019.
There has not been significant hedge fund activity around Pluristem Therapeutics Inc. (NASDAQ:PSTI) despite the fact that the shares have lost more than two thirds of their value in 2021. At the end of the third quarter of 2021, 6 hedge funds in the database of Insider Monkey held stakes worth $3.9 million in Pluristem Therapeutics Inc. (NASDAQ:PSTI), the same as in the preceding quarter worth $7.6 million.
8. Nano-X Imaging Ltd. (NASDAQ:NNOX)
Number of Hedge Fund Holders: 9
Decline in Share Price in 2021: 76.3%
Nano-X Imaging Ltd. (NASDAQ:NNOX) develops and sells X-ray source technology. Hedge funds have been exiting the stock as it registers a steep decline in share price. At the end of the third quarter of 2021, 9 hedge funds in the database of Insider Monkey held stakes worth $19 million in Nano-X Imaging Ltd. (NASDAQ:NNOX), compared to 11 in the previous quarter worth $28 million.
In addition to Tesla, Inc. (NASDAQ:TSLA), Coinbase Global, Inc. (NASDAQ:COIN), Shopify Inc. (NYSE:SHOP), Twitter, Inc. (NYSE:TWTR), and Sea Limited (NYSE:SE), Cathie Wood’s portfolio includes several small and emerging tech names like Nano-X.
Wood has also reduced ARK’s exposure to Nano-X Imaging Ltd. (NASDAQ:NNOX). Latest data shows that ARK decreased its stake in the company by 21% during the third quarter of 2021. It now owns 123,613 shares in Nano-X Imaging Ltd. (NASDAQ:NNOX) worth $2.7 million. ARK first bought a stake in the firm in the first quarter of 2021, increasing that stake by 64% in the second quarter before reducing that position in the third.
7. Cellectis S.A. (NASDAQ:CLLS)
Number of Hedge Fund Holders: 8
Decline in Share Price in 2021: 76.4%
Cellectis S.A. (NASDAQ:CLLS) develops immuno-oncology products based on gene editing. Interestingly, it is among a rare set of stocks in the ARK portfolio that have actually witnessed an increase in hedge fund investment in the past few months. At the end of the third quarter of 2021, 8 hedge funds in the database of Insider Monkey held stakes worth $55 million in Cellectis S.A. (NASDAQ:CLLS), up from 7 the preceding quarter worth $77 million.
However, Wood has decreased stake in Cellectis S.A. (NASDAQ:CLLS) by 19% during the third quarter compared to the ARK filings for the second. Latest data shows that ARK held 3.7 million shares in the company at the end of September worth $47.7 million, representing 0.11% of the portfolio. Cellectis S.A. (NASDAQ:CLLS) has consistently featured in the ARK portfolio since the first quarter of 2018.
6. Invitae Corporation (NYSE:NVTA)
Number of Hedge Fund Holders: 24
Decline in Share Price in 2021: 77%
Invitae Corporation (NYSE:NVTA) is a medical genetics company. Wood has doubled down on her bullish stance on the firm in recent months despite a sharp drawdown in the share price. According to 13F filings, ARK increased its stake in Invitae Corporation (NYSE:NVTA) by 22% between June and September. The stake is now worth over $736 million, representing 1.76% of the portfolio. Invitae Corporation (NYSE:NVTA) has featured in the ARK portfolio since 2016 with a minor break two quarters of 2017.
However, despite the bull call from Wood, other hedge funds have reduced their stakes in Invitae Corporation (NYSE:NVTA). At the end of the third quarter of 2021, 24 hedge funds in the database of Insider Monkey held stakes worth $1.8 billion in Invitae Corporation (NYSE:NVTA), down from 31 in the preceding quarter worth $2.1 billion.
Just like Tesla, Inc. (NASDAQ:TSLA), Coinbase Global, Inc. (NASDAQ:COIN), Shopify Inc. (NYSE:SHOP), Twitter, Inc. (NYSE:TWTR), and Sea Limited (NYSE:SE), Invitae Corporation (NYSE:NVTA) is one of the stocks affected by a market shift towards value in recent months.
5. StoneCo Ltd. (NASDAQ:STNE)
Number of Hedge Fund Holders: 37
Decline in Share Price in 2021: 78%
StoneCo Ltd. (NASDAQ: STNE) provides financial technology solutions. Amid a broader lull around growth stocks at the market, StoneCo Ltd. (NASDAQ: STNE) has suffered as well, leading to plenty of bearish calls on the stock. At the end of the third quarter of 2021, 37 hedge funds in the database of Insider Monkey held stakes worth $2.2 billion in StoneCo Ltd. (NASDAQ:STNE), compared to 44 the preceding quarter worth $2.7 billion.
However, the dip has served to embolden Wood, who has used it to buy even more shares of StoneCo Ltd. (NASDAQ: STNE). Latest filings reveal that ARK owned 1.8 million shares in StoneCo Ltd. (NASDAQ: STNE) worth $63 million at the end of September, an increase of 211% compared to filings for the second quarter.
In its Q2 2021 investor letter, JDP Capital Management, an asset management firm, highlighted a few stocks and StoneCo Ltd. (NASDAQ:STNE) was one of them. Here is what the fund said:
“StoneCo (NYSE: STNE) has been in our portfolio since early 2019 and has appreciated 225% since. In the first half of 2021 the stock was down nearly 20% and was a drag on the fund’s performance.
Stone is a leading fintec company in Brazil that provides back-office software, loans and other financial services to small and medium sized businesses (SMBs). We have discussed Stone in past letters and the company’s “ladder up” from a card processor to a supplier of enterprise software used to sell financial products on top of such as working capital loans.
The company generates a lot of cash that it reinvests to acquire or build new financial products for its customer base. Since we invested, the company has grown the number of SMB clients by 3x, revenue by 2.3x, and net income by 2.2×11.
The pandemic’s impact on SMBs in Brazil has been severe, especially for the many retailers who are only now adopting an e-commerce strategy. In the first half of 2021 Stone increased loss provisions on its lending product, and overall growth has slowed somewhat. The stock’s decline earlier this year was not surprising, but investors are now ignoring progress that has enhanced Stone’s position for coming out much stronger when the recovery begins.
StoneCo Q1 2021 Earnings Call: “Based on (i) our learnings with lockdowns last year, (ii) recent client transactional data and (iii) learnings from the dynamics of countries where vaccines are widespread, we expect that once vaccination scale (which we think will happen in the second half of 2021), the economic recovery will be fast and – although delayed – Brazil is moving in the right direction. For these reasons, we have made an informed decision to be ready for recovery by investing in growth…”
“…In the first quarter, we decided to increase our salesforce headcount by 24%, marketing investments by 33%, customer service and logistics headcount by 32% and technology headcount by 20% in order to be the fastest player when our economy comes back to normal levels.”
“I want to start our presentation by highlighting that Brazil went through a second wave of COVID in the first quarter of ’21, which imposed commerce restrictions in several cities throughout the country. Those restrictions were felt by our clients with average TVP reaching a low in the end of March…
…But similar to the behavior we saw in the comeback from the first lockdown in 2020, we already observed significant and quick recovery with average TPV in May achieving levels above January 2021. As Thiago mentioned, we expect that once vaccinations are scaled, the economy recovery of the country will be fast.”
In terms of COVID recovery opportunities within our portfolio, Stone might be the most “coiled” because the impact on Brazilian small businesses has been so traumatic. In addition, Stone is part of a much larger and fast-moving transition happening in Brazil around the digitalization of financial services. The speed of this transition is unique to Brazil because the Central Bank is actively trying to reduce the country’s previous dependency on a small handful of large banks. Important progress in the first half of 2021 included closing on the long-awaited acquisition of Linx, a mature provider of enterprise software with a large footprint across Brazil. The acquisition will provide Stone meaningful cross-selling opportunities and a more diversified customer base.”
4. Peloton Interactive, Inc. (NASDAQ:PTON)
Number of Hedge Fund Holders: 62
Decline in Share Price in 2021: 80%
Peloton Interactive, Inc. (NASDAQ:PTON) provides interactive fitness products. There has been little change in ARK’s position on the company in recent months despite a sharp drop in the share price. At the end of September, the fund owned 1.7 million shares of Peloton Interactive, Inc. (NASDAQ:PTON) worth $149 million, representing 0.36% of the portfolio. ARK first bought a stake in the firm in late 2020 and has added to it significantly since.
Peloton Interactive, Inc. (NASDAQ:PTON) has won the backing of major hedge funds as it captures the fitness market. Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Viking Global is a leading shareholder in Peloton Interactive, Inc. (NASDAQ:PTON) with 29 million shares worth more than $1 billion.
In its Q2 2021 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Peloton Interactive, Inc. (NASDAQ:PTON) was one of them. Here is what the fund said:
“Peloton Interactive operates a connected fitness platform offering live and on-demand classes allowing users to exercise at home. The firm’s shares were pressured in the quarter after Peloton announced a voluntary recall for both its legacy treadmill (Peloton Tread+) and its newly-launched base model treadmill (Peloton Tread). The issue surrounding the latter is somewhat troubling, as it appears it may be the result of an engineering flaw. This new treadmill offering was expected to be a key growth driver in the second half of 2021, and this development reduces our confidence in Peloton’s product pipeline. Therefore, we sold the stock.”
3. Chemomab Therapeutics Ltd. (NASDAQ:CMMB)
Number of Hedge Fund Holders: 3
Decline in Share Price in 2021: 81%
Chemomab Therapeutics Ltd. (NASDAQ:CMMB) operates as a biotech firm. Elite hedge funds have been attracted by the drug pipeline of the company in recent months. Among the hedge funds being tracked by Insider Monkey, New York-based firm OrbiMed Advisors is a leading shareholder in Chemomab Therapeutics Ltd. (NASDAQ:CMMB) with 2.5 million shares worth more than $28 million.
Chemomab Therapeutics Ltd. (NASDAQ:CMMB) is a new holding in the ARK portfolio. The fund purchased a stake in the company between June and September this year. The stake consists of 180,523 shares worth $2 million.
2. AquaBounty Technologies, Inc. (NASDAQ:AQB)
Number of Hedge Fund Holders: 6
Decline in Share Price in 2021: 83%
AquaBounty Technologies, Inc. (NASDAQ:AQB) is a biotech firm focused on the aquaculture industry. ARK owns more than 6 million shares in AquaBounty Technologies, Inc. (NASDAQ:AQB) worth over $25 million, representing 0.06% of the portfolio. The fund first bought a stake in the company in the first quarter of 2021, steadily increasing that position over the next few years. However, in 2021, Wood offloaded a portion of that stake in each of the first three quarters.
The hedge fund sentiment around AquaBounty Technologies, Inc. (NASDAQ:AQB) is not overly bullish either. At the end of the third quarter of 2021, 6 hedge funds in the database of Insider Monkey held stakes worth $27 million in AquaBounty Technologies, Inc. (NASDAQ:AQB), up from 4 in the preceding quarter worth $41 million.
1. Berkeley Lights, Inc. (NASDAQ:BLI)
Number of Hedge Fund Holders: 18
Decline in Share Price in 2021: 88%
Berkeley Lights, Inc. (NASDAQ:BLI) is a digital cell biology company. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Two Sigma Advisors is a leading shareholder in Berkeley Lights, Inc. (NASDAQ:BLI) with 1.1 million shares worth more than $23 million.
Even as Berkeley Lights, Inc. (NASDAQ:BLI) witnesses a steep decline in share price, Wood has remained bullish on the company. Filings for the third quarter of 2021 show that ARK increased its stake in the firm by 24% between June and September and now owns more than 8.5 million shares in Berkeley Lights, Inc. (NASDAQ:BLI) worth over $166 million, representing 0.39% of the portfolio.
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Disclosure. None. 15 Worst Stock Picks of Cathie Wood is originally published on Insider Monkey.
