Cathie Wood’s worst-ever year wasn’t even over before the clouds started to gather for 2023.
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For the past few weeks, Wall Street has been slashing earnings expectations for some of the biggest holdings of her flagship $5.8 billion ARK Innovation ETF (ticker ARKK) — signaling more pain ahead for a strategy that was hammered throughout 2022 by the most aggressive Federal Reserve tightening in decades.
Those relentless rate hikes crushed many of Wood’s tech-focused, speculative bets, and her legion of die-hard followers were surely hoping for a better 2023. But with interest rates set to remain the highest they’ve been since 2007, analysts have downgraded their 12-month earnings estimates for half of the largest weights in ARKK, according to data compiled by Bloomberg.
The list includes Tesla Inc. and Zoom Video Communications Inc., which are down 65% and 63% for the year through Thursday’s close.
The earnings revisions threaten to heap more pain on investors who have sunk billions into Wood’s strategy of handpicking growth stocks with so-called visionary stories. ARKK is down 67% year-to-date.
A spokesperson for Wood’s firm, ARK Investment Management, declined to comment.
“ARK’s portfolios are loaded up with longer duration tech stocks, which have been absolutely punished by higher rates,” said Nate Geraci, president of the ETF Store, an advisory firm. “If the Fed is more aggressive than expected in 2023, look out – it could be another bloodbath.”
Read the full article here by Emily Graffeo, Advisor Perspectives.
