When superstar investor Cathie Wood invests, many others follow. That's because Wood, who launched Ark Invest back in 2014, has delivered impressive returns. Her flagship Ark Innovation ETF truly took off during one of the worst of times for many: the early days of the pandemic. Ark Innovation soared 148% in 2020 compared to 16% in gains for the S&P 500.
But Wood's winning streak lost steam and eventually screeched to a halt. Ark Innovation slipped 24% in 2021 and more than 66% last year. These declines mean it now has gained less than the S&P 500 over time.
Now the big question is whether Wood's time in the limelight is over -- or whether this famous investor may bounce back this year. Let's take a closer look.
Wood's investment style
First, let's consider Wood's investment style. She's interested in disruptive innovation -- or technologies that change the way we usually do things. Wood's belief is, as stated on her website, "Investors should have access to innovation and benefit from owning what could be the most innovative companies of our lifetime."
Her funds -- and holdings -- are a reflection of this. Ark invests in themes including next-generation internet, genomics, robotics, space exploration, and cryptocurrency. But the biggest and most well-known fund is Ark Innovation. Today, the fund has more than $7 billion in assets under management and is worth about $32.8 billion.
Its holdings include many generally high-growth names. Electric vehicle giant Tesla (TSLA -1.11%) takes the top spot, with a weight of more than 10% in the fund. Other big holdings include Zoom Video Communications (ZM 1.57%), Teladoc Health (TDOC -2.40%), and Coinbase Global (COIN 5.68%).
These players soared during times of economic growth. But the bear market and general economic gloom led to major losses for these stocks last year. They each fell more than 60%.
Investors are favoring safety
And if economic difficulties continue throughout this year, tough days may not be over for these innovative names. Why? Because in times of trouble, most investors favor safety. This means investing in tried-and-true technologies, or companies that sell something consumers can't avoid buying -- like essentials or medication.
Wood, as a long-term investor, isn't changing her investment tune just because of today's tough economy. She still believes these companies offer bright prospects over time, so she's sticking with them -- and adding to her holdings. In December, Wood added to positions in the year's losing stocks, including Tesla, Teladoc, and CRISPR Therapeutics (CRSP 0.34%).
And in an interview with Barron's before the end of the year, Wood didn't seem daunted by Tesla's 2022 decline. She predicted the stock could reach $1,500 over the coming five years. (Tesla finished the year at about $123.) She cited manufacturing, technology, and materials advantages that support long-term success.
So it's clear Wood is standing by her favorite stocks -- in spite of last year's performance and ongoing economic difficulties.
Now, let's get back to our original question: Can Cathie Wood bounce back in 2023?
An investment case that hasn't changed
No one can answer this for sure, of course. But I can offer a few general thoughts.
First, the investment case for Wood's favorite stocks hasn't changed. Certain companies -- such as Tesla -- are facing headwinds linked to the economy. By this, I mean higher costs and unfavorable currency exchange rates.
But these problems are temporary -- and external. That means once these challenges ease, many of the stocks held back by them could take off.
And speaking of rebounds, since many of Wood's favorites plummeted last year, they could be among the first to climb once the general market situation improves.
So the key element here really is the economy. Once investors begin feeling a bit more confident about it, the Wood-style stocks could benefit. If this happens in 2023 -- perfect.
But if it doesn't, there's still reason to follow Wood's lead. She may bounce back over time because she's picked many innovative companies with solid long-term prospects. And that's why her days as a superstar investor are far from over.
