Cathie Wood is on pace to notch her best month ever as her beaten-down innovation darlings staged a big comeback in the new year. Wood’s flagship Ark Innovation ETF (ARKK) jumped over 3% on Tuesday, bringing its January return to more than 27%. The fund is slated for its strongest month ever since its inception in 2014. Leading the 2023 rally were the largest laggards of last year, including Coinbase, which has skyrocketed about 66% year to date. Shopify, Tesla, Exact Sciences, Roku and Nvidia have all rallied more than 30% this year. The big rebound came after a brutal year in which ARKK lost 67% as interest rates rose. “A lot of bearishness about inflation and interest rates has been baked into the multiple structure of the market and has punished innovation stocks disproportionately,” Wood said in an investor webcast earlier this month. The innovation investor has said that the macroeconomic trends should start to work in her favor. She has been calling for deflation for some time, betting that high prices that emerged in 2021 were caused by temporary Covid-related supply issues. Meanwhile, Wood said the US entered a recession last year, driven by excess inventories. Now the economic downturn, coupled with easing inflation, should prompt the Federal Reserve to reverse its monetary policy, which would benefit her funds, she said. “A recession is much worse for value and cyclical sectors than it is for growth oriented sectors and innovation being at the lead there,” Wood said. Muted flows Despite the dramatic rebound, the innovation-focused fund did not see big inflows in the new year — only $2 million in new money for the fund with more than $7 billion assets under management, according to FactSet. The muted flows marked a stark difference from the same month last year when it enjoyed $238 million in inflows. Investors also stood by the fund even amid steep losses last year as ARKK reeled in over $1 billion, and that is among the top 3% of all exchange-traded funds in the US, according to FactSet. “Ironically, many investors stayed loyal to the ARK strategies in 2022 when the fund was incurring losses,” said Todd Rosenbluth, head of research at VettaFi. “While some of them have lost patience that 2023 would be a recovery year, the ETF’s $1 billion of net inflows…the past year is a sign of a very loyal and patient investor base.” Wood has spent the new year continuing to buy the dip in her favorite technology names. The widely followed fund manager has been buying the beaten-down Tesla for a few months during the sell-off. She also bought 239,920 shares of Teladoc on Monday when the stock fell 5.5%.
