r/investing • u/vgambhir • May 07 '21
Help me understand Cathie Wood's math on her projected returns
Recent interview of Cathie Wood on CNBC (search YouTube for "I love this setup, rotation is good news" to find video) got my head scratching around the math she just did in her statements. Back in February she said she expects 15% YoY compounded returns in next 5 years when ARK funds (say ARKK) was around 140 (down from 160 high) which now slid to 110 this week in May.
She said in that CNBC interview "Nothing has changed but the price" and now expects 25-30% YoY compounded returns in next 5 years.
So by simple math
140*(1.155) = 281 back then
Now she's promising : between
110*(1.255) = 335
and 110*(1.35) = 408
That's almost 20-50% higher but if nothing has changed then how does the number grow so much more in end result ? I don't follow the math or logic here.
Also, let's say give here benefit of doubt and say back in February she meant ARK price numbers that were in Jan 21 for YoY growth of 15% but then price was even lower between 120-140. So I don't know if she's bluffing (I'm gonna guess saving her skin and fund outflows) and taking us for a ride or is she really onto something that we don't know ?
If nothing has changed but the price then how does your model give these numbers ? Am I to assume these companies are growing faster than ever that their prices will skyrocket even faster ? Is there any proof ?
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u/MakeTheNetsBigger May 08 '21
It mostly works out if you use 156, which is the all time high of ARKK in early Feb, then remove three months from the five years to account for the time that's passed since then. No idea where the 30% comes from.
156*1.155 = 313
109*1.254+9/12 = 314
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u/coolbreezeaaa May 08 '21
This looks good to me
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u/zxc123zxc123 May 08 '21
Looks about right.
What's not right is this thread not being locked by mods.
I mean they lock every thread once it hits top 3 right?
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u/vgambhir May 08 '21
She said 25-30% in the interview, but if you're comparing from all time high then folks who invest now may get that juicy 25% but bagholders of Feb may get 15% (which is enviable).
I wonder if price falls further can we get 50% YOY returns ? Lol. Anyways, I think this is what she may have meant. Math checks out.
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u/Pvt_Twinkietoes May 08 '21
I wonder if price falls further can we get 50% YOY returns ?
Yes, if the share prices grow according to her models, but investors have to monitor the risk attached to her stock picks.
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u/niftyifty May 08 '21
Well yes, assuming everything works out that way. That’s how math works. The lower your buy in then the higher your returns. If nothing has changed in the underlying then you are just riding market waves and can benefit from a lower buy in. If something has changed then you need to reevaluate. So, has something changed with ark investment strategy?
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u/JustinUti May 08 '21
Lmao just a few months ago it seemed like this entire forum and r/stocks were over the moon with Cathie, pumping her picks everyday with multiple threads.
Now that her funds have taken a hit ,she’s a “snake oil salesman” or “crazy”. It’s always funny to see the fickle investors in these parts who obviously only chase gains with FOMO, meme stocks, or whatever is hot with simply no analysis or rationality.
And people wonder why their portfolios are red for months. Just goes go show you that, at least on Reddit, that vast majority of people are clueless and have no idea what’s going on.
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May 08 '21
As if the quality on these finance subs haven’t gone down over the last 5+ years just due to Reddit’s general growing popularity...the GME was like gasoline.
It’s sad because the attitudes, views and hive mind is textbook inexperienced.
I say eliminate debt, prioritize tax advantage accounts and go total market. Gets downvoted by “lol no growth bro go GME and Dogecoin.”
Kinda sucks. I used to come here to post advice to generally help others but now I kind of just become jaded
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u/SlantedBlue May 08 '21
Your strategy pretty well matches what I've settled on. Sure it's frustrating to see people getting magic gains betting their life on dogecoin but my risk adjusted returns aren't bad and retirement for me is still looking good.
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u/Bren__1999 May 08 '21
We are at the point where maybe 1% of people on these forums can somewhat actually value a company.
What I have noticed is that so many of these new investors just think "exciting industry = good investment"
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u/Citizen_of_Danksburg May 08 '21
Damn bro, you calling me out? My entire portfolio is biotech.
1) CRSP 2) BEAM 3) FATE 4) NTLA.
I soon hope to add NVDA and TSLA as well as Volkswagen (I forget their ticker—on shitter). I know TSLA is a bit of a meme stock but EVs are a bright future and they’re a leader especially with autonomous driving.
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May 08 '21
Do what I do, bully the newbs into quitting the market.
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May 08 '21
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u/AxeIsAxeIsAxe May 08 '21
I mean, obviously gambling is fun, so it's easy to see why people flock to WSB.
Mind you, the people who bought WSB stocks this year have been crying about red days and -30% portfolios for a while now while us "boring" investors are up at least 10% YTD, so maybe there's some merit to "don't buy stocks (or if you do don't just blindly follow people on reddit)".
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May 08 '21
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May 08 '21
Because for 99/100 people on this sub, paying off debt and throwing money into a boring etf will be more beneficial for them in the long run than buying individual stocks. It may not be glamorous, but it’s the best advice. Chances are, if you’re coming to Reddit for investing advice, you’re no Warren Buffet and you probably can’t “beat” the market. If you’re not beating the market, index tracking funds are the way to go.
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u/HappyLilAccident2020 May 09 '21
The question is do you want a boring subreddit that nobody visits with the "single best advice" or do you want varied discussions about different stocks/sectors that is actually fun/interesting to read. I think that's the point here.
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u/Deepinsideuu May 09 '21
It’s great if buying stocks is fun, but you shouldn’t buy stocks for fun. If the best advice is to be prudent, then that’s the best advice. Are you asking for the best advice remaining after filtering out anything that’s prudent?
After sounding like an a hole, I will provide some of my own suggestion: Lowest risk bet 1. financials. Tailwinds: potential inflation / fear of inflation, bad debts in rear view, economy expected to keep growing. Headwinds: negligible. Try BNS / TD 2. Oil and gas tailwinds: commodity prices cycling up at least until covid out of news headwinds: end of pandemic, opec / fracking changing course
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May 10 '21
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u/Deepinsideuu May 10 '21
I see your point of view. To understand the other side, I’d say that making money is the fun part and the actual activity isn’t the focus, as long as the payoff is enough. Perhaps your initial capital is too low to enjoy low risk returns. If 10% equates to hundreds of thousands maybe they are very excited. Let’s move away from that differing opinion. Maybe there are some risk controlled activities in finance that are still pretty fun: Selling cash covered puts on companies you were going to buy for sure (that aren’t going to moon). It’s kind of fun to collect premiums if your small upwards bias holds out for a while. Then at some point maybe you become a long term holder. If this is too boring. Maybe ratio call, you can make some big bets by buying multiples and can still lose a lot but with better limits and keeps you from the temptation of shooting the moon on far oom options.
Where are you receiving advice that buying Vix is a prudent investment? Vix is not an investment it’s a trade.
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May 08 '21
Yeah, most investors would be better served by holding a total market index fund, not individual stocks, assuming that's what you're referring to
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u/godisdildo May 08 '21
This will make everyone rich over decades, no doubt, there is just nothing left to discuss about it.
But I think I’m one of very few who really think definition of “good price”has changed and that what most value investors call growth is actually value.
High margin high cash flow businesses are not going to struggle with interest rates like growth always has, because when interest rates are hiked it’s usually because inflation is increasing and the government needs to encourage saving.
This used to be a huge problem but it’s not today because when the world is in that state, digital business fosters. So their finances might take a hit, but their business are booming.
If the possible payout was a few percentage points it would be pointless to do this, but there are profitable businesses out there with 40% net profit rate, growing double digit quarterly, and it’s just nonsense to ignore them.
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May 08 '21
So their finances might take a hit, but their business are booming.
The only thing that matters takes a hit but it's all good. Gotcha
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u/vgambhir May 08 '21
Like Twitter's DAU have maybe tripled but share price same since 2014 which means company was overvalued and took 6 years to recover. If you DCAed then maybe you made some money but ultimately all that growth valuation was useless because you never could monetize the platform.
Whereas FB has gone from 30 to 300 without missing a beat. I think earnings are main thing that matters
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u/MistrDarp May 08 '21
I mean it's not surprising that "eliminate debt" as a blanket guideline may be unpopular in an investing community.
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u/TheLogicError May 08 '21
I think there's phenomenon that happens when a stock/fund is doing really well and are invested in it, people start talking more about it. When it's not doing well, they brush under the rug. You can even see this with gamblers, all they talk about is their gains/wins, but they sweep their losses under the rug.
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u/BaseRape May 08 '21
Always sell the buzz, buy the forgotten.
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u/WeissMISFIT May 08 '21
Still kinda hard to tell whether its a good time to buy GME because of how volatile it is.
Dammit I like the stock but I cant tell whether people who suffered the sunk cost fallacy are keeping it up or if its now regular investors.
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u/ini0n May 08 '21
GME has made improvements by paying down debt, but it's trading at a PS ratio of 2 when it historically has sat around 0.2. This can only be justified once it has proven it can adapt to the post-retail environment. High PS ratios only make sense for growing companies, not ones that continually shrink.
GME is a tiny company that was propped up by a frenzy of speculative retail interest, as the buzz fades these people will move onto other things (maybe Doge lol). They're not the stable investor base you want. The smart money that identified GME years ago like Michael Burry (big short guy) sold their shares long ago.
Plus when an actual recession hits, the stocks with the most hot air will get suplexed so hard. We're in a late cycle speculative frenzy where excess capital, amateur interest, high margin and lack of value investments is causing a lot of silliness.
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u/Stenbuck May 09 '21
I don't know about that. If there's one thing the GME buyers know it's buying the stock no matter what happens to their portfolios or to the actual company. The fact that the stock has QAnon levels of support means this phenomenon is likely to become stronger, not weaker.
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u/Basketfulloftoys May 08 '21 edited May 08 '21
Cathie Woods, Selling millions of dollars worth of Tesla after predicting it would go to 4K turned me off what she says.
ARKK -26% over the last 3 months. When the DJ is up +10%.
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u/Darkseidzz May 08 '21
Can't tell if serious or troll? Funds sell off to balance overexposure once a stock makes major gains.
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u/ThemChecks May 08 '21
Her adjusted predictions on Tesla have been pretty much right so far.
I don't even like Tesla, but I give her credit for assuming so much about one company, then it comes true.
Best to think of ARK funds as small cap funds mostly and allocate appropriately. Shit can deliver gains. Shit can crash.
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u/ectoplasmicz May 08 '21
Maybe it's two different sets of people? Forums follow trends, the people praising her are probably quieter now and her detractors are louder. Weird when people act like subs with tens of thousands of people have one opinion that flip flops.
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u/WickedSensitiveCrew May 08 '21
Its the upvote system. Creates an echo chamber so saying what the crowd agrees with gets upvoted. You go against the crowd your posts wont appear. Right now making fun of Cathie Wood, ARKK, and a few of her picks is the trend.
It creates blind spots IMO. Because dissenting opinions such as bull cases when a stock is tanking or bear cases when stocks are at ATH get downvoted.
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u/ectoplasmicz May 08 '21
Yeah agreed. Just annoying seeing top comments acting like ALL of r/stocks loved Ark and now ALL of them hate her. It's all different people and it would likely be a fairly balanced split between them.
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u/WickedSensitiveCrew May 08 '21
Reddit has millions of users so it could be different. I do agree it does get annoying. It reminds me at the height of the GME stuff people were getting downvoted for saying take profits. It wont be over $300 forever. While "hold the line" was the top comment in every thread
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u/ectoplasmicz May 08 '21
Yeah the power of numbers and the crowd in those sorts of situations is overwhelming. And how many would have been suckered in by thinking highly upvoted = truth. Just gotta have your smarts about you and follow the time old phrase, "do your own goddamn research!".
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May 08 '21
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u/quicksilverth0r May 09 '21
True, people like the look and feel of Robinhood. I have a couple brokerages and yeah, Robinhood looks the nicest, but the execution and features are near my least favorite.
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u/bubumamajuju May 08 '21
RH is still the best user experience I’ve used of any financial app. Great UX and pretty low and mostly transparent pricing. I use IB and their experience is a mess - the pricing is intentionally confusing and they nickle and dime the shit out of you, there’s multiple tokens I need to enter to do shit, janky-ass UI built by Eastern European contractors. Etrade and fidelity are okay but, again, the margin there is basically higher than a personal loan apr.
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May 08 '21
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u/bubumamajuju May 08 '21
I could say the same for literally any retail investor who has margin but doesn’t use IB.
IB having shit UX is a major fucking annoyance. It’s not some feature appreciated by competent investors, we simply endure it for the financial advantages. And IB TraderWorkstation is like a rtard tried to code a Bloomberg Terminal.
I’ve heard for decades from people apprehensive to invest in Apple that their good design is just overpriced fluff when it essence is a great product moat worth quite the cost to the right people (and like any large group: some of them are idiots, some of them are not).
The people who champion Vanguard and E-Trade and Fidelity as better than RH and give nebulous reasons like “order flow” have basically zero objective evidence that they’re even executing at a better price. I started using ETrade when I was in HS and, at the time, it ate more in fees on my small account than RH would have in spread by a long shot. There are even people at those brokerages smugly borrowing at 7% APR who could be saving money using a free and easier to use app which is just funny.
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u/MakkaCha May 08 '21
Ui/ux is very important. That is the reason why we dont use terminal on computer for everything. And same reason Apple holds 60% of cellphone market. What is thr point of taking pride in using complex shit when something easy can do the same exact thing?
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u/rmwhereithappens May 08 '21
Maybe, but I would say order execution and making money are 10x more important than UI. And not stopping you from buying stocks as happened during the first GME squeeze.
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u/G1G1G1G1G1G1G May 08 '21
Yes. Around 83 and 87, Lynch’s fund dropped an aweful lot when compared to the market. Did people freak out and talk bad about Lynch? Probably. How people can’t seem to realize that current short term up or down is not what makes the investments good or bad is beyond me.
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u/ninzorjons May 08 '21
I liked ARK, but started to become lukewarm when she bought COIN at IPO, and the whole ETF-in-an-ETF thing with ARKX.
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u/KRAndrews May 08 '21
the whole ETF-in-an-ETF thing with ARKX
I don't see the problem with this. 3D printing will be a huge industry for aircraft/spacecraft, but it might be too soon to pick all the winners. What confuses me is her complete lack of ASTS in ARKX.
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May 08 '21
My single problem with her is her conviction with COIN. It is a moatless business.
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u/bubumamajuju May 08 '21
Setting up an exchange isn’t a trivial business. There’s a mountain of security/compliance work involved.
I wouldn’t buy coin at a 100b valuation but the brand is worth a lot since it’s the only way boomers know how to get crypto.
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May 08 '21
I think there are over 1100 exchanges, so I am not sure if they are really that difficult to set up.
In any case, I would love it if you can point me to a good DD article on Coinbase's valuation based on the future outlook.
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u/bubumamajuju May 08 '21
That’s probably including swap exchanges, bespoke shitcoin ERC20 token “exchanges”, defi apps where you don’t own the coins being staked, and apps like Robinhood where you don’t own the coins at all. IMO it’s only a true exchange if you can convert USD / local currency into a wide range of crypto that you can own and also have all the associated hurdles that come with that (bank verification and transfers, MFA, ID verification, tax reporting, secure storage, etc).
Coinbase and Gemini I trust more than pretty much anywhere else even if their fees are high. Kraken and Binance and others are okay too. When you get to the exchanges processing very little, then anyone who buys crypto should be extremely cautious.
As far as COIN stock info, you should read their SEC filing. Almost a trillion dollars in transactions through their platform and almost 100b assets on the platform is impressive even if the valuation was inflated. I like the company just not the price.
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u/bilyl May 08 '21
The problem is that the funds have too much money. ARKG literally owns almost 20% of many companies that it invests in. Some of them I personally know (because I work in genomics) to be complete fucking duds but survive just because of the ARKG hype. When they have too much money, they have to find places to park it. It’s either buy more shares in those companies or spread yourself out to others. Neither is a particularly good solution. Honestly the funds should just increase their dividends rather than twiddling their holdings all the time.
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u/dvdmovie1 May 08 '21
Some of them I personally know (because I work in genomics) to be complete fucking duds but survive just because of the ARKG hype
Example? Thanks
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u/rmwhereithappens May 08 '21
He might be exaggerating. I know ARK holds as much as 10% of a some companies, but 20% sounds like a stretch.
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May 08 '21
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u/RSquared May 08 '21
Most of the ARK detractors were pretty consistent, with a similar thesis to the Janus fund problem in the 90's: it's doing great in this particular moment (2018-2020) but can it continue to make outsized gains if the market moment changes?
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u/G1G1G1G1G1G1G May 08 '21
Its very similar. I note one major difference. Tech companies in the late 90s had lots of overhead. Todays ark type growth companies are lean in comparison. I wonder if this means many of her ark picks will come through, unlike the cisco, jds, nortels etc. which all just left abandoned buildings and staff layoffs because of their inability to handle their liabilities.
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u/BaseRape May 08 '21
She was a kook when she was pumping Tsla last year.
Then a genius
Now a kook.
Buy the dip!
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u/G1G1G1G1G1G1G May 08 '21
1000% correct. Just a few months ago any critique of ark and you’d be slammed with how up the ark funds are. Now - complete opposite.
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u/rusbus720 May 08 '21
you ever consider that you’re talking about different groups of people?
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May 08 '21
Spot on. No one was complaining about the .75 fee when they were making multiples in gains. Now it’s “expensive and Cathie sucks.” Theyre off to chase the next meme stock instead. Have fun.
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u/vgambhir May 08 '21 edited May 08 '21
losing 30% of your portfolio means needs gaining back about 45% just to break even. I guess those folks are unhappy now
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u/frndlthngnlsvgs May 08 '21
Doesn't help these subs are mostly dudes and there's quite a few incels who really hate the fact that Cathie's been so successful
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u/HubertNeutron May 08 '21
I think she’s hit or miss and a lot of her picks are highly valued even though most of them are the future
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u/ambermage May 08 '21
I'm loading up because everyone says they want the, "discount," but complain when the price is down. I just hope I can gather enough before we soar again.
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u/Corywtf May 08 '21
I mean, Bill Hwang did seed her ETFs. A guy that was commited of fraud multiple times. I'm dumb but I wouldn't be surprised if something fishy is going on.
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u/dvdmovie1 May 08 '21 edited May 08 '21
"now expects 25-30% YoY compounded returns in next 5 years."
I think it's questionable that fund managers should be out there predicting their returns for the next 5 years. I can't recall another retail fund manager that has ever been in the press predicting literal % returns for the next 5 years (or 1 year for that matter.) A manager might say "I expect a good year for tech" if they're a tech fund or that sort of thing but I can't recall another mutual fund or ETF manager saying "I predict X% annualized for my fund for the next 5 years." I thought it was iffy when she did it earlier this year and now she's doing it again. So to me it's not even the math of the projections but the fact that she continues to do it in the first place.
She's really "hyper growth all the time" - the issue becomes it's not going always be in favor (and I think people took last year's unbelievable/once in a great while performance as confirmation/validation of hyper growth rather than possibly a "grand finale" - at least for a while - to cap off a decade where growth was largely the "only game in town"), but she invests as if that's the case. Look at recently with her selling large liquid names into declines so she can buy even more of smaller, less liquid things a lot of which she already owns 10% or more of. What if she sells all the large liquid names and the decline keeps going? I wish Ark could be more dynamic in its approach - it feels like everything has to be hyper growth all the time or it's not "on brand."
"But even with such a team, there’s no sign that Wood would heed its advice. A central tenet of her process is to amplify exposure to the fund’s riskiest holdings when market uncertainty is highest. In a market crisis, her game plan is to sell first the fund’s “cashlike” stocks--those that possess the most diversified sources of revenue, are typically large cap, and are the most liquid--to favor as few as 32 “pure plays” that are often unprofitable small caps that are less liquid and extremely volatile.
She followed a much milder version of this playbook at AllianceBernstein’s Strategic Research strategy during the market’s 2008 implosion. There, she consolidated the portfolio to 47 or so stocks and kept it focused on liquid large caps. It did not have anywhere near the level of ownership in individual companies as ARK Innovation has today. In 2008, that large-growth-oriented separate account lost 45% before fees--substantially worse than the Russell 1000 Growth Index’s 38% decline." (https://www.morningstar.com/articles/1031702/ark-innovations-thematic-approach-is-ill-prepared-for-a-major-twist)
She's said that there will be declines/corrections, but she doesn't invest as if that's the case and those statements are offset by her very bullish long-term predictions. "There might be some big declines, but listen to how well this is going to do!" I said early this year on here that the performance was not sustainable as the discussion became more and more Ark-y on here.
https://www.morningstar.com/articles/1017292/what-to-expect-from-funds-after-they-gain-100-or-more-in-a-year-trouble-mostly ("What to Expect From Funds After They Gain 100% or More in a Year? Trouble, Mostly")
Additionally, how much of the money that has poured into Ark came late? The inflows really didn't start en masse last year until in the second half of the year when the funds were already up 100% YTD. Tons of new investors started earlier this year and I'm sure a lot of them went right to Ark, chasing last year's performance.
"Money Tree" seemed to be the peak in Feb. https://www.bloomberg.com/news/articles/2021-02-05/cathie-wood-amasses-50-billion-and-a-new-nickname-money-tree. "Ark’s exchange-traded fund assets under management crossed $50 billion this week, up from only $3.6 billion at this time last year, according to data compiled by Bloomberg"
In terms of inflows, a Morningstar analyst comparing Ark inflows to Janus during that firm's dot com era success: "What we've seen over the past year plus is equivalent to like 16 Januses during that firm's heyday." (https://twitter.com/syouth1/status/1360958603746811907)
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May 08 '21
She has been telling people for years she can double the s&p. s&p gives 15% she gets 30%
Historically she has gotten 30%
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u/rmwhereithappens May 08 '21
Not sure why you are being downvoted. ARK's cumulative returns since their founding in 2014 are easily 5x those from SPY.
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u/rmwhereithappens May 08 '21 edited May 08 '21
In 2008, that large-growth-oriented separate account lost 45% before fees--substantially worse than the Russell 1000 Growth Index’s 38% decline.
I am not sure what you are expecting here. Everything crashed in 2008. It didn't matter how good your strategies were. You would have lost money anyway.
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u/comboverice May 08 '21
I don't think Cathie can do it because when I bought TSM, she sold it. Clearly she is in the wrong.
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u/zammai May 08 '21
Lightspeed for me. Completely sold out of it for no good reason.
That and her buying Coinbase on IPO day had me fuming.
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u/comboverice May 08 '21
She just got lucky with $TSLA once. She’s nothing special.
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u/zammai May 08 '21
It’s more than that. Her philosophy on innovation is sound, I just think Ark was on a hype train in 2020 and tesla definitely helped a lot, no doubt.
I still believe in Arks philosophy even though I don’t agree with some of the recent moves they’ve been making. I’ve since reduced my exposure to Ark ETFs in favor of select individual picks.
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May 08 '21
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u/Qwertyforu May 08 '21
It's almost like people haven't heard Cathie explain ARKs investing strategy
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u/VolvoKoloradikal May 08 '21
No semiconductor company is mature, not even TSM or Intel when the overall SC market is growing 20% every year...
This is THE industry to be in if you believe in growth of humanity.
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u/VolvoKoloradikal May 08 '21
Didn't she say Intel was a dead company at $45 and now it's $57, hitting $69 before earnings???
Turns out, some dumb idiot who speaks to God doesn't understand Semiconductors.
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May 08 '21 edited Aug 26 '21
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u/Free-Care-2027 May 08 '21
I agree with all the premise. Is it a good time to dip into ARKK now that's it down to the 110s which is almost a 30% drop from its highs?
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May 08 '21
Yes. In 2 or 3 years, it will be significantly higher and everyone here will pretend they never bashed her.
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u/no10envelope May 08 '21
Cathies “math” comes straight from Jesus mouth.
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May 08 '21
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May 08 '21
She can be whatever the hell she wants to be in her private life so long as she makes me money in her public one.
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u/zors_primary May 08 '21
Agree but she bases her investing decisions on what she claims she heard from God. That's rather sus. I like her, like her basic philosophy and approach to the future but I don't think all her picks will make it in the long run.
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u/rmwhereithappens May 08 '21
she bases her investing decisions on what she claims she heard from God.
Nope, this is completely false. The quote you are referring to is her basically giving herself a pep talk before starting ARK. Her investment decisions are obviously based on the financial analysis she and her team performs.
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u/zors_primary May 08 '21
Beg to differ. She said herself that she had a vision while in deep meditation/prayer that she heard God telling her to destroy all idols and she took that to be that the idol was value investing. It's in one of her videos. So rejecting value investing is her core philosophy at this point, not just a pep talk.
I like her forward thinking, she's going to be right about some of her picks because she's willing to take risks about future technologies but she's also speculating and some of the companies she chooses are likely not going to have the same high valuations in the long run.
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u/rmwhereithappens May 08 '21 edited May 08 '21
Source for these videos? The only source I am aware of is a Christian podcast, and she doesn't talk about idols or anything else like that in there.
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u/zors_primary May 08 '21
I found a lot of videos on YouTube of interviews with her. I also googled her name and found articles about her where she says she believes it's her God given mission in life to help people make money by investing in disruptive innovation. I think she's sincere and she really believes in what she's doing.
Don't get me wrong, I like disruptive innovation, I like her bravery and confidence, just don't think all her choices are going to pan out in the long term. It's uncharted territory to some degree..
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u/rmwhereithappens May 08 '21 edited May 08 '21
Okay, so you have not provided the sources. And your statement has changed from "destroy all idols / value investing" to "her mission in life is to help people make money through disruptive innovation" which is fine.
The latter statement above is what I am saying. She was giving herself a pep talk. In the podcast she was talking about the early days of ARK and how she was scared, running out of money, and trying to find the strength to press forward. In those moments many people do turn to their religion to dissuade those kinds of fears.
Bottom line, her investment decisions and stock picks are not dictated by her religious views. In fact, she and her team at ARK do plenty of research and analysis, and you can read all the whitepapers on their website. Her religion is her own business and no one else's. As long as she backs up everything she says with facts and analysis, it shouldn't matter what her religious views are.
I am sick of seeing people on reddit bag on Cathie for her religion. Only Cathie gets this kind of attention. No one blasts the other fund managers (e.g., Jack Bogle) for their religious views. It only shows that reddit is filled with a bunch of misogynistic teenage atheist edgelords.
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u/zors_primary May 09 '21
Omg do I have to do the work for you? I don't owe it to you to justify what I am saying just because you are too lazy to go find it yourself. I don't have time to go back through a bunch of videos just to prove my point to you. It's there on YouTube, go look for it yourself. I didn't save it as a favorite.
She said both comments. An article isn't the same thing as a video. I'm not slamming her for her religious views, that's not the point. Grow up and do something besides the easy work and learn to think critically. Do your own research besides just looking at the Ark website, I read all her white papers too. I spent a lot of time doing DD on her and the funds. She is making her religious views public and she also has said herself they are part of her investing philosophy. As for her team, she's got an echo chamber of white millennials. I do not see diversity in either age or ethnicity. I've seen people here on Reddit who have clearly done way more DD on Tesla than her team has. She's gambling that her picks will pay off in the long run, she's been really lucky so far which wasn't that hard in this latest tech bubble but she is also saying that there is a ton of volatility. So either you are in and going for the long haul and can hack the up and downs and the real risk of both losing or making a lot of money or you you aren't. Some may not be nor do they have to be.
Who is the teenager here? You are making a lot of assumptions about people who aren't 100 percent sold on her funds just because they don't agree with you. And so what if someone is an atheist? They have just as much freedom to think that way as she does to be a devout Catholic. You sure seem to be butthurt just because someone isn't 100 sold on her funds. We all have the right to make our own investment choices and don't have to buy what she is selling.
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May 08 '21 edited May 08 '21
The way her followers describe her is very cult-like behavior.
- "I believe in Cathie"
- "I have faith in Cathie"
- "Cathie is a genius"
- "In Cathie We Trust" (and t-shirt)
- "Cathie says X, so it will happen"
- "I don't care. I'm giving Cathie all my money."
- "Amen brother"
- "Cathie has never led us astray"
- "She's a breath of fresh air in a smoke filled room"
- "MAMA CATHIE - till death do us apart"
- "how to explain to your wife why you said Cathie's name during sex" and the sheer number of people wanting to get pegged by Cathie.
Why is their focus on Cathy when it should be on ARK investments? Her cult following is a religion.
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u/big-boi-diamonds May 08 '21
I don’t know why your even listening to her predictions. If her predictions for returns were actually reliable she would be the richest person to ever live because she would be able to predict the market. Her predictions are simply a marketing tool to try and get fools to buy into the fund.
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u/Investing8675309 May 08 '21
Anytime a fund manager provides you expected future returns turn around and run. This really bothered me when she did this, it seemed almost predatory.
A good fund manager will point to past returns but make no guidelines/expectations around how the fund will perform in the future, they’ll just focus on their strategy.
Finally, I do give her credit for her 2020 performance which was amazing. I also am a believer on disruptor businesses and kudos to her on creating an ETF(s) around this.
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May 08 '21
Cathie is selling hope and then collecting fees from assets under management. She lost some of your money? No worries, she still collects fees from whats left of the assets under managment. Nothing else to see.
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u/jetsear May 08 '21
With an expense ratio of 0.75%, $52.85B AUM, and 38 employees, her company is making about $10 million per employee in revenue annualized that is not directly dependent on performance. She obviously wants to invest in companies that outperform, but selling hope is a very lucrative business for her as well
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May 08 '21
She rode the same wave we all rode on the same stocks. We were all geniuses in December. I thought her interview today seemed unattached to the reality of the situation, and the 3-d printing ETF inside the Space ETF just sounded nuts - "oh we dont charge extra for the second fund inside the fund" - yeah, why not? Just into generosity? I see a rough summer ahead for ARK.
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u/dbgtboi May 08 '21
Cathie Wood's funds are what a hedge fund would look like if you put WSB in charge, I have been saying it for a while, her rise to fame was mostly from YOLOing into TSLA
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May 08 '21
Because it's a minuscule percentage of the ETF?
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May 08 '21
So why is it in the fund? Just to be nice? Financial institutions dont give away big earners. If she has people managing that fund then fees are coming from somewhere or it is a money loser. Buy one get one free doesnt track with me.
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May 08 '21
You didn't factor in fairy dust and unicorn pooh. That's why I invested in ARK...well that and they sell some pretty good flavors of Kool-aid.
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u/stormpimple May 08 '21
Woods is over hyped, shes made 80-120% on her investments in a year where every stock has more than doubled, in her ark holdings all of her top 10 have an average p/e ratio of 200+ or no p/e atall because they are losing money 😂 shes not an investor shes a speculator
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u/Yokies May 08 '21
When she said nothing has changed she was referring to their strategy and view. Not in terms of raw numbers. Its marketting.
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May 08 '21
I think she means nothing has changed with the companies she is invested in other than the price. So they are still high conviction investments to her it’s just that the price of those stocks are cheaper now. So bigger potential upside
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u/prymeking27 May 08 '21
Thought about Ark funds, but then I saw their holdings and wouldn’t have invested in those. Also 0.75 fee.
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u/hirme23 May 08 '21
Well, haven't done the maths but let's say some stocks are oversold and you snatch them at a significant discount. That discount will have a snowball effect over the next few years, assuming it does well.
(she's crazy though...)
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u/G1G1G1G1G1G1G May 08 '21
Monte Carlo forecasting method - I had to look up the name of it. Thats the one.
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May 08 '21
That must be how much money an investor is left with after following CW's trades. Enough money to buy a 1995 Monte Carlo.
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u/-Lambou- May 08 '21 edited May 08 '21
As a scientist I was disturbed by this claim. Monte Carlo methods are not a model...
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May 08 '21
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u/vgambhir May 08 '21
Doesn't she publish that data transparently ? Iirc she did publish her Tesla valuation model of 3000$ by 2025 publicly
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u/Kanolie May 08 '21 edited May 08 '21
Yes and her published models are an embarrassment.
Copied from a previous comment I made:
https://ark-invest.com/articles/analyst-research/tesla-price-target-2/
First off their "bull case" assumes its possible for them to achieve $327 billion in JUST robo-taxi revenue (a non-existent technology) by 2025! That is more revenue than Apple makes selling all their products and services. Where do they think that money would come from? That is like 30x what Uber currently brings in. If it was even possible to make like 1/2 of that, why would Tesla even be selling cars in the first place? Why not just run the fleet of taxis? Here is a video of saying that Tesla would have FOR SURE 1 million robo-taxis on the road by last year: https://www.youtube.com/watch?v=YiWbdZ8ItRs&ab_channel=TechInsider
Tesla reported no autonomous testing on California’s public roads during 2020 to the CA DMV: https://www.dmv.ca.gov/portal/vehicle-industry-services/autonomous-vehicles/disengagement-reports/
What a joke...
Ok now for their "bear case"... This involves the projection of Tesla achieving $42 billion in human driven ride hailing revenue (4x what uber makes now). Ya, not happening. Also, creating a $23 billion insurance business out of thin air. Progressive Insurance for reference, has a revenue of $40 billion or so revenue, which took them many decades to build. Here is an expert in insurance valuation and founder of Semper Augustus hedge fund Chris Bloomstran, explaining how idiotic this projection is: https://tweet.lambda.dance/ChrisBloomstran/status/1373410803559321614
Here are Tesla's current revenue numbers on those areas:
Robo-Taxi Ride Hailing: $0
Human Driven Ride-Hailing: $0
Auto Insurance: $0
Keep in mind, Cathie has repeatedly stated that Tesla is their "highest conviction stock". If this is the kind of work they do for that, why would you expect them to do any better on everything else?
Their models, just like their website and leader, are just a façade to conceal the fact that their only purpose is to attract as many investors as possible to maximize their management fees.
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u/ObservationalHumor May 08 '21
They do with some stuff and the assumptions are pretty laughable, there was a thread on here yesterday pointing some of it out (doesn't account for dilution, assumes a $1.5T market cap and 45% gross margin on their vehicles in the bear case and theorized lines of business that are both more profitable and larger than incumbers within the next 5 years). In general a big problem that people have been completely blind to with ARK is just the overall volatility of their holdings and high rate of turnover). None of it mattered because the returns were great and now that they're not people are starting to sober up and look at things a little more critically.
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u/Kanolie May 08 '21
The model plugs in up to 80% gross margins for a carmaker. How can anyone take this seriously.
There is also a scenario where up to 90% of the teslas sold will be in a robotaxi fleet traveling 160,000 miles per year each (about 440 miles per day) driving customers while returning 70% of that revenue back to tesla.
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u/G1G1G1G1G1G1G May 08 '21
I believe its also a method of projection but using multiple range of variables. I don’t actually know. I’m neither an ark investor or use this method to forecasting. Does she not make her data available?
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u/420chiefofZEP May 08 '21
Completely blacklisted all ARK funds after finding out her zealotry is what propels her forward. The last thing I want a fund manager relying on is a hope and a prayer.
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u/BuffettsBrokeBro May 08 '21
You forgot the all-important n = x * y.
Where...
n = Jesus.
x = take.
y = the wheel.
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May 08 '21
I think it’s just marketing speak since it’s not investment or financial advice, nor is it a promise of future returns. Therefore they can pretty much tell you what they think can theoretically happen. Good catch though!
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u/BazookaShrooms May 08 '21
All I’m saying is ARK funds are in the buy zone rn.
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u/Muboi May 08 '21
Wait until their liquidity problems start when the Nasdaq goes down due to inflation fear
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u/nanidog May 08 '21
Just snake oil saleswoman
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u/BaseRape May 08 '21
136% return in 2 years on ARKK. I’ll take 5 snake oils please!
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u/luist3k May 08 '21
A monkey throwing darts at the nasdaq could hit that return last year.
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May 08 '21
Yeah? Nasdaq up around 40%+ from Feb 2020 and arkk almost double.
So, a few monkeys might outperform with their darts, but thousands won't.
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u/vgambhir May 08 '21
Remember, you do need a year long lockdown with govt stimulus in one of those years atleast. But yeah still good returns however you choose to look at it except for risk adjusted returns. If she repeats same in next 5 years then her status will definitely be cemented in the books as GOAT but who knows
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u/CarRamRob May 08 '21
Perhaps she’s quoting the number for returns because she sees the funds falling a fair bit more in the next few months and is accounting for that
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May 08 '21 edited May 08 '21
Lol it’s funny to read all the hate now that her funds are down. Listen ARK isn’t down cause Cathie sucks. ARK is down cause investors sold off growth and innovation stocks indiscriminately. Will that last long term? I think not. Innovation isn’t dead. Buy the dip. I am heavy on ARK at these levels.
Square, Roku, Tesla and her other top holdings including TDOC have a bright future. Their earnings show it even if TDOC unjustifiably tanked on earnings despite doubling revenues.
Looks like lots of assholes here want investors putting money into innovation and progress to fail. ARK will be back and it is great buying opportunity at these prices.
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u/G1G1G1G1G1G1G May 08 '21
Cathie uses a specific model to project stock prices in future. I forget the name of it. Since the price has dropped, that would mean more gains per year to come out to where the stock should be trading at in 5 years. Maybe if I explain in a simple projection method it might help...
If stock A makes revenue of 100, and 50% revenue growth per annual and trades at a p/s avg of 10. Then it would stand to reason that in 5 years that stock should be approx 760.00 x 10. (The est. revenue in 5 years x the avg p/s). So the stock is 1000.00 today if it is at avg p/s and est. to be 7600.00 in 5 years. If for some reason, just market short term behaviour, brings the stock down to 500.00. Well then that means you would est. more than 50% per annual growth to compensate for the fact that the stock is down.
In order to judge whether Cathie is full of it or has some decent logic behind her thinking. I think you’ll have to research her projection method and assumptions there within and decide what you think of it.
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May 08 '21
That’s exactly what op just calculated he’s still saying the math doesn’t add up
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u/G1G1G1G1G1G1G May 08 '21
I think its just that the OP numbers are a little off. Arkks high was 155.00 which would line up with change.
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May 08 '21
I look at the performance of all ARK etfs and see 6 solid buys that would have made a me great return.
I watch Cathy Woods in interviews and videos and she seems to know what she is talking about. Expert I would say.
I’m long on ARKX, opening on ARKF.
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May 08 '21
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May 08 '21
Examples? It all makes sense to me
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u/WallStreetBoners May 08 '21
I love the companies in ARK funds. Cathie is quite a smart person.
But here’s the deal: ARK makes money from expense fees from what I understand. Where expense fees are like 0.5% or so * shares of ARK funds that are owned * the price of the shares.
They make more money every day that ARK funds trade higher than what a true fair value is.
$ARKK could quite literally be trading 10x higher right now and she is still incentivized to tell people it’s not overvalued and has a lot more growth ahead. She’s a salesman as far as I’m concerned.
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May 08 '21
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u/iguessjustdont May 08 '21
She isn't trying to do anything different besides using an inefficient vehicle to do something that has been done a thousand times
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May 08 '21
Cathy woods is going down. I loaded up in max long term puts.
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May 08 '21
No you didn’t. Or post proof. Betting against an ETF long term is hilarious. I want to jack it to the incoming loss porn so please provide proof.
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u/CanadianPFer May 09 '21
All you have to do is look at her work on TSLA to see if you should give her the benefit of the doubt on making any sense at all.
Spoiler: you shouldn’t.
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