Cathie Wood’s ARK Innovation ETF drops more than 3% amid tech sell-off, off almost 30% from high

Cathie Wood, executive director and chief investment officer of ARK Investment Management LLC, speaks during the Sooner Than You Think conference in the Brooklyn neighborhood of New York on Tuesday, October 16, 2018.

Alex Flynn | Bloomberg | Getty Images

Star manager Cathie Wood’s flagship fund – Ark Innovation – took a hit on Tuesday amid growth stocks sell-off.

Ark Innovation fell 3.3% on Tuesday while the Nasdaq Composite fell 1.9%. The Disruptive Innovation fund is down more than 6.4% this week and 9.2% in 2021, while the S&P 500 is up over 10% this year.

The fund is almost 30% below its high as of February this year. After that, the ETF writhed in the face of the looming rate hike.

“High multiple stocks in tech are very crowded,” said Stephanie Link, chief investment strategist at HighTower, in CNBC’s “Mid-Term Review”. “You have very difficult comparisons going forward. But so are the valuations. High valuations are not good when you see better GDP growth and a little more inflation.”

Some of Ark Innovation’s top positions achieved great success. Tesla lost 1.7% and Teladoc Health fell 3%. Square and Roku fell 5.1% and 4.7%, respectively. The Zillow group was down 3.4%.

It is difficult to pinpoint the exact reason technology stocks are selling this week as interest rates remain lower and the sector makes blowout gains for a week. Investors could take profits on their biggest winners since the pandemic lows and transform themselves into things that will be more heavily used to reopen.

In addition, the risk of higher capital gains taxes is unlikely to add to sentiment.

Jim Paulsen, chief investment strategist at Leuthold Group, told CNBC that investors may be increasingly disappointed that the stocks are not doing well given the fantastic earnings news. He suggested that when the “good news” is fully priced in, a market top might be close by.

Given this weakness, investors are pulling money out of Woods’ funds. Ark Innovation left more than $ 290 million in the past week, according to FactSet. However, more than $ 7 billion has flowed into Woods ETF this year.

Wood, as always, holds course while pushing for their top positions. After falling 15% in Twitter shares on Friday, Wood added 843,194 Twitter shares to the Ark Innovation ETF and 468,256 shares to the Ark Next Generation Internet ETF. Those positions would be valued at approximately $ 72.4 million based on Twitter’s closing price on Friday.

Wood’s other ETFs also faced strong selling pressure on Tuesday. The Ark Next Generation ETF lost 3.2% and increased its losses to more than 5% since the beginning of the week. The Ark Genomic Revolution ETF and Ark Autonomous Technology and Robotics ETF lost 4% and 2% respectively on Tuesday. The pair is down 6.6% and 3.6% this week alone. The Ark Fintech Innovation ETF fell 3%, bringing its weekly losses to 4.3%.

The Ark Autonomous Technology and Robotics ETF and Ark Fintech Innovation are Wood’s only green funds for the year.

Wood gained almost 150% in popularity after the Ark Innovation rally in 2020.

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