What she got wrong
|
You’ll remember Cathie Wood. It’s not too long ago she was everywhere. I first wrote about her in my email newsletter back in March 2021. Back then, readers and members were asking me about ARK Innovation ETF (ARKK), the flagship ETF managed by Cathie Wood. My answer is the same as it is now. Over the years, ARK Innovation ETF has shed ~US$21 billion in AUM since its peak, dropping to a low of ~US$8 billion. According to Morningstar, ARKK has lost over US$13 billion of investors’ capital. I’m not here to make fun of anyone. That’s not me. But I do want to say this: sometimes the “sexiest stuff” in the room at that moment is also the most expensive stock market lesson that will ever humble you and me. What didn’t sit right with me back in 2021Even at ARKK’s peak, something felt off. The type of stocks she bought - Zoom, Roku, Teladoc and so on - were businesses with enormous hype, with many of them struggling to make predictable profits. More importantly, it was a sky-high price tag that shocked me. Many of these stocks are now down 70-80% from their peaks. Today, Cathie Wood’s flagship ARK Innovation ETF is still down over 30% from its peak, while the S&P 500 is up 80% over the same time period. That’s a massive performance gap of over 110%. Here’s the part that really stings - and what most people don’t talk about. Cathie Wood is probably still happily running her fund and still collecting hundred of million dollars in management fees. She has personally made money. Meanwhile, her investors have collectively lost money. That’s just how it works in this crazy finance jungle. In my years as a private investor and former analyst, this is not the exception. It’s how it is. My investing strategy isn’t very hard Most investors in the stock market chase the next big story. I was doing the opposite. Instead, I prefer to quietly compound my portfolio for dividends… And I try to do this by spotting undervalued gems early by investing in high-quality, profitable businesses trading at a discount to their intrinsic value. To a large extent, these also include companies that are favoured by Warren Buffett – durable companies with a strong economic moat. Now much of ARKK’s performance was built on hype - stocks with massive potential, but whose businesses have never made a single dollar of profits. When I first wrote about avoiding ARKK, the fund had US$50 billion in AUM. Even then, I said what I believed: Like someone said before… "and this too shall pass."
I know I might sound bearish today, but I still want to put my honest thoughts across.
I won’t be surprised if the market rallied for another year or so before crashing terribly. And it might make me look stupid. But I couldn’t care less.
Because the signs are clear.
You know, when you’re serious about building wealth for the long-term, it's never about chasing the next hot stock, or the big trend. It's safely growing your money by buying good businesses at the right price
ARK cannot run at this pace forever. At some point , it’s going to fall out of favor and when that happens, it’s too late.
Over my last 16 years investing, I’ve learnt it’s never about chasing the hottest stocks. And after quitting the banking industry in 2018, I’d say: No one looks after your money better than yourself.The point is, you don’t need to chase the most popular stuff in town. More than anything, it's trusting your guts, staying patient, and not letting the noise drown out what you actually believe. It’s your money. It’s your retirement. What’s important is learning how to build your own passive income. That’s what I try to do. And I encourage you to do the same. Sometimes, investing can be simple. Willie Keng, CFA Founder, dividendtitan.com P.S. Like this issue? Click HERE to join other dividend investors reading my DT Compound Letter. I send my regular letters to your inbox. |
Dividend Titan
A billion-dollar telco merger has collapsed. A major industrial Singapore REIT is facing growing pressure. And one of Singapore’s transport giants is suddenly raising fresh questions among investors. So what’s really going on beneath the surface? Yesterday, I sat with Michelle Martin on MoneyFM89.3 to break down some of Singapore's favourite dividend stocks. We discussed: Why the Simba-M1 merger collapsed - and what it could mean for Singapore’s telco sector Is Mapletree Industrial Trust a...
Something’s happening in the bond market. And it’s making people nervous. The 30-year Treasury bond yield has climbed to its highest level. And if there’s one thing we don’t know today, it is where long-term interest rates are ultimately headed. You don’t know. I don’t know. Even Mr. Market doesn't know. But what I know is this. When bond yields move like this, it’s a signal. First - how do bond yields actually work? You see, long-term bond yields - especially the 10-year and 30-year Treasury...
This was a lesson I won’t forget. The meeting started at 8.30am. I was running late. I rushed down to Capital Square in Raffles Place. I slipped into the meeting room - a small, compact room just enough for about ten people. On the right side of the long, brown mahogany table, five or six executives in full black suits, name cards in hand. Among them was the CEO of Noble Group. After I exchanged name cards, I took the only empty seat across the table, joining three other investors. I was...