It’s been a while since we last checked in on the “growth” narrative and its poster child — Cathie Wood.
The Financial Times has an update for us. Before reading, you might want to grab a stiff drink and sit down:
Cathie Wood’s Ark Investment Management has earned more than $300mn in fees on its flagship exchange traded fund since its inception nine years ago, while wiping out almost $10bn of investors’ cash in the same period.
Investors have continued to plough money into the Ark Disruptive Innovation ETF, known by its ticker ARKK, over the past two years even though it has been badly burnt by the downturn in technology stocks.
Ark has earned more than 70 per cent of its $310mn fees since the fund’s valuation plummeted by nearly three quarters from its high in February 2021, according to FactSet data. This year it has brought in an average of roughly $230,000 in fees a day as ARKK’s value recovered slightly, rising by a quarter.
Oy vey! While “crazy Cathie” incinerated $10bn (and pocketed a cool $310m in the process), investors kept giving her more.
But also…
Cathie made the exact same mistakes investors made en-masse during the dot-com bubble. Technology can, will, and has changed society. But it doesn’t change the laws of economics.
This reality is apparent in her returns, but the most perplexing thing about it all is that it looks like her investors didn’t mind getting taken for a ride.
BUFFETT’S SECRET SAUCE
Warren Buffett is out with a new shareholder letter. In it, Buffett talks — among other things — about his proverbial secret sauce:
In 58 years of Berkshire management, most of my capital-allocation decisions have been no better than so-so. In some cases, also, bad moves by me have been rescued by very large doses of luck. (Remember our escapes from near-disasters at USAir and Salomon? I certainly do.) Our satisfactory results have been the product of about a dozen truly good decisions – that would be about one every five years – and a sometimes-forgotten advantage that favors long-term investors such as Berkshire. Let’s take a peek behind the curtain. In August 1994 – yes, 1994 – Berkshire completed its seven-year purchase of the 400 million shares of Coca-Cola we now own. The total cost was $1.3 billion – then a very meaningful sum at Berkshire. The cash dividend we received from Coke in 1994 was $75 million. By 2022, the dividend had increased to $704 million… American Express is much the same story… The lesson for investors: The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders. And, yes, it helps to start early and live into your 90s as well.
It echoes the approach we favor here at Capitalist Exploits HQ (and in the Insider portfolio). Namely, allocate a tiny fraction of your capital in any position with the aim of achieving at least 300% returns.
Now, does it always work out this way? No. We wish it did. But it ensures winners pay for any losers (and then some). And we go in ready to hold for many months, if not years.
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Disclaimer: This is not intended to render investment advice. None of the principles of Capex Administrative Ltd or Chris MacIntosh are licensed as financial professionals, brokers, bankers or even ...
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Disclaimer: This is not intended to render investment advice. None of the principles of Capex Administrative Ltd or Chris MacIntosh are licensed as financial professionals, brokers, bankers or even candlestick makers in any jurisdiction, anywhere on this big ball of dirt.We do NOT know your individual situation, and you should always consult with your attorneys, accountants, financial planners, and those that are sanctioned to provide you with advice. DO YOUR OWN DUE DILIGENCE.
But seriously, all investments carry risk. Some of what I discuss arguably carries great risk. Investments which can lead to you losing 100% of your capital and maybe more if you are stupid and use margin.If you invest more than you can afford to lose, or borrow money from Joey down at the tavern, Master Card or Visa to make your investments, then you need to go and read a different website.
But really seriously…
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