If there’s one investor I worship above all others, it would be the legendary Warren Buffett. The ‘Oracle of Omaha’ has built a fortune exceeding $113bn through long-term value investing. What’s more, as one of the world’s most generous philanthropists, he’s given away more than $45bn to good causes. And Buffett’s words of wit and wisdom have benefited many millions of investors worldwide — including me.
However, in recent years, doubters have started taking pot-shots at the 91-year-old guru. The stellar performance of Berkshire Hathaway (NYSE: BRK.A), his conglomerate, has eased off over the past decade. In the last five years, Berkshire stock has gained 91.3%, versus 92.9% for the S&P 500 index (all returns in this article exclude dividends). But over the past 12 months, Berkshire stock has leapt 35.7% — more than double the S&P 500’s 17.4% gain. So, for the past year at least, backing Warren Buffett was once again a wise move.
‘The Queen of the bull market’
Since 2019, one major contender has stepped up — a challenger to seize the throne and take the crown from the world’s greatest investor. She’s Cathie Wood, manager of the wildly popular ARK Innovation ETF (NYSEMKT: ARKK). Wood, a 66-year-old devout Christian from Los Angeles, named her fund group Ark Invest after the Biblical Ark of the Covenant. And in 2020, her ARKK exchange-traded fund’s performance was nothing short of heavenly, easily thrashing Warren Buffett’s returns.
Cathie Wood has managed the ARKK ETF since it was launched on 30 October 2014. This New York-listed ETF invests in ‘disruptive innovation’ in fields such as DNA sequencing and genomics, automation and robotics, green energy, artificial intelligence, and fintech (financial technology). Thus, Wood’s fund is heavily weighted towards highly rated tech stocks — with the largest holding being electric carmaker Tesla.
From its launch in late 2014 to peaking in February 2021, ARKK delivered a colossal return of 683.6%. In other words, $1,000 invested in this ETF at launch would have been worth over $7,836 at the peak price of $159.70 on 16 February 2021. But such market-thrashing returns rarely persist and quite often become a flash in the pan. On Friday, ARKK closed at $68.91, having collapsed by more than half (-56.9%) from its all-time high. So far in 2022 — just a month into the year — ARKK has crashed by more than a quarter (-27.2%). And over 12 months, the stock has collapsed by 51.7%, making it one of the worst-performing US ETFs over one year. So much for Cathie Wood stealing Warren Buffett’s crown.
Warren Buffett trounces Cathie Wood over one year
Though I admire and respect Cathie Wood, her reputation relies on just three outstanding years: 2017, 2019 and 2020. Here’s how ARKK has performed since end-2014.
| Year | Year-end price | Yearly change |
| 2014 | $20.16 | – |
| 2015 | $20.46 | 1.5% |
| 2016 | $20.05 | -2.0% |
| 2017 | $37.08 | 84.9% |
| 2018 | $37.19 | 0.3% |
| 2019 | $50.05 | 34.6% |
| 2020 | $124.69 | 149.1% |
| 2021 | $94.59 | -24.1% |
As shown, ARRK had three dull years, three exceptional years, and an awful 2021. Thus, its five-year gain has declined to 207.9% — still an excellent return. However, with the stock now deep into bear territory, anyone backing Cathie Wood since late June 2020 will have lost money (on paper or in reality). Meanwhile, investors backing Warren Buffett have been handsomely rewarded. Over one year, $1,000 invested in Berkshire stock would be worth more than $1,357 today, versus $483 in ARKK.
In short, ARKK’s collapsing stock over the past year has cost Cathie Wood’s fans billions of dollars. Meanwhile, Berkshire Hathaway’s market value has soared to nearly $700bn. This has added almost $30bn to Warren Buffett’s personal wealth. That’s why he’s still my hero!
Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.
