Scientifically Dismantling Cathie Wood
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- เผยแพร่เมื่อ 7 ส.ค. 2024
- Cathie Wood's ARKK innovation ETF has not been having a great 2022 with the fund having lost 68% of its value. One of the biggest criticisms levied against Wood is her tendency to buy shares of money-losing companies. To rebuff these claims she has created her own measure of profitability which she calls adjusted EBITDA. Under this metric most of her portfolio companies are profitable. But what is adjusted EBITDA and is it an accurate reflection of true financial performance?
0:00 - 1:44 ARK 2022 performance
1:45 - 6:35 Adjusted EBITDA
6:36 - 8:45 Roblox
8:46 - 12:36 Divorced from reality
12:37 - 14:49 Cash burn
14:50 Cathie Wood's incompetence
Cathie Wood's article about adjusted EBITDA: ark-funds.com/articles/commen...
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Cathie Wood is the icon of the modern retail investor. She picks a good stock once, then chases that high for the rest of her life while losing money! This is relatable investing.
You always get the first one for free... right?
Exactly, same with SoftBank, they got in early on Alibaba and since then have made bad investment after bad investment.
So basically same as a gambler who wins early...
So very true, yet she's an all over pudit.
no, she doesn't lose money, she generates cash from her expense fees. It's the people who bought into her ETF that lose money.
'She said old school investor are too obsessed with accounting metric and cash flows' To be fair, when the money printer goes BRRRRR, her strategy works. When we are going into a recession, people focus one actual proven accounting metrics and cash flows
Any long only strategy works during quantitative easing.
@@samsonsoturian6013 Or She has too much pride to lose when she admits her mistakes,
I can’t believe this grifter said this. Women ruining everything, smh
Remember, Biden redefined what a recession is......
@@thekingofkush4447 She could have been baking us some delicious cookies instead.
I’m an accountant and you should never trust a firms adjusted EBITDA figures alone. They can report them however they like. Start with the cash flow statement. Cash never lies.
^ underrated comment .
Boom! Right on 👍
Good advice no wonder accountants aren't likable they don't bs you.
I'll admit, my beginning of looking at company reports as a retail investor was "is this place making a profit and have they been for the past decade?" Tied that strategy with "go with the most common household brands" and it's worked pretty well for stock picking. I perform just as good as the Indices, but I get to learn about a bunch of different companies and their industry in the process. Along with that, it's taught me how to keep track of macro trends so I can decide what industry to average my investment cash stack into over the year. This knowledge is priceless.
I have a question. Is operating cash flow minus depreciation a good enough metric or should I just use free cash flow?
As an accountant, casually recognizing deferred revenue is laughable 😂
Isn't that how Enron got into trouble?
@@Ciborium Yes, one of the ways.
It's like a homeless person claiming he's a millionaire by recognizing his future net worth in the present.
She is basically saying she knows better that thousands of accountants and finance professionals.with decades of experience and reinvent the wheel
@@Ciborium one of many things, yes
She's a YOLO investor who got lucky during the COVID run-up with free money and low interest rates.
Yup, to listen to her Zoom invented remote work solutions.
2012 calling.
The strangest thing about her is that she continues to double-down on her horrible ideas.
Works for Musk... 😏
What else is she going to do? She can hope to get lucky again or collect a high salary until the fund collapses. If she goes: "Uh... I guess I can't outpreform the marked," it's over at the spot.
Cathy is just buying time... Never believed her stories and acted accordingly.
If the market rebounds in a year or so she will look like a genius.
@@nas8318 Yeah but that goes off the assumption her investments are worthwhile.
It's not just her. It seems like all venture capital firms and Silicon Valley have collectively decided that profitability is for losers.
There are plenty of proven companies out there that are delivering revenue and profits but they aren't "sexy" and exciting as the "fake till you make it" tech firms.
@@frevazz3364
Exactly. Everybody goes for the get rich quick scams then cries when the inevitable happens.
Yes .... I think 98% of these firms are pretty much scams ...
I don't know Kathy Woods was a chef because this cookbook is amazing
She is not cooking the books. You suck down WSM's bullcrap and don't ask why this is happening. Learn from a man who is not an accountant, but is still smarter than WSM. Cathie understands that all the tech startups run in a no-profit mode. All the money that comes in the door goes into the bank account and is spent on growing the company. THe established companies in the market are run for profit, while these companies are being run for growth. What cathie is doing is taking the balance sheets of the megacorps and asking if Roblox wasn't in mega growth mode, what would the balance sheet look like? Thats what shes doing. Its actually pretty simple. Amazon was run in mega growth mode with no profits for over a decade and once wall street figured out how fast it was growing the stock exploded. Cathie is buying stocks that are fixing to explode like that.
@@davidanalyst671 are you a bot smh
@Kyle "...Kathy [Cathie] Woods [Wood]..."
@@davidanalyst671 hope you aren't being serious....
@@davidanalyst671 However that is an inherently speculative metric and, for every Amazon, there are a plethora of failures. The adjusted metric itself makes it hard to identify when a company is still deferring profits or if its business model is unworkable.
Never mistake 'luck' for 'skill.'
❤
Was she lucky with her Zoom and Roku picks too?
@@St.Maurice 💯
@@St.Maurice Yeah, so were a shit ton of beginner investors as well. ass.
@@VinceroAlpha What have you done? Feel free to show receipts. 😉
Everyone is an investing genius in a record bull market.
Didn’t Roku and Zoom skyrocket during the pandemic? She was lucky 3 times!!!
Something I have never gotten my head around is her obsession with first mover advantage. Amazon was not the first e-commerce store, Yahoo existed before Google, the pebble watch existed before the Apple watch, etc...
This is based on the assumption that the so-called network effect is more important than anything else or, in more conventional terms, that the monopoly always wins.
People easily fall for the monopoly story if you try to scare them, and the first mover story is just a positive spin on the same idea.
Well so true many so called first movers are gone and forgotten. My math teacher said long time ago slow and steady, check fundamentals, who runs it etc. Than take calculated risk.
Should have started off with Myspace...
@@jantschierschky3461 something like 70% of the companies that were trading in the S&P 500 index in 1960 were no longer trading by 1990
@@jamalnasir5648 true, but many were merged. As I stated do your homework
My accounting method is to take the average quarterly gross revenue of Apple combined with the average daily expenses of a florist and apply that to all companies equally. Then I use a chicken to pick my stocks by pooping on a Twister mat. It works pretty well.
Take my money!!
Can I borrow your chicken?
You may be onto something. It likely would top Cramer's picks too. Cramer vs Chicken... I would watch that.
You should contact Cathie Wood and sell her your method.
Cathy gets her 0.75% either way.
She winning. lol
People only invest if stock go up
Meanwhile SBF is going to prison and she continues to defraud her investors.
@@707Berto Cathy isn't a liar.
@@samsonsoturian6013 questionable. you really think she is this clueless?
@@chiquita683 most of her team was recruited while in college, so yeah. Inexperience and autists are a big problem despite the leader's respectability.
It sounds like Cathy's team cooked the books for these companies in order to delude themselves it was a good idea.
There's reasonable logic and then there's deluded incoherent conclusions clowns like this come up with 😂
no. You suck down WSM's bullcrap and don't ask why this is happening. Learn from a man who is not an accountant, but is still smarter than WSM. Cathie understands that all the tech startups run in a no-profit mode. All the money that comes in the door goes into the bank account and is spent on growing the company. THe established companies in the market are run for profit, while these companies are being run for growth. What cathie is doing is taking the balance sheets of the megacorps and asking if Roblox wasn't in mega growth mode, what would the balance sheet look like? Thats what shes doing. Its actually pretty simple. Amazon was run in mega growth mode with no profits for over a decade and once wall street figured out how fast it was growing the stock exploded. Cathie is buying stocks that are fixing to explode like that.
@@davidanalyst671 bagholder detected
@@davidanalyst671 hello Cathie 👋
@@davidanalyst671 Your comment ain't just your average bullshit. Not even the world's largest cow could produce that much bullshit as what you just wrote. Did you write that because you invested in ARK and are to deluded/in denial to admit that you've been burned.
There are good reasons why you don't recognise money received as revenue until you have earned it
Cathie is basically saying she knows better than accountants with decades of industrial experience and reinvent the wheel
you don't understand what cathies accounting system is actually doing, and you aren't very smart for ignoring her points.
@@davidanalyst671 you do ? Well yes she is smart too smart for her own good. Well I been investing for long time and her logic is way beyond me, weird thing so I make money.
@@jantschierschky3461 any tangible criticisms??
@Vinnie "...accountants with decades of industrial experience and reinvent the wheel..." Who "reinvent the wheel"? Accountants with decades of industrial experience?
@@freckrpeckr Enron played fast and lose with innovative deferred revenue accounting systems that it too trumpeted as superior to more old fashioned/conservative revenue recognition principles. If you start playing that game, it can be a slippery slope to even dodgier accounting tricks with a focus on the short term.
You know your company is screwed when Cathy can't even fudge your numbers to profitability.
This is why one can make money on SARK which is a short of Catie Woods portfolio
Short the FARK
That's hilarious
That deferred revenue trick reminds me of Enron's mark to market accounting.
It’s not as bad as Enron. Her companies at least have the money in hand. Enron forecasted fiction, then recognised it as revenue.
@@chrsmcfrln forecasted fiction 😂 😂 😂 😂 😂
Most of Cathy's team is very young. As in, she recruited them while they were in college kind of young. Of course they don't seem to understand business math.
Funny enough majority of business owners who haven't gone to college don't understand business and the quantity of those are far higher than the perceived quantity of so called college graduates that simpletons like you categorise as knowing nothing lmao.
no. You suck down WSM's bullcrap and don't ask why this is happening. Learn from a man who is not an accountant, but is still smarter than WSM. Cathie understands that all the tech startups run in a no-profit mode. All the money that comes in the door goes into the bank account and is spent on growing the company. THe established companies in the market are run for profit, while these companies are being run for growth. What cathie is doing is taking the balance sheets of the megacorps and asking if Roblox wasn't in mega growth mode, what would the balance sheet look like? Thats what shes doing. Its actually pretty simple. Amazon was run in mega growth mode with no profits for over a decade and once wall street figured out how fast it was growing the stock exploded. Cathie is buying stocks that are fixing to explode like that.
@@davidanalyst671 did you copy paste that not knowing you replied to the same guy twice?
You have identified a key to her fall.
ok then how can she collect $300M in fee then?
You are the voice of reason. I have been dumbfounded as to how she manages to keep her business afloat. I have never come across such a delusional fund manager before.
All that pesky accounting just gets in the way of her brilliant strategy
She's literally a grown Up Professional Wallstreet-bets User. With her Investment Funds and all she's literally living the Dream of Wallstreetbets...
Although the companies in my portfolio are solid, last year was a loss. In my first year of investing, I experienced a 35% decline in the March/April sell-off and a further 17% decline in the most recent sell-off. I earn my money via hard work, thus investing makes me anxious and depressed. I'm uncertain if I should sell everything and wait.
Sell not, I say. Avoid attempting to time the bottom by selling merely for the sake of selling. That is gambling with taxes added on top of it to slap you in the face. Keep it real and keep thinking long term!
The time for selling is now over. Since the two aren't necessarily associated, if your investment was down 35% this year, you're not buying good businesses or stocks. The best businesses on the planet are found in the S&P. Contrary to what Cathie claims. The return on the S&P last year was 27%. That's amazing if you enjoy ARK. The research and transparency Cathie uses are both admirable. However, it is simply irresponsible to not be assigned to what is likely the best index in the planet.
@@ThormanBoucher It's difficult for me to participate in the market right now because my job is full-time, even though I'm a novice and make awful decisions. I don't even consider combining since the stress would be too great; hence, I am unable to spot trends.
@@colleen.odegaard It's not like I invest in a certain fund because my portfolio is fairly diverse. "LISA ELLEN SHAW", an investment adviser who is subject to SEC regulation, is quite the genius when it comes to portfolio diversification and direction. My portfolio just follows what she trades and not just on some certain industries of my choosing; it increases by an average of 25% each month.
@@ThormanBoucher When I searched for LISA using her complete name, I came on her website. I read over her resume, reviewed her educational history, and noted how excellent it was. She will act in my best interests because she is a fiduciary. So I messaged her, and I'm hoping for a prompt response.
I work for one of the biotech companies listed in the ark revised report. It shows as our company being slightly profitable, but we are definitely not profitable, and we will go bankrupt within a couple years if drastic action is not taken soon
“If you back out all their expenses all the companies in my portfolio are wildly profitable.” - Cathie “Cash flows? We don’t need no stinkin cash flows!” Wood
Those pesky expenses, who needs them lol
I agree completely. If you have no expense, of course any income at all is profit. Like other comments on here, it amazes me that investors follow the logic she presents.
I just bought a carton of a dozen chickens at the grocery store. I calculate that they are producing hundreds of eggs per week.
Your adjusted EBITDA must look great!
It’s easy to look like a great investor when everything is going up.
And on the flip side, Berkshire Hathaway gained value in 2022 against an overall market loss. It looks like the new Warren Buffett is..... Warren Buffett (credits to Patrick Boyle)
I have worked for multiple FAANG companies. The one correction I will make about your assessment about salaries is large tech company DO NOT pay large cash salaries relative to new start-up. Most of us employeed at the FAANG companies get most of our compensation from large stock grants and not massive cash salaries.
Here is an example of what an actual comp package looks.
Base Salary: $175,000 annual
Stock Grants: $900,000 paid over 4 years
Sign-on: $100,000
👆 most of the money made is not base salary. The only way tech workers can make large comp packages is massive stock grants. Even large tech companies print their own stock to compete with each other on comp packages to get talent.
I get your point, but I like your idea of NOT a large cash salary.
I think that big companies while giving large stock packages don't dilute stock, they buyback stock with their cash - so that cash serves them better than just giving it away, but I may be wrong.
There’s no 100k sign on anymore and those renumeration packages are bs. I doubt you are earning a fraction of that over 4 years, that’s if you still have a job.
What would you think of the idea that the explosive growth of venture capital in recent decades is driving all these micro-bubbles? There's 100 times more private equity now than in 2000 and volatility is strangely high even during good times recently. And VC firms and angel investors have there hands all over literally every major fraud and bubble in recent years. Kathy is no exception, as s sizeable portion of her fund's investment are venture capital into "disruptive" firms.
Over indexing is adding to that problem too.
@@dhayes907the big indexes all track big companies and/or track thousands of companies. But yes, big actively managed funds like ARK can easily pump the value of select stocks. They have over 10% stake in many of the companies they own.
@@dhayes907also, illiquid private equity funds are a thing. They can get huge.
@@samsonsoturian6013 I'm very much an armchair economist, but it feels like controlled inflation punishes savers. When savers are pushed to invest without really knowing what they are doing they put it into an index fund that funnel capital to companies just because they are large. Free capital that comes from sources that only want profits and don't participate in voting causes is own brand of stock inflation leading to more and more aggressive investors to look for larger and larger returns followed by unsophisticated investors doing the same thing and shady indexes pop up with unrealistic promises. Pushing unsophisticated investors into the space through controlled inflation seems to lead to a period of reckless growth followed by a quagmire.
That's some creative accounting right there.
Great arguments from you guys. Objectively. Respect!
Counting deferred revenue immediately for a purely digital company like Roblox doesn't strike me as too bad. What I question is if they're careful to take that revenue off the future statements when the transactions are finalized.
Isn't recognising deferred revenue as current income exactly what Enron and Worldcom did?
No. Enron and Worldcom were capitalizing on expenses, treating expenses as assets. That's what Tesla is doing with their warranty repairs, treating them as goodwill.
Super content. Very well researched. Exposing the fraud/ignorance
I started trading on 3.23.20 and thought I was a genius. Now the more I learn about the market makes me realize how little I do know. So much more to learn but learn I will.
Excellent content. Keep it up
agreed
Thanks. Ok
Thanks for this great analysis! I’m and MBA grad and it’s refreshing to see liars and frauds being called out on basic principles..it’s astonishing that she’s in that position
I only started hearing about Cathy Wood back in 2020 as COVID hit and hadn't seen any reason why she would be prominent. I guess the surge in popularity then was unjustified.
Great video. Will be fun watching her investors lose their shirts. Sadly she will be fine and will have no trouble finding new suckers.
Great vid as always.
Thx.
Keep em coming
Old school are obsessed with …. account metrics and ….cash flows 😂😂😂😂😂
It'd be smarter to just buy a bunch of lottery tickets than to invest like Cathie Wood.
Cathie Wood seems like the type of person who would have invested in RIM/BlackBerry back in 2006
or FTX
She's definitely a "wework is a great idea" type
If one wants to impute 2025 projections into 2022, it might be easier to just use sell-side analysts' projections (if they existed). At least the asset manager could say the projections were "independent".
Is deferred revenue gross or net of Apple/developer fees?
She should just capitalize all the expenses and call it an adjusted balance sheet.
Wow the comment on SBC not equivalent to cash is certainly revealing, good catch!
Sorry for her investors!
This lady cost me thousands of pounds. I thank her teaching me the hard way and finally becoming a value investor.
If ur based out of the UK (judging from you saying "pounds") you should look into terry smith's fund. One of the actively managed funds who has beaten the index.
Channel is gold, keep it up!
Gotta love SCHADENFREUDE!!
(Tip for host - pronounced Sharden-froyder)
Reminds me of Enron's use of "mark to market" accounting.
Excellent catch on the double counting!
Why not adjust all expenses? Just have one figure for sales and the same figure for net profit. Then every business looks like a great investement!
bro, good one. 'desperate times call for desperate measures' type of situation.
Is recognising deferred expenses the same as Mark to market accounting?
Adjusted EBITDA, sounds a lot like Adam Newman 😮
It doesn't make sense to me that companies are allowed to pull accounting tricks that would put the regular person in prison.
I've always enjoyed adjusting financials, the numbers are the numbers whether you like them or not
People have been talking about her for some time but this breakdown is spot on!!!
I like stocks that reward investors with buybacks and dividends.
K - for the past 30 years has been in an uptrend. Apparently boring cereal companies that make money go up in value.
I'm a novice regarding accounting so this question may very well serve to underscore my ignorance. Regarding the deferred revenue and payment to third parties. Are not the third party payments already accounted for in the company's expenses?
Your last point was perfect. Cathy Wood got extremely lucky with Tesla and tried to extrapolate that success to other innovative companies. The problem was that most of her stock picks are not like Tesla and time will tell if Tesla itself will avoid the bankruptcy.
I never understood why people were so bullish on her in the First place, she Just bought the worst companies: overpriced and rapidly losing Money.
FANTASTIC research
Never heard of Wood until a few months ago, and she's 67. Why is she suddenly so (in)famous?
this Arkk experience floats about as well as the one in Williamstown, KY
Hey fam what do you mean by GAAP EBITDA? I'm quite certain that EBITDA is a non GAAP Metric ? That is neither recognized by GAAP or IFRS.
She is just a front for something else, in my view. The whole story will unfold someday. It's a lot of smoke and mirrors.
Yeah, ARK invest is really a team of amateurs with the old lady just speaking for them. Most of the team were recruited while they were in college, and they are the ones doing the DD.
Kinda sounds like no one is doing any DD
@@rightwingsafetysquad9872 IIRC thehead of research has had no other full time job but ARK Invest. That's how young they are
@@samsonsoturian6013 That’s not necessarily a bad thing. The only other “company” my boss worked for was selling drugs. Now he people could die if he makes bad decisions. He’s very good at what he does, been with the company for 10 years.
@@rightwingsafetysquad9872 I'm sure inexperience, infighting, and immaturity were issues, though.
Roblox needs to spend more on advertising than it does in R&D
VERY likey this video's style.
Great video.
Shopify logged $2.91 billion in profit in 2021…so how are they losing money constantly?
It’s a new paradigm….until it’s not.
got in at 32, it's now 52 and gaining almost every day
I've seen this movie before. It ends with her company going down in flames and someway, somehow, she claims it was a man's fault or that a man forced her to make the bad picks.
Stock based compensation is a shadow method of paying employees without accounting for it as an expense for non GAAP press releases. Palantir does this a lot.
She studied under Arthur Laffer, what else would you expect other than massive manipulation of data?
There are still plenty of good picks within those ARK ETFs that do not have many of the issues pointed out in this video. However this video would have been most helpful BEFORE the massive loss in market value of those ETF shares.
Now that they're at their weakest it's not a bad time to pick them up. Would you rather pick them up at their peak? Hopefully not!
Well still not there yet, not with the tsla stocks absolutely plummeting
As I saw someone comment "Use a chicken to pick my stocks by pooping on a Twister mat" theory. You can use any animal (If you don't like that chicken) to pick stock for you during bull market. Every fund manager are profitable during bull market, but not many can survive during rainy days. That's the difference.
She'll look absolutely stunning in orange!
Increasing losses over time should prompt any trader/investor to thoroughly review their trades and investments. Hoping and holding on to any losing positions is definitely unwise, if we are hesitant of booking minimum acceptable losses, it can destroy the entire trading capital.
Great video
Playing with stats until she gets what she wants. Operating income and profit is fairly important.
🎅 Merry Christmas!! 🎅
❤Thank for video, still new to investment and finance, but was able to follow up a tiny bit 😂😂😂
very educational video regarding deferred revenue. I also never released just how clueless Cathy really is when it comes to financial analysis
The problem with the vast majority of ARK holdings in all the ARK variations are that they are companies that can only thrive in hyperinflation, endless money printing, zero interest rate environment. Tesla is the quintessential example of this. Of course her valuation models and projections are total nonsense.
ARKK total returns over the last 5 years is -8.8%. S&P 500 total returns over the last 5 years is 53.9%.
@6:15 that's literally one of the things ENRON did lmfao
great great channel
Not only are those adjustments crap, but what people fail to see is that a large amount of what software companies call r&d is actually capex. If that spending stops, the business stops.
Do you mean things like adding features to an app?
As the saying goes, someone who catches a falling knife invariably gets cut.
She is either deluded, inept or incapable of admitting she got it wrong
That's an unfair statement. I's very likely that she is all of the above.
@@will6246 i concede that all could be true
I am good at adjusting stuff too, i just multiply a -1 to all my expenses and they all become positive.
Now i have good looking green charts.
Apple gets 30% of in-app purchases if you down load it from the apple store?
So, if the numbers were completely different she would be doing great?
as this point, I wonder who even wants to work for her firm...imagine having ARK Invest on your resume...
Largely the same guys have worked there the whole time. Mostly finance majors she recruited from colleges.
Appple's 30% fee seems like a steal compare to the 3rd party developers who only receive 25% revenue.
So why has Ark Investment not fired her?
Oh. She owns the place.
Maverickofwallstreet calls her the Tesla Witch, I like that.
Ok question, can the players exchange the reblox once purchase, back into real money? If not then she is right, it doesn’t matter what those people end up spending those in game money on, they have no choice but to spend them, and it isn’t like real life coupons where you will need to give them something tangible and real so there will be a cost, it’s just a copy of some lines of code, so there won’t be any additional cost in the real world
You can exchange them back for real money
@@ProfAzimov from the company or by selling to other people? Because that makes a difference,
@@KageNoTenshi You sell them to the company, but not at par value
@@ProfAzimov well then at the very least there are some sure profit then, probably need more detail on how much there are and how much she booked as profit before we can say much
Is there a mechanism to have unused Robux refunded by the company? If there isn't then how is the revenue deferred? It's not like it'd be a deposit, the product would be the Robux.
It's easy to see the stocks she invested in with so much of many other people's money is what artificially inflated those stocks. She can't unwind many of them without creating a death spiral for them. Her ARKK investor's are screwed.