Kathy Woods AR Andest Rose to fame and popularity due to their long-standing stake in Tesla, which has been one of the best performing stocks in the entire Market over the past decade. More recently, Wood has also taken credit for her firm's long-standing position in Nvidia. She started buying the semiconductor stock many years ago when its split adjusted price was just $5 per share. Picking two of the best stocks in the entire Market may seem like an impressive fee, but we must consider that Arc has invested in many hundreds of stocks over the years.

By the very nature of Ark's investment strategy of disruptive technology, we should expect a few of them to be massive successes and the majority to be failures to judge Kathy Wood's Investing Acumen We must also look at her failures. Ark Invest currently offers five ETFs which were launched between 2014 and 2021. Most of them have massively underperformed the S&P 500 since Inception. On average, her funds have returned 86 6% since Inception compared to a 128% return for the S&P 500 during the same period.

Thus, Arc has underperformed the S&P 500 by an average of 42% Remember, this performance is despite the fact that Arc has held Tesla and Nvidia. Most of the time, the majority of Wood stock picks have underperformed the market and massively so. This has dragged down the success of her few successful picks like Tesla and Nvidia. To get a complete understanding of Wood's investing Acumen or lack thereof, we need to delve deeper into the losers.

In this video, we'll take a look at the 10 worst performing stocks owned across arcs. ETFs Today, these stocks have suffered declines between 76% and 99% compared to Ark's average buying price. According to data from Cathy's Arc.com we're only looking at stocks Arc Invest holds. As of the time of recording this video, there have been many other positions that Arc has dumped at huge losses.

For example, Arin Vest was a major investor in the now defunct Crypt Bank Silvergate. She dumped the entire position as the bank was collapsing earlier this year at a massive loss. Before we get into Cathy Wood's worst stocks, quick word from our sponsors over at Tendies: The Tendies iOS and desktop app is the first serious attempt to integrate trading tools with a social media platform and it's 100% free! It has everything from an earnings calendar, proprietary research from their expert analyst, a news feed connected to Reddit options flows, and an options profit calculator. Basically, it is all the real-time information that you need to sift through the market for investing opportunities or keep up to date with the stocks you already own.

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We've already made dedicated videos about two of them: Goo Bioworks and Ted Do. Both videos are linked in the description below. So for this video, we'll focus on the eight stocks we haven't talked about before. Wood's 10th worst performing stock is UI Path AR Invest has lost 76% of this investment based on their average cost basis.

Uip Path ipoed at the peak of the tech bubble in 2021 and has since lost 79% of its value Arc Bought it shortly after the IPO and has written it all the way down. So what is Uip Path and why is it stock performed so badly? Uipath is a software company that creates robotic process automation programs. These programs allow white collar workers to automate mundane tasks such as searching through documents and generating reports. If done correctly, this can save time for workers, allowing them to focus on more creative and value adding tasks.

Historically, they've grown their revenue very quickly, allowing them to IPO at a premium valuation of $35 billion. For software companies like Uipath, the main Revenue metric is annual recurring revenue or Ar. ARR represents the annualized value of total customer subscriptions. In 2021, their AR was growing at an incredibly fast rate of about 12% per quarter.

However, one thing to note is that their sales and marketing expenses were roughly the same as their ARR. Thus, substantially all of their revenue was eaten up by sales efforts To grow the business. In 2022, they started to decrease their sales and marketing expense. This caused their ARR growth to decelerate to about 7% per quarter.

In the first calendar quarter of 2023, it slowed to a crawl of just 4% Thus, their revenue growth is dependent on spending exorbitant amounts of money on sales people. As soon as they pulled back on, the Salesforce Revenue growth collapsed. But if UI Path is really so great and can make workers so much more productive, why is it so difficult for them to land new customers, Why aren't the customers just coming to them? Uip Pass Automation programs are not a magical Panacea that automate away any task they're complicated to maintain and are only feasible for a small subset of workflows. In many cases, setting up and maintaining a Uip Path program may take longer than just doing it manually.

On Uip Path's Reddit page, there are many users who complain about how finicky it can become because it integrates with other softwares a company is using. One small change in one of the softwares can cause UI paths to break and needs to be redone. There's often an expectation versus reality problem whereby people think that Uip Path is going to do all their work for them, but they eventually realize it actually takes longer to be constantly fixing all the bugs. Only a very small portion of tasks can be efficiently automated.

With Uip Path, Salespeople have to spend copious amounts of time working with potential Enterprise customers to identify suitable use cases. Because the use cases are so limited, Uipath has to charge very high prices to generate an acceptable amount of Revenue. The pricing structure is very complex and can be up to many, many thousands of dollars per year for each process. The high price point makes the jobs of the salespeople even more difficult.

As investors gradually realize how difficult and expensive it is to grow the business, the stock price collapsed. The next worst performing stock is Twio, which has also declined by 76% since Arc bought it. Tlio is a software company that allows companies to communicate with their customers using email and text messages at scale. For example, the fast casual chain Panera Bread uses Twilio to send ordered confirmation and notifications to their customers over text messages.

Twilio handles the whole process automatically. Without Twilio, a Panera employee would have to send each text manually, which would not be feasible. In contrast to most of the other companies we'll discuss in this video, Tulio is actually a pretty good company with a viable business model. Their product is easily scalable and relevant to a wide range of Enterprise customers.

During this particular investment, the problem was not the stock selection itself, but instead the timing during the pandemic. Tech Bubble too's stock price increased more than three-fold. They did experience a small uptaking growth as companies wanted more ways to communicate with their customers remotely, but that was not nearly enough to justify the massive increase in share price. As the pandemic ended, Too's share price fell back down to earth AR Invest bought into the stock near the highs and rode it all the way down.

The next stock on the list is 3D Systems which has also yielded a 76% loss for Aran Vest they produce 3D printers. These are large expensive system used by industrial companies as opposed to individual hobbyists. Arc considers 3D printing to be a disruptive innovation and even published a white paper about its revolutionary potential. 3D Printing can theoretically increase the speed and efficiency of manufacturing new products because you don't need to set up an entirely new assembly line for a new design.

The problem is for the vast majority of industrial applications, 3D Printing is much more expensive. For example, 3D printing of metal objects requires the use of powdered metal. Particles of metal powder are fused together by a laser. This is a complicated process which takes a lot of time, and the powdered metal is up to five times more expensive than regular metal.

Thus, for the vast majority of industrial applications, 3D Printing has always been and will always be more expensive than traditional methods. 3D Printing was invented in the 1980s and 3D Systems Corp has been around for almost as long. There have been a few hype Cycles where investors got excited about the supposedly revolutionary potential of the technology and the stock prices surged, but the hype never materializes and the stock always crashes back down. In recent years, the company has suffered from revenue declines and has thus far failed to achieve sustainable profitability.

Next on the list is yet another 3D printing company called Vo 3D which went public by merging with a Spack in 2021. This Company's stock has been a failure for broadly the same reasons that 3D System Scorp has been a failure. Arc has lost an estimated 85% on Vo. 3D Next on the list is the four profit Prof Education Company 2u, which has declined 91% compared to Ark's average cost basis.

2u partners with universities to deliver online degree programs. Tuu handles the technology and advertising while the university provides the actual teaching. Tuu has been a longtime holding of Aran Vest in 2020. Kathy Wood Touted You2 as an excellent example of innovative companies gaining traction during the pandemic according to a recent class action lawsuit.

Two use of parent success may have been the result of a highly sophistic Ated scheme to defraud students and overpaying for subpar online degrees. Tuu began operations in 2008 when they partner with the University of Southern California's Rossier School of Education to offer online graduate programs. As the technology provider, Tuu received 60% of the tuition Revenue while USC received the remaining 40% The most widely trusted ranking for universities in the US is published by US News and World Report. A given University's ranking in US News is a material factor in students desire to apply and their willingness to pay tuition.

The better a University's ranking, the more applicants they will attract and the higher tuition they can charge. Before they started working with Tuu, the Rosser school is ranked number 38 in the country, which is okay, but not great. In the first year they started working with Tuu, their score inexplicably jumped to number 28 and by 2018, their score improved even further to number 10. With such a good ranking, demand surged and they were able to raise tuition costs to as high as $100,000 per student.

This allowed both USC and Tuu to bag millions of dollars in Revenue. A major criteria that factors into a School's ranking is the acceptance rate. If a university is good, a lot of students will want to apply. There are a limited number of seats, so this will cause the acceptance rate to be very low.

The lower the acceptance rate, the better. in the year. Immediately prior to forming a partnership with Tuu, the USC's Rossier School of Education had an acceptance rate of about 50% In the very next year, this decrease to just 10% So what happened? Did they really become five times more competitive? or was there something else going on in 2021? USC's General Council became concerned that the data they were supplying to US News may be inaccurate or misleading, so they hired an outside Law Firm to conduct an independent investigation. The investigation found that USC had been defrauding US news for the better part of the last decade.

The Rossier school offered multiple degree programs, some of which were more competitive than others according to the investigation. USC supplied acceptance rate data for only their most selective program and deceived US News into believing that the data was for all full-time programs that they offered. USC and Tuu used their US News ranking to advertise their courses, some of which cost more than $100,000 per student. Based on the fraudulent US News ranking, enrollment at USC's online courses surged, allowing both the university and 2u to bag millions of dollars of.

Revenue 2u is currently being sued by former students who feel they have been defrauded. In my personal opinion, if an education company is implicated in one of the largest academic frauds in recent memory, this makes the stock uninvestable. It seems that most investors would hold the same view as the stock price has lost almost 70% of its value since the Scandal was exposed. Two years's Revenue has been declining recently and their losses have been increasing.

Understandably, many universities no longer want to work with the company. AR Invest has over 100 employees. The USC Scandal was extensively covered in the media at the time the Scandal was exposed in April of 2022. Arc owned $60 Million worth of the sock.

They either knew or were negligent in not knowing about this material adverse development. Despite this, not only did they not close their position, they have continue to be net buyers of the stock and this has yielded predictably disastrous results. The next entry on the list is invite Corp which has yielded Arc a catastrophic 93% loss. Nvite is a Healthcare company that does does genetic testing to screen for potential diseases.

While genetic testing sounds great in theory, it is too expensive and generally yields a very high level of false positive results. Despite receiving much hype in 2020 and 2021, it has failed. As a business, they've never turned a profit, their revenue has been declining, and they've recently fallen into penny stock territory with a share price of less than $1 And last on the list is Phenomix, which used to be called Berkeley Lights. This investment has been a near total loss for AR as it has suffered a 99% decline compared to their average cost basis.

The company appears to be on the brink of bankruptcy as they only have $3 million of cash, which they're burning at a rate of $20 million per quarter. Berkeley Lights sells a device called Beacon which can analyze celles. This could be used by pharmaceutical companies to develop new drugs. The beacon machines cost $2 million each, making them orders of magnitude more expensive than similar offerings on the market, but they claim that the machine is so good that it can justify the price.

They started selling it in 2016 and were able to convince large pharmaceutical companies including Amgen and Fiser to buy them. The ipoed in 2020 and their valuation surged to over $4 billion despite them only generating about $20 million of Revenue per quarter and burning huge amounts of cash. Arin Vest was one of the biggest Bulls buying hundreds of millions of dollars worth of the stock. In September of 2021, a large hedge fund called Scorpion Capital released a short report on Berkeley Lights with a $0 price Target They claimed to have called former employees of Amen Fizer and other Berkeley Lights customers who used the beacon machine.

They said it was basically unusable because it had high error rates of 50 to 100% The machine is so useless that it just sits idle most of the time, and they would never buy another one again. Soon after the short report was published, Ark Invest posted a lengthy Twitter thread responding to the allegations. Arc Said quote Beacon is an ambitious platform. Its internals are complicated, involving interconnected liquid Regent pumps, pumps, semiconductor chips Optics and software.

The result seems to be interrun variability, though I'm unsure if the errors are stochastic or systematic. Unquote: AR Andest often uses needlessly complex jargon, and this tweet is no exception if we translate that tweet to: English Arc admits that the machine produces numerous errors as Scorpion Capital alleged. this is due to the highly complex nature of the machine. Furthermore, Arc concedes that they do not know whether the errors are to be expected due to the inherent randomness of Cell Biology or the result of a systematic problem.

A systematic problem means the machine just doesn't work If you don't even know if the Machine Works why would you continue to put hundreds of millions of dollars of your Investor's Capital At Risk by holding the stock after the short report was released Arc continued doubling down, buying more and more shares. It turns out the Scorpion Capital was right. Berkeley Lights's Revenue has consistently declined, Their losses have accelerated, their stock prices declined by 99% and they're on the brink of bankruptcy. This has been a near total loss for Arin Vest.

AR Invest has over $14 billion of assets under management and over 100 employees. Their full-time job is to identify Innovative companies which will provide Superior risk adjusted returns. So why is it the case that the majority of their funds underperform the S&p500 To find the answer? we have to look at Cathy Wood's overriding investment philosophy. In her public statements and interviews.

she obsessively talks about something called Rights Law. It was invented by an airplane engineer named Theodore Wright in 1936. Wright observed that every time airplane production capacity doubled, the labor required per unit fell by 20% the idea is that over time Factory workers and Engineers gain experience which will help them innovate and become more efficient over time. The problem is Rights Law is pseudo science that rarely plays out in the real world.

Global airplane production today is orders of magnitude greater than it was in 1936. If Rights Law held, airplanes would be almost free today, which is obviously not the case, Kathy would invests in many technologies that are commercially nonviable today. She assumes that magically the cost will decrease in the future, but in many cases this just isn't possible. Take the example of 3D printing, which has been one of her most disastrous Investments 3D Printing of metal Parts requires the use of powdered metal, which is up to five times more expensive than normal metal.

This is a fact that will not change. No matter how many 3D printers you produce, the raw materials will still be prohibitively expensive for the vast majority of industrial applications. All right guys, that wraps it up for this video. What do you think about AR Invest? Let us know in the comments section below.

As always, thank you so much for watching and we'll see you in the next one. Wall Street Millennial Signing out.