Risk taker Cathie Wood: Wall Street’s hottest investor is betting on a handful of stocks. Critics say he plays with fire

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It is a level of high risk, high risk and reward investment. And he put Wood fans on a journey with the white knuckles in 2021.

Last year, Wood’s strategy paid huge dividends to investors on its flagship Ark Innovation (ARKK) background changed. It rose nearly 150% in 2020 and helped turn her into a Wall Street superstar, a sort of Warren Buffett of momentum investment.

But this year has not been as kind to Wood as the previous one. The Innovation ETF fell 2.5% by the end of August, although there was a hot technology market with the Nasdaq more than 18% so far in 2021.

Wood was unavailable to comment on this story, but it was dubbed in an interview with CNBC in August. He’s not worried that Ark’s strategy of looking for new tech leaders will end badly, and he maintains that his current rally will not be a repeat of the epic point-like implosion of 2000.

“I don’t think we’re in a bubble, which is what I think a lot of bears think we are,” Wood told CNBC. “Right now we have nothing like it. In fact, you see a lot of OPIs or SPACs coming out and falling to Earth. We couldn’t be further from a bubble.”

How Wood developed his strategy

Wood speaks from experience. She’s not a millennial or Generation Z investor for whom the technology implosion of 2000 is just a war story told by folder traders. Wood, 65, experienced the last major technology crash, as well as the infamous 1987 Black Monday.

He worked for 18 years at Prudential-owned money manager Jennison Associates during the 1980s and 1990s, and then spent a dozen years at AllianceBernstein before leaving in 2013.

But then AllianceBernstein conveyed its idea of ​​launching a set of actively managed exchange-traded funds. So she attacked on her own and started Ark in 2014.

“I’ve been seeing disruptive innovations throughout my career, why don’t I help my own industry?” He told Forbes in a 2014 interview.

This focus on disruption means Wood links the fortunes of his ETF with visionary but mercurial leaders.

In the most prominent example, Wood remains a brazen fan Tesla (TSLA) and CEO Elon Musk. The electric vehicle manufacturer is by far the main value of Ark’s Innovation’s ETF, which accounts for more than 10% of the fund’s holdings. It is also Ark’s largest position Autonomous technology and robotics (ARKQ) i New generation internet (ARKW) ETF.
Wood is a vocal fan of Tesla, which is one of the major holdings of various Ark funds.

Wood is also fine with companies like Tesla issuing more shares to raise money to fund futuristic projects like autonomous vehicles. Some investors distrust this strategy because the new shares reduce the value of existing investor holdings, but he believes it is a short argument, particularly from Tesla bones.

“We’re not afraid of dilution … if we think they do it for the right reason,” he told CNBC. “We wanted them to scale as fast as possible because we believe that if we’re right in autonomy … Tesla could get most of that market, certainly in the United States.”

You don’t have to be rich to take advantage of the space race
Arka’s large investment in Tesla is a bet for Musk to continue to innovate beyond the electric car business, Wood explained in an interview with Bloomberg Radio in August. For example, he became enthusiastic about Tesla’s plans to build a humanoid robot.

“With each passing day, especially as we learn more about their experience in AI and how they actually drive the space … we think they have the pole position,” he said, noting that Ark analysts were “impressed” by Musk’s presentation.

Growth at all costs

Wood recognizes that his way of investing at all costs is not for everyone.

Tesla has lagged behind in the wider market this year. Actions of Teladoc (TDOC), a telehealth company that is the second largest stake in the Ark Innovation ETF and was a big winner at the start of the pandemic, fell more than 25% in 2021.
“We’ve seen higher valuation stocks hit hard this year. But the growth of these innovative companies will still be handled well over time,” Wood said during a webcast hosted by Cboe Global Markets in March.

Wood added that he believes investors should also put a small percentage of their money in bitcoin, another risky bet. And he stressed that investors should overlook the inevitable short-term outbursts that any asset entails. Wood is essential to maintaining long-term convictions and investing for future growth.

“Many companies cater to short – term investors who wanted profits now [have] “He invested more in stock rewards and dividends on innovation,” he said. “That puts them in danger.”

A fellow professional describes Wood’s approach at home as a model for the new way of investing. There are too many fund managers who are afraid to look too far into the future when judging a company’s merits, rather than focusing myopic on previous and subsequent quarterly earnings reports.

“Cathie has been focusing on Tesla for a long time. She doesn’t just look at it as a carmaker. It can’t be compared to traditional car companies,” says Ren Invest of Ark Invest, who works closely. with Wood in investment decisions as The company’s customer portfolio manager told CNN Business in March.

Wood reviews

But a growing heart of skeptics believes Wood’s funds could end up collapsing. Michael Burry, one of the super bass investors who became famous in “The Great Short Film,” recently set a short position in the Ark Innovation ETF, basically betting that it will fall sharply.

Some tech stock veterans also wonder if Wood is just an investor flavor of the month, comparing it to popular portfolio managers like Kevin Landis of Firsthand Funds, Alberto Vilar of Amerindo and Garrett Van Wagoner, who ran a popular fund of emerging growth in the late 1990s.

Many of these technology funds exploded after the 2000 bubble Wall Street Journal wrote an update piece on Van Wagoner and other tech gurus in the late 1990s in 2010 entitled “From Fame, Fortune to Flaming Stars. Tech-Fund Mavens Post-Bust Destinations.”

Is wood destined for a similar ignominy?

Rivals have trouble getting Wood to make such big bets just for a handful of shares. The Ark Innovation ETF, for example, has about half of its assets concentrated in its top ten interests. Beyond Tesla, this fund also has significant stakes Course (COURSE), Coinbase, Zoom (ZM) i Square (SQ).
Roku is another example of high risk / high reward stock that Wood loves.

“Our investment approach is similar to Ark, as we focus on technology. But we are different in avoiding concentration,” Jeremie Capron, head of research at ROBO Global, told CNN Business in March.

The first 10 participations of the Global Robotics and Automation Index of ROBO (ROBO) ETFs account for less than 20% of the fund’s total assets and the fund holds about 80 shares. Ark funds typically hold shares of only 30 to 50 companies.

For now, Wood gets the last laugh.

Yes, its fund returns may be volatile year-on-year (the Ark Innovation ETF fell close to 25% in 2018 before recovering 30% in 2019), but it has tended to soften. The average five-year annualized return on the Ark Innovation ETF through mid-2021 was 48.6%, compared to 17.7% for the S&P 500.

As long as this trend continues in the long run, Ark’s acolytes may forgive a year down as Wood continues to sway through the fences.

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