Cathie Wood Sees Opportunities
Cathie Wood (profile link) sees opportunities in disruptive technologies.
Cathie Wood’s Ark Invest focuses on fourth revolution disruptive technologies, particularly in artificial intelligence, DNA sequencing, gene editing, robotics, electric vehicles, energy storage, fintech, 3D printing, and blockchain technology. The fund also invested in cryptocurrencies. ARK Innovation ETF has achieved an impressive average annual 39% return on investment, which is three times the return of the S&P 500 over the same time.
Rising yields triggered a recent sell-off, particularly in the tech sector stocks which is where Cathie Wood sees opportunities
“The last few weeks have given those who are averaging into innovation strategies a gift,” said Cathie Wood.
“We do believe we are on the right side of innovation, disruptive innovation, transformative innovation is going to deliver exponential growth trajectories for many of our companies” she said.
The growth rates of many of our companies are enormous, many find them to be unbelievable. “We expect unit sales of electric vehicles to globally including China to compound at an 82% annualized rate during the next 5 years,” said Cathie Wood. That growth is met with skepticism as some analysts believe vehicle sales are in a secular decline, believing that we are moving to autonomous vehicles, ride-sharing. So that disconnect is creating opportunities said Cathie Wood. “Our extensive research shows that we are on the right track and truth will win out,” she said.
Cathie Wood believes that institutional investors have been put off by volatility following the dotcom, telecom bust, so they are more risk-averse.
Cathie Wood sees opportunities in the EV secular bull market
“Volatility is not a bad word in a bull market,” said Cathie Wood.
“We believe a sub-segment of the auto industry is going to see exponential growth for the first time in one hundred years,” she added. “A transformative revolution is taking place which will alter the auto industry” said Cathie Wood.
Cathie Wood notes the tug war between the traditional world based on benchmarks, where instead, Ark is focused on the future.
Cathie Wood sees opportunities in long-term investing
“We have a five-year time horizon” she said.
She notes that innovations are cross-sector and that her analysts are generalists who are comfortable with technology. “You do not find that flexible thinking in institutions” she said. For example, autonomous vehicles are electric, they will be powered by artificial intelligence, they will entail battery-package technology. So, EV crossover into multiple platforms.
Cathie Wood sees opportunities also in periods of fear, uncertainty where innovation gains more traction
“I am never afraid of times like this” she said.
She also rejects the view that technology is in a bubble. Cathie Wood believes that the seeds of the fourth revolution, which entails five innovation platforms involving fourteen technologies were planted 20 years ago. Moreover, her five-year timeline is best suited to harvest the profits.
Cathie Wood then moves onto the Fed’s monetary policy and believes that yields control policy never worked in the US. She argues that real interest rates going up suggests long-term growth. “Keeping your portfolios on the right side of change is going to be important,” she said and thinks the economy is in a V-shaped recovery.
She believes that the market is factoring in interest rate normalization.
“Market is highly algo driven if they are given two variables, they are going to make a lot of mistakes” she said.
Cathie Wood also thinks that value companies will face many headwinds going forward, particularly those companies that have not invested in the new world.