Controversial investment manager Cathie Wood says investing in stocks considered defensible against high inflation and valuable during an economic downturn will not bring financial reward long term.
In an extended interview with Markets with Madison, Wood said her strategy to invest in innovative companies pursuing disruptive technologies was superior tothe strategy most major fund managers were implementing in a higher interest rate environment.
“They do not see how quickly innovation is going to disrupt the world order,” she said.
“The benchmarks are tried and true, and for many years tried and true worked, but if we’re right ... then we think that the benchmarks are going to be the underperformers in the years ahead.”
Using oil stocks as an example, which performed well for traditional investment managers last year, Wood explained they would soon be disrupted as electric vehicle usage grew.
“We expect oil demand will drop from 100 million barrels a day to 70 [barrels] in the next five to 10 years.”
Cathie Wood said she expected global oil demand to drop from 100 million barrels a day to 70 million a day within the next decade. Photo / NZME
Wood is the founder and chief investment officer of Ark Invest, a US investment firm that sells exchange-traded funds and mutual funds, with holdings in companies pursuing technological advances such as robotics, space exploration and cryptocurrency.
Ark’s flagship fund, Ark Innovation (ticker name ARKK) made a -60 per cent return in 2022. This year its total return was positive at 27.8 per cent on January 31.
Wood’s negative returns drew criticism, including from global financial crisis-famed investor Michael Burry, who revealed he was shorting some of Wood’s bets.
CEO and chief investment officer of ARK Invest, Cathie Wood. Photo / Getty Images
Responding to criticism, Wood said she doubted they were reading her firm’s research.
“Because it doesn’t suit their purpose. If the market’s time horizon shortens to one quarter ... then our [Ark’s] strategy is going to have a difficult time.
“As the risk appetite picks up, say because inflation’s coming down dramatically and interest rates will follow, then our strategy should do very well.”
Proving the high conviction she had in her own strategy, Wood said she had not sold down or out of any positions she held in stocks that caused negative returns for her clients and followers.
“I did not sell any of my Ark [fund holdings] or crypto during this shellacking that we’ve seen.”
Teslas galore at Auckland's port. Photo / John Barker, Ports of Auckland
Wood’s purchases of Tesla early this year made it Ark’s largest holding by February, from second in January. Other top 10 holdings across all Ark funds included Zoom, Square, Coinbase and Shopify.
Wood said Ark had US$1.5 billion flow into its exchange-traded funds last year, and inflows this year were “picking up nicely”.
Ark’s research included a price target of about US$1500 for Tesla shares, which was about eight times more than they were worth in February.
“There are many people who don’t believe it, or don’t want to believe it,” she said.
“We assume that electric vehicles are going to increase as a per cent of total vehicle sales from roughly 10 per cent in 2022, to 60 to 70 per cent in 2027.
“The other thing we have to assume is that Tesla becomes the autonomous taxi platform, the primary one in the United States.”
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Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.
