Catherine “Cathie” Wood is the founder, CEO and CIO of investment firm ARK Investment Management LLC. ARK managed the largest actively-managed exchange-traded fund in 2020, and Wood herself was named the best stock picker of 2020 by Bloomberg editor-in-chief emeritus Matthew A. Winkler. With this in mind, here are some of Wood’s investments through ARK going into 2021 and her observations and predictions on the stock markets in 2021.
ARK’s investments
One significant financial Cathie Wood made through ARK in 2020 is the firm’s investment in DNA development innovators, in response to the Covid-19 pandemic. With a focus on “disruptive innovation,” Wood has purchased millions of therapeutics and bioscience shares through the ARK Genomic Revolution exchange-traded fund (ETF) which supports companies that aim to “substantially benefit from extending and enhancing the quality of human and other life by incorporating technological and scientific developments and advancements in genomics into their business.”
Speaking to Bloomberg’s Erik Schatzker on the Front Row programme, Wood said: “The coronavirus created a tremendous number of problems, and our portfolios are all about solving problems, and our investors have been rewarded for helping to solve some of the world’s most profound problems.
“I love bringing to life new ways of looking at the world, helping people understand how the world is going to change not only in their investment portfolios but also in their own lives, their children’s lives, their grandchildren’s lives — helping them understand how to move everyone to the right side of change and really benefit from the exponential growth trajectories that are just taking off now.”
Wood is also known for being an early supporter of California-based electric vehicle and clean energy company Tesla soon after launching ARK, and remains bullish on the company in 2021. While Tesla CEO Elon Musk has proven to be a highly controversial figure recently, it appears that Wood’s faith in the Tesla brand was not unfounded from a purely financial standpoint, with Musk recently beating out Amazon CEO Jeff Bezos to be the richest person on the planet for a week in January 2021.
Innovation is at the forefront of Wood’s investments through ARK, and the ARK Innovation ETF posted a 152% return in 2020. The firm invests solely in what it calls “disruptive innovation”- according to a statement on the ARK website, “ARK recognizes that disruptive innovation causes rapid cost declines, cuts across sectors, and spawns further innovation.
“Through an iterative investment process, combining top-down and bottom-up research, ARK aims to identify innovation early, capitalize on the opportunities, and provide long-term value to investors.”
One big move Wood has made through ARK in 2021 is the launching of a space-focused ERT on January 14 with the ticker ARKX, perhaps influenced by the success of the SpaceX aerospace company. The fund will invest at least 80% of its assets in domestic and foreign equities involved with space exploration and innovation.
According to the US Securities and Exchange Commission (SEC) filing, the investment strategy is focused on four overarching categories:
- Orbital Aerospace companies, including companies that launch, make, service, or operate satellites or launch vehicles
- Suborbital Aerospace companies, including drones, air taxis and electric aviation vehicles
- Enabling Technologies companies creating technologies that add value to aerospace operations, including artificial intelligence, robotics, 3D printing, materials and energy storage
- Aerospace Beneficiary companies that stand to benefit from aerospace activities, including agriculture, internet access, global positioning system (GPS), construction and imaging
Cathie Wood’s predictions
With Cathie Wood’s predictions about movements in global markets, particularly when it comes to technological innovation, helping propel ARK to the heights of financial success in spite of the current socio-economic crises, many investors are looking to her assessment of the financial landscape going forward into 2021.
While we are still only a few weeks into the new year, it is clear that Wood does not intend to stop investing in innovation, something that is made clear by her recent investment in space exploration. In an article on the ARK website, Wood said: “ARK’s research suggests that the global economy has entered a period of convulsive changes, some exceptionally good and others devastating, that will shape financial markets for years to come.
“Thanks to seeds planted during the tech and telecom bubble more than 20 years ago, record-breaking technological changes are creating not only exponential growth opportunities but also black holes in global economies and financial markets.”
In this article, Wood outlines the five innovation platforms she expects to transform the global economy: DNA sequencing, robotics, energy storage, artificial intelligence, and blockchain technology. Conversely, energy, industrials, consumer discretionary, communications services, health care, and financial services are sectors Wood cites as being at risk of disintermediation as the five innovation platforms change the way technology and business work.
In terms of specific movements on global markets, Wood is expecting good things from electrical vehicles (EVs), and predicts that gas-powered vehicles are on their way out: according to ARK’s research, “EV sales will scale 20-fold globally during the next five years, from an estimated 2 million and ~2.5% of the market this year to 40 million and ~45% in 2025.
“If we are right, the good news is that EVs will generate exponential growth in the auto market for the first time in 100 years. The bad news is that, just as rapidly, the more expensive gas-powered cars that dominate the market today will lose almost half of their sales base. Moreover, if transportation goes autonomous, as we believe it will, the auto market will continue to shrink as the capacity utilization per car increases.”
Wood also expects traditional financial services to be affected by application programming interfaces (APIs), social platforms, and blockchain technology, which she predicts will converge business and consumer marketplaces and disintermediate the middlemen that dominate current financial systems.
As is expected from the CEO of a company with as big a focus on disruptive innovation as ARK, Cathie Wood is clearly enthusiastic about the emergence of exciting new technologies that could completely change the way we live and work. The ongoing Covid-19 pandemic has significantly disrupted the global economy, but has also spurred investment in technological companies, so this innovation may come sooner than expected.