Hazard Taker Cathie Wood: Wall Street’s most popular investor is betting significant on a handful of shares. Critics say she’s taking part in with hearth

It truly is a large-traveling, substantial-chance, superior-reward tier of investing. And it is set Wood’s fans on a white-knuckle experience in 2021.

Very last calendar year, Wood’s technique paid out big dividends for investors in her flagship Ark Innovation (ARKK) exchange-traded fund. It surged practically 150% in 2020 and aided switch her into a Wall Road celebrity — sort of the Warren Buffett of momentum investing.

But this calendar year hasn’t been nearly as type to Wooden as the past. The Innovation ETF was down 2.5% as a result of late August, regardless of a purple-incredibly hot market place for tech with the Nasdaq up a lot more than 18% so considerably in 2021.

Wooden was not readily available to comment for this tale, but she doubled down in an job interview with CNBC in August. She’s not worried that the Ark strategy of looking for new tech leaders will end terribly, and she maintains that this present-day rally will not be a repeat of the epic 2000 dot-com implosion.

“I do not consider we’re in a bubble, which is what I believe a lot of bears imagine we are,” Wooden instructed CNBC. “We have nothing at all like that ideal now. In truth, you see a good deal of IPOs or SPACs coming out and falling to Earth. We could not be additional away from a bubble.”

How Wood formulated her approach

Wooden speaks from experience. She’s no millennial or Gen Z investor for whom the 2000 tech implosion is merely a war tale informed by more mature traders. The 65-year-old Wood lived via the last key tech crash, as nicely as the notorious Black Monday of 1987.

She worked for Prudential-owned dollars manager Jennison Associates for 18 many years in the 1980s and 1990s and then invested a dozen several years at AllianceBernstein before leaving in 2013.

But then, AllianceBernstein handed on her thought to start a suite of actively managed exchange-traded resources. So she struck out on her personal and started out Ark in 2014.

“I have been looking at disruptive innovation for my whole job — why never I assist my possess sector alongside?” she explained to Forbes in a 2014 job interview.

That concentrate on disruption indicates Wooden ties her ETF’s fortunes to visionary but mercurial leaders.

In the most popular illustration, Wooden remains an unabashed admirer of Tesla (TSLA) and CEO Elon Musk. The EV maker is the prime inventory, by far, in Ark’s Innovation ETF, accounting for much more than 10% of the fund’s holdings. It is also the most significant posture in Ark’s Autonomous Know-how & Robotics (ARKQ) and Up coming Era Internet (ARKW) ETFs.

Wood is also Okay with businesses like Tesla issuing additional stock to raise income to fund futuristic initiatives like autonomous automobiles. Some buyers are wary of that strategy for the reason that the new shares reduce the price of current investors’ holdings, but she thinks which is a quick-sighted argument, significantly from Tesla bears.

“We are not concerned of dilution … if we consider they are accomplishing it for the appropriate reason,” she instructed CNBC. “We required them to scale as promptly as probable because we consider if we’re proper on autonomous …Tesla could get the lion’s share of that sector, surely in the United States.”

You don't have to be rich to cash in on the space race
Ark’s significant financial investment in Tesla is a guess on Musk continuing to innovate beyond the organization of electrical vehicles, Wood defined in an interview with Bloomberg Radio in August. She raved about Tesla’s programs to construct a humanoid robot, for illustration.

“Every passing day, specifically the extra we discover about their AI abilities and how they are actually driving the place … we consider they have the pole situation,” she said, noting that Ark analysts had been “blown away” by Musk’s presentation.

Expansion at all costs

Wood acknowledges her advancement-at-all-costs way of investing is not for absolutely everyone.

Tesla has lagged the broader current market this calendar year. Shares of Teladoc (TDOC), a telehealth business that is the second-biggest holding in the Ark Innovation ETF and was a significant winner at the begin of the pandemic, are down more than 25% in 2021.
“We’ve found greater-valuation stocks hit really hard this 12 months. But the progress for these revolutionary providers will even now be dealt with nicely over time,” Wood mentioned in the course of a webcast hosted by Cboe World Markets in March.

Wooden additional that she thinks investors also should place a modest percentage of their revenue in bitcoin, another dangerous bet. And she stressed that traders have to ignore the inevitable small-expression bumps that arrive with any asset. It really is necessary to maintain longer-phrase convictions and spend for long run progress, Wood believes.

“A large amount of firms catering to limited-time period traders who wanted earnings now [have] invested additional in inventory buybacks and dividends around innovation,” she claimed. “That places them in harm’s way.”

A colleague describes Wood’s go-big-or-go-house tactic as a product for the new way of investing. As well many fund managers are scared to seem significantly into the upcoming when judging a company’s deserves, in its place concentrating myopically on the prior and next quarterly earnings reports.  

“Cathie has been concentrating on Tesla for a prolonged time. She appears to be like at it not just as an car manufacturer. You won’t be able to look at it to standard vehicle corporations,” Ark Invest’s Ren Leggi, who performs closely with Wooden on expenditure conclusions as the company’s shopper portfolio manager, explained to CNN Company in March.

Wood’s critics

But a expanding chorus of skeptics assume Wood’s resources could eventually collapse. Michael Burry, 1 of the super-bearish traders built well-known in “The Significant Short,” not long ago set up a shorter placement on the Ark Innovation ETF — effectively betting that it will slide sharply.

Some tech stock veterans also question if Wooden is just an investing taste of the thirty day period, evaluating her to once-well-liked portfolio administrators like Kevin Landis of Firsthand Resources, Alberto Vilar of Amerindo and Garrett Van Wagoner, who ran a well-liked rising-growth fund in the late 1990s.

Many of these tech funds imploded following the 2000 bubble. The Wall Avenue Journal wrote a catch-up piece about Van Wagoner and other late 1990s tech gurus in 2010 with the headline “From Fame, Fortune to Flamed-Out Stars. Write-up-Bust Fates of Tech-Fund Professionals.”

Is Wooden destined for similar ignominy?

Rivals consider issue with Wooden producing such large bets on only a handful of shares. The Ark Innovation ETF, for example, has almost 50 % its property concentrated in its top 10 holdings. Beyond Tesla, that fund also owns sizable stakes in Roku (ROKU), Coinbase, Zoom (ZM) and Square (SQ).
Roku is another example of a high-risk/high-reward stock that Wood loves.

“Our investment tactic is similar to Ark in that we are focusing on tech. But we are distinct in that we prevent focus,”Jeremie Capron, head of analysis at ROBO Global, informed CNN Business in March.

The top rated 10 holdings in the ROBO International Robotics and Automation Index (ROBO) ETF account for significantly less than 20% of the fund’s total assets, and the fund owns about 80 shares. Ark money typically own shares in only about 30 to 50 corporations.

For the time getting, Wooden is acquiring the previous snicker.

Yes, her fund’s returns may be volatile calendar year-to-12 months — the Ark Innovation ETF fell almost 25% in 2018 just before rebounding 30% in 2019 — but it has tended to smooth out. The 5-year regular annualized return for the Ark Innovation ETF by means of mid-2021 was 48.6%, as opposed to 17.7% for the S&P 500.

As lengthy as that long-time period development proceeds, Ark acolytes may perhaps forgive a down calendar year every single now and then as Wood carries on to swing for the fences.