Move over, Warren Buffett. There’s a new oracle in town.
Last year, Cathie Wood, founder of asset management firm Ark Invest, established herself as a master of the modern exchange-traded fund (ETF). In 2020, her flagship Ark Innovation ETF (ARKK) posted eye-watering gains of 153%, easily crushing the return of the overall stock market.
Over the past five years, ARKK has averaged an annual return of greater than 40%.
While ARKK and another of the company’s funds, Ark Genomic Revolution ETF (ARKG), have struggled this year, money from investors continues to pour in and CEOs like Elon Musk want to be on her podcast. You may even have Ark funds in your portfolio.
Despite the choppy road Wood's offerings have bumped along in the past few months, investors continue to hold on. Here's why.
Just who is Cathie Wood?
When she founded Ark Invest in 2014, Wood had already amassed 40 years of experience researching and investing in innovation. She managed over $5 billion in assets at AllianceBernstein and over $800 million at hedge fund Tupelo Capital Management, a company she also founded.
Wood launched Ark as a means of packaging active stock portfolios into an ETF format.
By concentrating on innovative, disruptive technologies, Ark invests in companies with the potential for both explosive short-term growth and long-term relevance. As the company’s CIO and portfolio manager, the final call on Ark’s investment decisions is Wood’s to make.
Wood has received plenty of recognition for her investment performance in recent years.
She was a featured speaker at the World Economic Forum (China) in 2016 and 2017. In 2018, she was selected by Bloomberg as one of the 50 people defining global business. In 2019, Fortune chose Wood to be one of the experts included in the publication’s annual Fortune Investors Guide.
As of Aug. 11, Forbes estimated Wood’s net worth to be $400 million.
Investment philosophy and performance
Ark Invest describes its sole focus as “disruptive innovation,” which allows the firm to invest in companies whose products and services are expected to meet the needs of a planet barrelling from crisis to crisis.
Ark’s big bet is that technology is the most effective solution to these crises and that a disruption-first ethos is a primary path to greater returns.
“We’re all about finding the next big thing,” reads a quote from Wood on Ark Invest’s website. “Those hewing to the benchmarks, which are backwards looking, are not about the future. They are about what has worked. We’re all about what is going to work.”
And Wood’s picks have definitely worked.
Despite the recent sluggishness that ARKK and ARKG are experiencing, both funds have crushed the market over the past five years
ARKK, which includes tech heavyweights Tesla, Zoom, Coinbase, and Shopify among others, has grown by about 450% since the summer of 2016.
Meanwhile, ARKG, which targets technologies like molecular diagnostic and genetics, and holds companies such as virtual healthcare provider Teladoc Health and Regeneron Pharmaceuticals, is up roughly 340% over the same time period.
Recent struggles providing a buying window?
Investors who purchased either ARKK or ARKG in 2021 have had little to celebrate, with the ETFs posting year-to-date declines of 9% and 15%, respectively.
With investors changing course from growth stocks to economic recovery plays this year, many of Ark’s tech-focused plays have seen their shares decline, dragging down the value of Ark’s ETFs.
It’s one of the risks of the company’s relatively narrow focus.
But despite the recent weakness, investors aren’t exactly losing confidence in the Ark ETFs. In fact, they’re backing Wood with even more money, suggesting they see the dip as an attractive buying opportunity.
For instance, ARKK has seen nearly $5.9 billion in inflows this year, bringing its total assets under management to a whopping $22.6 billion.
ETFs and beyond
Purchasing Ark ETFs is easier than you think. And now might be an ideal time to do it.
You can get started with a popular investing app, which offers not only ETFs, but also fractional shares. Another app allows you to build a diversified portfolio with little more than the “spare change” left over from your everyday purchases.
With a little help from the right platform, you can invest alongside Cathie Wood and, hopefully, profit massively from her next set of big ideas.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.