How Cathie Wood
Beat Wall Street
is worth more than $1 trillion
The newest celebrity investor leveraged a zealous innovation conviction into a $29 billion-in-asset business and a net worth of $250 million. Among her predictions: Elon Musk's car business is underrated.
Tesla shares limped about $200 in May 2019, around where they traded five years ago, when Elon Musk 's biggest Wall Street booster attempted a gutsy experiment. Cathie Wood and her Ark Investment Management were already well-known for their way-out forecasts that Tesla would create a $1 trillion robo-tax fleet and that its shares would skyrocket 20- or 30-fold by 2023. Now she stirred the pot again by publishing online Ark 's latest $1.4 trillion bull-case valuation, suggesting a share price above $6,000, along with every Excel estimation and assumption behind those figures.
Criticism came hard, furious. Tesla short seller Jim Chanos, famous for uncovering Enron's fraud, took Wood over Ark's gross margin estimates. "[W]hat Ark has created is forward pricing for Tesla, not valuation," sniffed valuation expert Aswath Damodaran, a New York University finance professor. The model, he noted, did not provide a discounted cash-flow analysis and carried imperfect estimates of Tesla's costs to scale its vehicle production. The $1 trillion worth Ark put on Tesla's non-existent robo-taxi fleet? "Strike me as more fairy-tale than valuation," Damodaran said.
Sixteen months later, following a five-for-one August stock split, Tesla shares were valued at $400. In other words, they would have risen tenfold, driven by anticipation and enthusiasm about Musk 's autonomous-driving and battery developments and Tesla's better than anticipated financial results. Musk 's car business now worth five times as much as Ford and General Motors combined, and Wood made a fortune. The nitpicking skeptics, she argues, missed the larger picture: As electric cars become more popular, manufacturing efficiencies and developments in batteries and other technology will reduce the cost of producing them. And as sticker prices fall, demand will increase, particularly from ride-sharing companies. In September, Musk promised a three-year $25,000 vehicle.
Meanwhile, Wood, 64, is perfectly happy to have a critical chorus: "It almost makes me more relaxed, to be honest, because if we're right, the rewards will be pretty big."
Loaded on the Ark
Cathie Wood’s ETFs bet on big ideas and industry disruptors. Here are some of her top holdings.
|ETF||Stock||1-Year Gain||Bullish Case|
|ARKK (Innovation)||Invitae Corp.||109%||Genetic-testing innovator could cut health-care costs.|
|ARKW (Next-gen internet)||Roku||68%||Consumer operating system for streaming media.|
|ARKQ (Robotics)||Proto Labs||26%||3D printer lowering costs in industries like aerospace.|
|ARKG (Genomics)||CRISPR Therapeutics||81%||Gene editor developing treatments for cancer and diabetes.|
|ARKF (Fintech)||Square||165%||The payment processor is becoming a digital bank.|
Wood 's trust in going her own way has helped make Ark one of the world's fastest-growing and top-performing investment firms. Its flagship $8.6 billion Ark Innovation Fund is up a whopping 75 percent in 2020, returning an annual average of 36 percent over the past five years, almost triple that of the S&P 500.
While most star stock pickers treat their work as state secrets, Wood makes Ark 's research publicly accessible online and publishes real-time logs of their businesses. Instead of hiring MBAs, she recommends getting onboard young analysts with expertise in subjects such as molecular biology or computer engineering, as they are more likely to spot the next trend. Also Ark 's framework, Active Study Information acronym, is original. Wood manages seven portfolios designed to capitalize on breakthroughs in robotics, energy storage, DNA sequencing and financial and blockchain technology, making them available as tax-efficient exchange-traded funds to investors , especially Robinhood Millennials.
Its Tesla position and a pandemic that has accelerated technological adoption embedded in the 35 to 55 companies in each Ark ETF helped its assets nearly triple to $29 billion in 2020. "For solving problems, Coronavirus has catapulted our creative platforms into high gear," Wood says. "Innovation fixes issues."
Forbes conservatively rates Ark at $500 million, or about 2% of assets under administration, about the same multiple as publicly traded T. Rowe Price's orders. Wood's 50 percent plus ownership gives her $250 million net worth, good for the No. 80 spot on Forbes' sixth annual list of America's Wealthiest Self-Made Women.
Dismissing Wood as the face of a stock-market bubble created by easy-money policies of the Federal Reserve is easy. Yet she survived both bubbles and bear markets. While studying economics at the University of Southern California, she studied under supply-side guru Arthur Laffer and trained at Los Angeles Fund Giant Capital Group from 1977 to 1980, seeing interest rates approaching 20 percent crush the economy and industry. After graduating in 1981, she joined Jennison Associates, now Prudential 's equity investment arm, as New York economist. There, she called early that inflation and interest rates had peaked. That earned eye rolls from her bosses, but Wood was right — and the experience encouraged her to understand the potentially major payoff of going against consensus.
Frustrated with her career direction at Jennison, one Friday Wood leaves and wants to study individual businesses. Her business mentor convinced her to return the next Monday, switching her to equity analysis. She covered emerging wireless communications firms in the late 1980s and early 1990s, obtaining a ground-floor view of major economic and social shifts as cellphones became omnipresent. She moved to New York-based AllianceBernstein as Chief Investment Officer for thematic portfolios in 2001. But the financial crisis of 2008 started in a period when active investors underperformed the S&P 500 and poured into low-cost index funds. Wood wanted a new approach. In 2012, she suggested placing active portfolios of creative companies within an ETF framework. AllianceBernstein had no idea.
Two years later, New York launched Ark. Performance wasn't inevitable. In the first two years, its flagship fund put its peer group in the bottom quartile, according to Morningstar. At the end of 2016, Wood had attracted just $307 million in cash, and Ark's 0.75% management fee did not cover overhead. She dug deep in her savings, sold minority shares, and formed alliances with larger firms to create distribution. Japan's Nikko Asset Management and American Beacon mutual fund now own 39% of the firm. Nearly 10 percent of the company's two-dozen staff.
Ark took off in 2017, driven by rising stock prices including Netflix, Salesforce, Illumina DNA sequencer, Square digital-payment processor, and Athenahealth digital health provider. Assets grew tenfold, and Ark started building its brand on the back of bold forecasts, an aggressive Twitter account, and the free research it put online. (It also gained attention for a cryptocurrency fund open only to approved investors; Wood began buying Bitcoin, which she considers an inflation strategy, at $250 a coin in 2015.)
Wood takes a top-down approach to portfolio construction, first finding disturbances by every means imaginable, including crowdsourcing — she also opens Friday afternoon research meetings to outsiders who can call in via Zoom. Economy is key. Wood is most creative if she expects that their costs will decrease over time, generating real demand. When rating future holdings, Ark explores organizational culture and execution on growth initiatives. Only at the end of the process does Wood value a brand, refusing to buy something she doesn't think to increase by 15 percent annually over five years, Ark 's projected minimum holding period.
2020's turmoil was fine for Ark. When the pandemic erupted in March and stocks plummeted, Wood correctly predicted fast-growing tech firms will lead the world (and financial markets) to recovery. She concentrated Ark portfolios in Tesla and other top picks, including 2U education-software business and Zillow real estate platform. Then, when Tesla soared late summer, she trimmed her holdings and established a large position in Slack's battered stock.
Copycats come with all popular inventions. Gimmicky-themed ETFs proliferated from pets to sports gambling to work-from-home. Dimensional Fund Advisors, Fidelity Portfolios and T. Rowe Price recently launched their own slates of active ETFs.
Naturally positive, Wood gives some disturbing projections for the next five years. She expects a wide range of large industries — banks, electricity , transport, health care — to be disrupted by technological change, with many jobs displaced. The result, she argues, is that economic growth, inflation, and wide market indices will all persistently fall short of expectations, offering active managers an opportunity to choose creative winners that will continue to drive market-cap gains.
"I think benchmarks and indexes go through a horrible time. We're seeing it, "she says. "We assume value traps are rapidly populated."
Does she think the business is bubbling now? Nope. Nope. Uncertainty about the pandemic and election (Wood "unabashedly" supports President Trump) means money has poured from stocks and into bond protection, she says. "The fact that people are frightened now that we're back at 25-time earnings at the S&P 500 trading shows me we're not in a bubble."
Cathie Wood Net Worth
Catherine D Wood 's reported Net Worth at least $106,000 as of September 21, 2020. Ms. Wood holds over 2,400 shares of NexPoint Residential Trust stock valued over $105,504 and has sold NXRT stock worth over $0 in recent years. She makes $0 as Independent Director at NexPoint Residential Trust.
Cathie Wood NXRT SEC Form 4 insiders
After 2020, Catherine has made over 1 NexPoint Residential Trust stock transactions, according to the SEC Form 4. She recently purchased 2,400 NXRT stock units worth $98,736 on September 21, 2020.
On September 21, 2020, she bought 2,400 units of NexPoint Residential Trust stock worth over $98,736. Catherine trades about 2,400 units every 0 days since 2020. As of September 21, 2020, she currently holds at least 2,400 NexPoint Residential Trust stocks.
Cathie Wood biography
Catherine D. Wood is Independent Business Owner. Ms. Wood is Chief Executive and Chief Investment Officer of ARK Investment Management LLC ("ARK"), which she established in January 2014. Until ARK, Cathie spent 12 years as Multinational Thematic Strategy Chief Investment Officer at AllianceBernstein. Ms. Wood joined Tupelo Capital Management's Partnership, a co-founded hedge fund. Before joining Tupelo Capital, she served as Chief Economic Officer at Jennison Associates LLC and various other positions for 18 years. She began as an assistant economist in Los Angeles at The Capital Company. Ms. Wood received her Bachelor of Science in Finance and Economics from Southern California