But investors need an ironclad stomach to deal with the recent volatility in ARC exchange-traded funds.
Tesla accounts for more than 10% of the fund’s assets, so Wood’s success is in line with what Elon Musk’s market thinks. Tesla has risen 25% over the past five days, but is still more than 20% below its record high.
As a result, the ARK Innovation ETF has risen by more than 15% over the past week and by almost 200% over the past 12 months. But it is almost 20% lower than the 52-week high due to a dip in the past month.
But Wood and her colleagues accept the volatility of investing in momentum stocks.
Wood added that investors should avoid these traps by “avoiding industries and businesses at the crossroads of ‘creative destruction’. ‘
To bet that the collection of values may not last much longer
CNN Business spoke to Ren Leggi of ARK Invest about the large and daring shares of the company. Leggi works closely with Wood on investment decisions as the company’s client portfolio manager.
Leggi is not worried that investors on Big Tech companies like Tesla, the FAANGs and other growth companies will go bail. He believes the recent shift to banks, oil supplies and retailers is a ‘short-lived conversion into value stocks’.
“Value industries are becoming increasingly vulnerable to disruption,” Leggi adds, noting that Wood and the rest of the ARK team are reflecting on investments over five to ten years.
That’s why ARK is happy to bet even more on the companies they are best at as their share prices fall, Leggi said.
“If there are disruptions in the market and big sales, it does not scare us. It excites us because you can pick up a good stock at a lower price,” he said, adding that volatility can be good buying opportunities. create.
That’s why ARK bought even more Tesla shares during its recent sale.
“Cathie has been focusing on Tesla for a long time. She does not just consider it a car manufacturer. You can not compare it to traditional car companies,” Leggi said, adding that Tesla’s growing influence with autonomous driving technology will lead to even more recurring revenue. .
Although Wood and ARK are best known for their positive attitude towards Tesla, the funds also have the best interest in many other innovative companies.
Too much of a good thing?
The strategy of selecting only a handful of potentially big winners is not mild, as evidenced by the recent volatility in the funds. For example, ARK Innovation holds nearly half of the fund’s assets in its top 10 stocks.
“There was this recent rough patch, with a correction in super-growing technology stocks,” said Jeremie Capron, head of research at ROBO Global, an investment firm with ETFs focusing on robotics, artificial intelligence and healthcare businesses.
“Our investment approach is similar to ARK because we focus on technology. But we differ in the sense that we avoid concentration,” Capton said.
The ROBO fund owns about 80 shares, while ARK funds usually only own about 30 to 50 companies.
Still, Leggi defends ARK’s decision to limit the number of shares it owns. Rather, it’s a big-or-go-home approach. He describes Wood and the rest of the company’s strategy as looking for companies that are an industry where ‘its winner takes the most’.
It worked well with Tesla, but it is likely to lead to even greater fluctuations in ARK yields.