After much ‘soul searching,’ Wood says her strategy still has ‘huge’ potential
Turns out “disruptive innovation” isn’t the most stable place to put your money. Just ask Cathie Wood.
Over the last few years, her company Ark Invest delivered huge returns through several ETFs focusing on these kinds of businesses. But as some of the high-flying tickers fall into correction territory, the funds’ performance seems less rosy.
Her biggest fund — Ark Innovation ETF — is down about 25 per cent year-to-date. In comparison, the S&P 500 Index climbed 25 per cent during the same period.
“When we go through a period like this, of course, we are going through soul-searching, saying, ‘Are we missing something?’” Wood told Bloomberg last week.
Yet the famed investor is sticking to her guns, doubling down on its research and modelling.
“The opportunity in our strategy is huge right now. We expect a compound annual rate of return of roughly over 40 per cent over the next five years.”
Here’s a look at three stocks Ark Invest recently bought — plus some exotic assets to consider if you want to try a little innovation yourself.
If you follow Wood, you might know that her company has sold some Tesla shares recently. But that doesn’t mean she’s turning bearish on the electric vehicle (EV) industry.
For one, Tesla remains the largest holding at Ark Invest. At the same time, Wood has started a new position in another EV stock: XPeng.
XPeng is a U.S.-listed Chinese EV maker based in Guangzhou. It went public in August 2020 with an IPO price of US$15. Thanks to the market’s huge appetite for EV stocks over the past year, XPeng shares have climbed to over US$40 apiece.
Earlier this month, on Dec. 2, Ark Invest bought 277,263 shares of XPeng. Five days later, it added another 254,601 shares to its portfolio.
The automaker is rapidly ramping up production. In Q3, XPeng delivered 25,666 EVs, representing a 199.2 per cent increase year-over-year and marking a new quarterly record.
Meanwhile, total revenue jumped 187.4 per cent year-over-year to US$887.7 million for the quarter.
Robinhood Markets (HOOD)
Though the company’s shares tumbled more than 40 per cent over the past month, Wood sees the fall as a “buy the dip” opportunity.
On Monday, Ark Invest picked up 260,791 shares of Robinhood, which is known for its commission-free stock trading platform (that, sadly, Canadians can’t use ).
While Robinhood stock is far from a hot commodity at the moment, its business isn’t doing too badly.
In Q3, revenue grew 35 per cent year-over-year to US$365 million, fueled by a 32 per cent increase in transaction-based revenue. Monthly active users reached 18.9 million in the quarter, compared to 10.7 million in the year-ago period.
The company also appeals to the growing cryptocurrency community. While many exchanges charge up to 4 per cent in commission just to buy and sell crypto, Robinhood charges zero per cent. And Robinhood will be launching a crypto wallet soon.
“More than one million people have joined our crypto wallets waitlist to date,” said co-founder and CEO Vlad Tenev in the company’s latest earnings release.
While Robinhood may be inaccessible to Canadians, no-fee investing is available north of the border through certain innovative trading platforms .
Here’s another stock Wood bought on a recent pullback.
This company based in Bucharest, Romania, provides software to help organizations automate their business processes.
Ark Invest first bought shares of UiPath when it began trading on the NYSE in April 2021 and has since added to that position.
On Monday, Ark Invest snapped up another 303,708 shares of the company.
UiPath reported earnings last week. In the fiscal quarter ended Oct. 31, revenue increased 42 per cent year-over-year to US$220.8 million.
Its annualized renewal run-rate — that is, the amount of revenue the company expects to generate in a year, given the renewal status of its products — totalled US$818.4 million for the quarter, up 58 per cent from a year ago.
Despite posting impressive growth rates, UiPath shares slipped nearly 40 per cent over the past six months. Wood clearly sees value, but if you don’t feel comfortable picking individual winners and losers, you can always build a diversified portfolio automatically using your “spare change.”
Looking beyond the stock market
Ark Invest’s recent history is a reminder that stocks don’t go up in straight lines, and even Wall Street experts aren’t right 100 per cent of the time.
Diversification is key — and you don’t have to stay in the stock market to have it.
If you want to invest in something insulated from stock market swings, take a look at some lesser-known alternative assets .
Traditionally, investing in things like exotic vehicles or multi-family apartments or even litigation finance have only been options for the ultrarich, like Wood.
But things are changing. For instance, a new trading platform allows Canadians to buy shares of blue-chip artworks , which have seen values explode in recent years.