Cathie Wood, the founder of Ark Investment Management ($24 billion in assets under management), is a big believer in disruptive innovation.
That’s a scenario where entire industries are shaken up, often by smaller, nimbler companies that emerge and change the way an industry operates.
That commitment to disruption had worked well for ARK from its inception in 2014 to 2020.
In that period, returns in the flagship ARK Innovation ETF (ARKK) averaged 45%.
Since ARK’s inception, Wood has made headlines with big investments in robotics, blockchain and cryptocurrencies, artificial intelligence, and clean energy. She’s also called for Tesla’s market value to reach $3 trillion by 2025 (it’s less than $1 trillion today.)
2021 and 2022, however, flipped the script. Both years saw a decline in the investment company’s fortunes, as the ARK Innovation Fund fell 20% in 2021 and is down over 65% in 2022, a year where many stocks significantly underperformed.
That slide in fund performance hasn’t stopped Wood from stepping up and opining on the biggest issues of the day in business and finance.
Let’s take a look at what Wood had to say in 2022 – a year where her star dimmed, but her opinions certainly did not.
Cathy Wood's Top Quotes This Year
On innovation and disruption. In an October speech to the Forbes/SHOOK Top Advisor Summit in Las Vegas, Wood said the innovation market will be worth $210 trillion by 2030 (it currently sits at $7 trillion). She also noted disruptive stocks tend to be deflationary, a trend that should roll into 2023.
“Innovation trends like electric vehicles, artificial intelligence, gene sequencing, and blockchain technology are all highly deflationary,” Wood said. “Yet there are extreme fears of inflation in markets today… no one is really making big bets, everyone is cowering and cash is at record highs. . . Investors are “too fearful of innovation that is going on,” yet the disruptive companies that Wood favors are already emerging as “new leaders of the next bull market cycle.”
“Anyone who bets against American innovation in the long term is likely doing bad business,” she said.
On cryptocurrencies. At the same Las Vegas event, Wood reinforced her support for cryptocurrencies.
“Bitcoin truly a money revolution,” Wood said. “It’s a very important insurance policy for countries that don’t have the dollar as a reserve currency as we do.”
Wood also called for Bitcoin price to rise to $1.3 million by 2023, up from $16,400 as of December 19, 2022.
On the FTX cryptocurrency scandal. “We think bitcoin is coming out of this smelling like a rose.”
On the Federal Reserve’s campaign to smother inflation with ongoing interest rate hikes. In an October interview with Yahoo Finance, Wood said that repeated Fed rate hikes are leading the U.S. economy into a ditch. She also noted how that compared to other Federal Reserve inflation battles.
“As we're thinking about the Fed and inflation, we compare what Chairman (Jerome) Powell is doing to what Chairman (Paul) Volcker did in the late '70s or early '80s when he was fighting an inflation problem that had been building for 15 years.”
“There you had the Vietnam War, Great Society, closing the gold window-- that was a real inflation problem that built up over 15 years. This inflation problem has been 12 to 15 months by the time the Fed started addressing it.”
“We think it's much more a function of supply chain imbalances caused by COVID and then again by Russia's invasion of Ukraine,” Wood added. “These are very, very different circumstances.”
On an imminent recession. As a result of high inflation and Fed-driven interest rate hikes, an economic downturn is inevitable, Wood noted in the same interview.
“(The Fed’s rate policy) is a real shock to the system,” she said. “I believe we’ll see the ramifications in many ways. We're seeing housing shutting down. I think we're going to see a lot of other activities shutting down as well.”
“Consequently, we believe we're in a recession and we believe this recession now will be sustained,” Wood said. “Also, if we see an increase in gross domestic product, it's probably because either inventory are continuing to increase or imports are coming down as companies try to unwind their inventories.”
On disruptive companies going into 2023. Wood isn’t deviating from her core investment philosophy that innovation and disruption will dominate the business and economic headlines going forward.
“Our sole focus is on disruptive innovation,” Wood said in October. “We also believe that innovation solves problems. We had a tough time going into COVID with our kind of strategy.”
“Then we had a boom in our strategy during COVID because we needed the genomic revolution to help sequence the coronavirus and figure out tests and vaccines,” she added. “Our kinds of companies helped with that . . . . as once again innovation is going to help solve these problems. For example, currently, there’s an accelerated consumer preference shift towards electric vehicles, like Tesla, because of oil prices. We think there's no stopping that trend now.”
On her reluctance to be a celebrity. In a recent CNBC interview, Wood said that she’s never sought the media spotlight and fame as her goal.
“ARK did have a social strategy, but I was hoping to make the young people—analysts, portfolio managers, advisors—famous, not myself,” she said at a New York City media event on October 17.
That was tolerable when ARK was outperforming, but the spotlight has been harsher in the past 18 months.
“In early 2021, we could do no wrong,” she added. “Everybody wanted to talk to us. Today, we can do nothing right, according to the media,”
