Cathie Wood doubles down again with her disruptive bets. Cathie Wood is a high-profile money manager known for her innovative ETFs, which attracted billions in inflows during the pandemic.
Cathie Wood said in her latest interview that Ark is currently testing a fund that will take her strategy a step further by simultaneously betting against benchmark stocks disrupted by technology.
Put another way, Cathie Wood doubles down again with her disruptive bets and goes long technology disruptors and shorts the disrupted companies.
“Cathie Wood doubles down again with her disruptive bets and goes long technology disruptors and shorts the disrupted companies”
Cathie Wood doubles down again strategy was coined as Ark on steroids in her latest business interview
“We’re testing out a portfolio, but it’s Ark on steroids,” Wood told CNBC’s “Squawk Box” on Wednesday. Wood said she wants to test the strategy on Ark’s employees and did not say when the fund would be made available to retail investors.
Cathie Wood’s Ark also gave her view on where she sees long-term risks in these markets.
“We think the benchmarks are where the big risks are long term because they are filling up with value traps — those companies that have done very well historically but are going to be disintermediated and disrupted by the massive amount of innovation that’s taking place,” said Caithie Wood.
So, Cathie Wood is searching to find and short the next Rank Xerox and Kodak that were success stories of the 70 and 80s but were later displaced by digital technology.
These companies were so successful that their names influenced language. For example, Xerox meant to take a copy and a Kodak moment symbolized taking a photograph. Who would have thought that disruptive digital technology would wipe these iconic companies out a few decades later?
“We’re testing out a portfolio, but it’s Ark on steroids”
So, could big oil companies of today that primarily rely on burning oil for fuel rather than using it to make products be the next Kodak or Rank Xerox?
Does Cathie Wood see value traps in big oil as global policy pushes the decarbonization of energy agenda?
Cathie Wood categorizes these companies as those, which catered to short-term-oriented shareholders by leveraging their balance sheets to pay dividends and buy back shares. As a result, these companies did not invest enough in innovation. Cathie Wood thinks these companies have under-invested in technology and could become the next dinosaurs.
“In five years, the world will look nothing like it does today, and we’re invested in all the disruptors, the winners, that are going to disrupt the traditional world order” – Cathy Wood
Cathie Wood doubles down again while many of her contemporaries are calling here a bubble chaser and over playing her hand on a losing strategy
“What we would be doing is shorting stocks that are in the big benchmarks and when we get into a risk-off situation, what happens is portfolio managers and analysts generally run back to those stocks, get closer to their benchmarks and they dump our stocks, which are either small parts of benchmarks or not in benchmarks,” she said. “Great opportunity for us, as we have experienced during these last few days, to pick up those stocks because it simply is a risk-off move to get closer to benchmarks,” she said.
With Wood’s flagship fund, Ark Innovation ETF, down nearly 15% in 2021 and the S&P 500 up 25%, this new strategy could see some losses.
“In five years, the world will look nothing like it does today, and we’re invested in all the disruptors, the winners, that are going to disrupt the traditional world order,” said Cathie Wood.
Technology investing is a high-risk, high reward play that often tests investors’ patience to near breaking point. Amazon’s stock price fell 90% from its highs in the dot-com crash.
So, Cathie Wood’s doubles down again on a strategy may not look smart today, but she is bound to have chips piled on a few big winners, bearing in mind, we are in the midst of a disruptive fourth revolution.