Cathie Wood’s Investment Strategy

As we enter into a new year, investors are examining their portfolios to determine which stocks were winners and losers.

With global crises, inflation, and increasing interest rates all contributing to market volatility, it is not unexpected that many experts’ top equities underperformed the benchmark indices last year. Catherine Wood (Trades, Portfolio) of ARK Investments is no exception. While her portfolio of exchange-traded funds has found success in the past among firms with “disruptive innovation,” its largest holdings lagged behind the S&P 500 Index’s -19.44% return on growth stocks in 2022.

Getty Images/ CNN | The portfolio manager expects the next few years to bring the most spectacular period for innovation

Who is Cathie Wood?

She is the founder, chief executive officer, and chief investment officer of ARK Invest, a disruptive innovation-focused asset management. ARK manages about $40 billion in assets across six actively managed exchange-traded funds (ETFs) and three index exchange-traded funds (ETFs).

Wood received a widespread reputation as a renowned investor in 2020 when all six ARK ETFs posted gains higher than 100 percent, compared to the S&P 500’s 16% growth. Six distinct funds annihilated market returns, lending credence to Wood’s theory that innovation is the quickest route to development.

In September 2022, the expert’s $41.63 billion equities portfolio comprised of 249 stocks. The bulk of the portfolio, or 37.81%, was invested in healthcare companies, while the weight of the technology sector was 32.533%, and the weight of the communication services sector was 11.90%.

What is the ARK Invest ETF?

Exchange-traded funds (ETFs) managed by the tech-focused investing firm ARK Investment Management include names like Next Generation Internet ETF, Genomic Revolution ETF, Autonomous Tech & Robotics ETF, and Fintech Innovation ETF. Additionally, Space Exploration ETF, 3D Printing ETF, Israel Innovative Tech ETF, and Transparency ETF are included in Cathie Wood’s stock portfolios. There are overlapping holdings in several of Cathie Wood’s ARK Invest accounts.

The ARK Innovation ETF (ARKK) is the flagship investment product of the company. In June 2022, ARKK managed assets of more than $7.9 billion.

Crystal Mercedes/ CNBC | Cathie Wood says she invests on a five-year time horizon, betting big on speculative growth names such as Tesla

Cathie Wood’s portfolio performance vastly outperformed the US tech-focused benchmark index Nasdaq Composite, resulting in ARK ETFs gaining notoriety and popularity. ARK Innovation ETF had returns of 373% between January 2016 and December 2021, compared to the Nasdaq Composite’s return of 219% during the same time period.

In 2022, however, Cathie Wood’s stock price has taken a knock due to a deteriorating investment climate caused by global monetary tightening. ARK Innovation ETF was down 55% year-to-date (YTD) in July 2022, compared to the Nasdaq Composite’s drop of 27% YTD.

Cathie Wood’s best investments

It might be helpful for small-scale investors to understand which businesses ARK Invest is interested in. The top 3 equities listed by Cathie Wood may aid investors in their hunt for tech-driven, disruptive, and inventive businesses.

Tesla

Tesla is a company that Wood is enthusiastic about. ARK Invest stated a price prediction of $4,600 by 2026 in April 2022. Following a 3-for-1 stock split in August 2022, Tesla is currently valued at about $274. In a profit-taking move- more than a change in strategy – ARK liquidated part of its Tesla assets in 2021.

Shutterstock/ Decrypt | Forbes estimated Wood to be worth $140 million

Coinbase

A bitcoin exchange oriented toward newcomers is called Coinbase. Since Coinbase went public in April 2021, ARK has been a stakeholder. Wood has been vocal about the bright future of cryptocurrency. An ARK analyst forecasted that the price of Bitcoin would increase to approximately $1 million in eight years by the beginning of 2022. If ARK’s prediction comes true, Coinbase will profit since it serves as a convenient entry point for new cryptocurrency investors.

Zoom

When the epidemic prompted company offices across the nation to close in early 2020, usage of Zoom’s video conferencing software increased. The shares of the IT company increased as a result.

Zoom’s stock price has been declining since October 2020, reaching pre-pandemic levels in August 2022. But Wood hasn’t let it stop her. ARK Invest set Zoom’s four-year price objective at $1,500 per share in June. Two months later, Wood’s business bought 800,000 further shares of Zoom. When the epidemic prompted company offices across the nation to close in early 2020, usage of Zoom’s video conferencing software increased. The shares of the IT company increased as a result.

Zoom’s stock price has been declining since October 2020, reaching pre-pandemic levels in August 2022. But Wood hasn’t let it stop her. ARK Invest set Zoom’s four-year price objective at $1,500 per share in June. Two months later, Wood’s business bought 800,000 further shares of Zoom.