Cathie Wood, the founder and head of Ark Invest, said Friday that the recent rotation in stocks — a market element signaling a self-sustaining and broadening bull market — is a healthy bullish sign indicating the stock market is not being driven by one dominant sector.
“I love this setup,” Wood said, noting that the “worst thing that could have happened to | her investment house | is to have the market narrowly focus on just our ilk of stock — the innovation space.”
Wood saw her flagship Ark Innovation ETF, an investment vehicle that has a particular focus on disruptive innovation across multiple industries, lose all of its gains in late February-early March 2021. The pullback reflected the broader pullback in tech stocks at the time. Now however, Wood — who back in February had projected a 15% compound annual rate of return (CAGR) from her strategies — says her CAGR expectations have risen to between 25% and 30%.
“From our point of view — five-year time horizon — nothing has changed except the price,” she said.
While Wood is sticking with her long-term positions, one ticker her ARK Fintech Innovation ETF has been selling is that of Apple (NASDAQ: AAPL). Wood’s fund dumped nearly 300,000 shares of the iPhone maker on Thursday. Since the fund is not allowed to hold any cash, Wood said the dollars are instead put in what she calls “cash-like innovation stocks,” which includes Apple.
“The FAANGs certainly meet that criteria — they’re acting like defensives,” she said. “During a period of volatility like we’ve just seen, we will sell those stocks and move into either our more pure-play or earlier-stage innovation companies that are being hurt by risk-off.”
Wood’s firm has been the talk of Wall Street over the past couple of years, outperforming the market. Last year, her flagship Ark Innovation ETF gained nearly 150 percent. As a result, assets have jumped from $10 billion to $80 billion in just under a year.
Wood called the acceleration in fund flows “parabolic.”
”We are used to exponential growth — that’s what we do. Our Ark strategies, our Ark innovation platforms we believe are going to scale exponentially, and therefore our capacity should scale exponentially. 10 to 80 billion was a littler faster than that,” she said.
During her interview, Wood also talked about Tesla (NASDAQ: TSLA), one of the biggest holdings in her ARK Innovation ETF, saying she expects to see surprising breakthroughs in autonomous driving from the electric car maker in the next 24 months.
Tesla is going to make the shift to autonomous at scale much more quickly than any of its competitors, the pro investor said.
Last year, during a video message at the opening of Shanghai’s annual World Artificial Intelligence Conference, Musk said that Tesla is very close to achieving level 5 autonomous driving technology. Industry insiders however, have said it would take time for the technology to be ready.