Crystal Mercedes | CNBC
Ark Investment Management founder and CEO Cathie Wood said she is not worried about the recent drop in her funds and that the bull market is simply broadening out to include more strategies like value.
The hot handed investor added that over time her disruptive strategy will pay off, and she’s capitalizing on the sell-off.
“Right now the market is broadening out and we think in an underlying sense the bull market is strengthening and that will play to our benefit over the longer term,” Wood said on CNBC’s “Closing Bell” on Monday.
Wood manages five ETFs focused around “disruptive innovation” that have raked in more than $15 billion of investor money this year alone. Ark’s flagship fund — Ark Innovation — returned nearly 150% in 2020 as the pandemic accelerated innovation trends and now has more than $17 billion in net assets. However, ARKK is down about 8% this year amid recent weakness in technology stocks, pressured by rising interest rates.
“We are getting great opportunities” in the sell-off to buy the pure play names in the funds, said Wood. “When we get opportunities like this to invest in pure plays instead of more mature plays…we will move back into pure plays.”
“We are becoming more and more optimistic about our portfolios in this sell-off,” she added.
Wood took the recent tech weakness as an opportunity to buy the dip in some of her ETF’s top holdings. Wood has made big purchases of Tesla, Teladoc, Zoom Video and Palantir, according to the firm’s disclosures. Ark Innovation also scooped up shares of Square, Roku, Zillow and Shopify recently.
Investors have exited some of their high growth names as bond yields rise in recent weeks. Wood said Ark Invest is struck that the market never priced in 0.5%, 1%, or 1.5% yield on the U.S. 10-year Treasury.
“We do think the speed of the increase in interest rates is scaring people. It became very comfortable in a low interest rate environment: nothing much changing, the Fed has our back and so forth,” said Wood.
Wood added that this type of pullback happened to Ark during the fourth quarter of 2016, when President Donald Trump was elected and promised to lower tax rates. During that period, Ark’s strategies went negative.
“The bull market was broadening out to incorporate value or more cyclical sectors and I thought that was going to be very good news for our strategies longer run. The worst thing that could have happened to us what another tech and telecom bubble where the market narrowed so that only a few groups won,” said Wood.