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Tech Investing Has Its Come to Jesus Moment

Ark Invest

  • Long term investing and hot technologies are not typical bedfellows
  • ARK Innovation ETF is an embodiment of the contradiction of investing in novel innovations for the long run and guided by a Christian ethos

Cathie Wood is not someone you would typically imagine rubbing elbows with some of the biggest tech CEOs in the United States, let alone investing in their firms.

Wood, a bespectacled 65-year-old mother-of-three, who wouldn’t look out of place at a book club with a glass of chardonnay, is also the brains behind one of the most successful if controversial ETFs on the market right now.

Earlier this week and for what seemed like no apparent reason, Wood’s US$23 billion flagship ARK Innovation ETF (-1.32%) rose by 10% in a single day, not bad for someone who’s embraced the term “buy the dip” like a cryptocurrency junkie (Wood is into Bitcoin as well by the way).

The public face of what some have suggested is a speculative tech boom many liken to the dotcom bubble of the early 2000s, Wood’s ARK Innovation ETF has risen on the back of Tesla (-0.84%) and other tech stocks that it invests in.

Coupled with massive investor inflows, ARK Innovation ETF has rocketed to a staggering US$60 billion from just US$3 billion a year ago, performance which has propelled Wood from a middling money manager to a cult figure among some investors.

Among her biggest fans and most ardent followers are the same set that helped propel shares of GameStop (+3.24%) and AMC Entertainment (+9.09%) to unbelievable gains.

And Wood shows no sign of stopping.

Preaching from her newfound pulpit the virtue of her investment mantra, at a recent webinar Wood noted that “Innovation finally got some recognition.”

But where does Wood get her investment philosophy from?

It may surprise some that her investment beliefs aren’t founded in such tomes as “The Intelligent Investor” by Benjamin Graham, instead, they’re grounded in the good book, the Bible.

The divorced Wood is a devout Christian, starting every day by reading the Bible and her religiosity is reflected in the name of her flagship fund – the Ark of the Covenant is a gold-covered chest described in the Bible’s Book of Exodus as containing the stone tablets of the Ten Commandments.

But unlike some growth investors, Wood is patient, and appreciates how innovation is underestimated and how exponentially explosive growth can be when the rest of the world finally catches on.

That patience is reflected in Wood’s own career, only striking it out on her own at age 58 and even then struggling through her early years with an emphasis on disruptive companies that could shape the future, including electric vehicle maker Tesla, one that turned out spectacularly well for ARK Innovation ETF.

In early 2018, Wood shocked Wall Street by predicting that Tesla, whose shares were worth around US$300 at the time, would be worth over US$4,000 in five years and based on its five-for-one stock split last year, Tesla blasted through the adjusted US$800 target last January, far exceeding Wood’s forecast.

But the last few weeks which saw a sharp spike in U.S. 10-year Treasury yields have been more challenging and critics say that ARK Innovation ETF’s tech holdings are wildly overvalued.

At one point, the ARK Innovation ETF fell some 30% off its mid-February peak. Wood however hasn’t had a “come to Jesus” moment, and is open with investors that some of her bets are long shots, while all of them are long term.

And there are good historical precedents for Wood to draw her confidence from – shares of e-commerce juggernaut Amazon (-0.77%) took a decade to recover from their 1990s internet bubble peak but investors who held their nerve eventually made huge gains. But that’s what you get when you make faith-based investments, hallelujah. 

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