ARK Investment Sees Bull Market Amid Sell-off

ARK Investment Management ETF and CEO Cathie Wood said the recent drop in funds is nothing to get worried about. Wood said that the bull market is simply broadening out to include more strategies like value.  Over time, she insists her disruptive strategy will pay off. For now, she’s capitalizing on the sell-off.

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Broadening Market

Wood and ARK rose to center stage when they made big, bold bets during the pandemic. They bet big on companies such as Tesla and Square, which surged due to new record highs as people jammed the stock market. ARK netted $14.84 billion in inflows over 2020. 

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“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 remarked on CNBC’s Closing Bell last Monday. Wood said that the current sell-off provides ARK Investment with great opportunities to buy pure-play names in the funds. “When we get opportunities like this to invest in pure plays instead of more mature plays…we will move back into pure plays,” she added. 

Disruptive Innovation

Ark Investment Management handles five ETFs focused on the concept of disruptive innovation. This year alone, the funds earned ARK Invest more than $15 billion in investment money. ARK Innovation, the flagship fund, returned 150% to its investors last year. Its net assets now total $17 billion. However, the fund is currently down 11% in 2021, as tech stocks continue to fall while interest rates continue to rise.

Wood saw the tech slide as an opportunity to buy the dip. ARK bought stocks from Tesla, Teladoc, Zoom Video, and Palantir, according to disclosures. In addition, ARK Innovation got shares of Square, Roku, Zillow, and Shopify. “We are becoming more and more optimistic about our portfolios in this sell-off,” she added. 

Interest Rates Are Scaring Investors

As bond yields rose in recent weeks, investors exited growth stocks. ARK noted 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 noted that the same type of pullback happened to ARK during the fourth quarter of 2016.  That was the time when President Donald Trump won the elections and promised lower tax rates. As a result, ARK 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.

Faith in Tesla 

Wood also gave her opinion on Tesla, who is in the midst of a strong sell-off the past few weeks. “Our confidence in Tesla has gone up for a number of reasons,” she said. She pointed to Tesla's market share and its progress in the autonomous space as proof. “It didn't lose share in the EV market when the luxury brands started bringing EVs to the market,” said Wood. In contrast, ARK’s expected Tesla to lose market share as more companies introduced new EV models.  Instead, Tesla’s share increased. “We believe that Tesla has been staging the movement into autonomy differently,” said Wood. She believes there's a misunderstanding on how Tesla will market its autonomy segment. Then, she noted the strengths in both Tesla’s chip and battery technology. Consequently, ARK continues to have faith in Tesla.  as to why ARK is still confident in Tesla.

Watch the CNBC ‘Closing Bell’ episode featuring ARK investment CEO Cathie Wood, who said the bull market is broadening which will be good for ARK’s funds long-term:

Do you agree with ARK Investment’s strategy to hold on to tech stocks or buy during the dip despite recent sell-offs? Or, do you think it’s time to totally veer away from growth and jump to value stocks and bonds? Let us know what you think. Share your ideas below in the comments section.