If you were one out of the million retail traders that was bored out of your mind at the start of this year, youâre not alone.
We all did something in the last year and a half that we regret.
At least in this situation, gambling on Robinhood can be considered education.
Although the Robinhood versus hedge fund palooza has tamed, not the hidden pioneer behind this movement.
Cathie Wood, CEO and Chief Investment Officer of ARK Investment Management LLC has become a prominent investor this year thanks to her unconventional moves in the market up against companies that were once seen by the broader investment community as pure failures.
Although majority of her holdings still havenât had a profitable quarter yet, they have high hopes that are backed into the market. She is willing to go up against companies that seem to have no game plan but somehow make it out alive and beat the broader indexes.
Tesla, Airbnb, Roku, Zillow, Square, Netflix, sound familiar? Cathie and very few investors had optimism for these indebted companies at the time of their founding which lead a movement of retail traders to follow her flock. These companies rose to prominence in 2020 with WFH, retail trading, SPACs, and companies seeking capital in public markets came to fame.
These risk-hungry retail traders who followed her strategies mostly consisted of Millennial men, not a typical approach that females, traditionally conservative investors by nature, follow. Yet Cathie has always been extremely confident in her approach and shown to stomach risk better based on reason and of course, data, lots of it as a veteran money manager always leading the charge somewhere.
As a female investor, sheâs comfortable and used to hearing ânoâ. All women can relate to that. She has a relentless unwavering commitment and dedication towards focusing her investments on defensible high growth industries. In addition, at times she dabs into cyclical companies that evolve around tech but not traditional consumer staples or financials all that much since they issue dividends and donât offer a whole of innovation or perform stock buybacks.
Cathy was ready for software, artificial intelligence, distribution networks, engineers, and battery technology to take off through automation, especially eyeing a particular company, Tesla in 2017.
In 2016, she believed the future was electric, ESG focused, and about the planet which in hindsight lead the online army of Tesla shareholders to slowly follow through. With her high levels of transparency and levels of risk, she connected with the tech industry and social media influencers even as an older woman.
What ARK ISÂ ABOUT
According to ARKâs thesis, âARK invests in high-growth potential companies through taking aggressive bets on often unprofitable technology stocks.â Seems like the perfect match for Robinhood traders. At 65, Cathie manages a $85 billion dollar fund up from less than $10 billion at the end of 2019. From her unique background in the traditional wealth management space where she spent more than 30 years taking unconventional bets and looking at unvalued companies allowed her to harness her ability to connect with individual investors and eventually conduct her own proprietary research and start a fund.
ARK heavily bet on tech stocks that flourished since they were relying on them for their future.
The flagship fund according to NY times information on âARK Innovation included shares like Roku, Zillow and the payment technology firm Square- soared almost 150 percent, trouncing the S&P 500âs 16% gainâ
With her astounding gains, unwavering commitment, and âfeast-famine styleâ of investing lead her towards skyrocketing returns.
Cathie Woodâs performance was driven by an unpredictable confluence of events which included:
-March 2020 shock-buy the dip in tech, hospitality, tourism, leisure, consumer discretionary, real estate
-Fedâs cut towards interest rates and buying $120 billion in bonds per month through QE lead to tech betting on borrowing and taking advantage of low interest rates as they have less cash on the side and rely on future expectations and investors guarding their assets into safe haven ones predominantly bonds and US government bonds, the safest investments in the world
-Trading boom through retail trading and meme stocks on Robinhood to WeBull
Besides good timing and sheer luck, Cathieâs fearlessness, experience as a woman in the space, and transparency in her strategies was what made investors curious. She built a new kind of money management firm optimized for the social media age which embraced a new kind of transparency that Wall Street isnât known for.
The guts to form ARK at age 57 in 2012 was unbelievable. Her worth ethic and voracious consumption of information is what made her special according to former co-workers. But what was most important is that she enjoyed the work and had the ability to present her investment decisions as near certainties. I believe this is a quality more people need to adopt. We donât believe in people based on their experience or test scores. We believe in politicians to investment decisions when they are backed by certainty. Certainty is confidenceâââa good learning lesson for women in this male-dominated field.
We donât always get what we deserve but we get what we negotiate. Confidence is derived from certainty. Social skills and taming emotions with investment decisions are crucial to letting your money work for you, something females can bring to the table as non-traditional fans of gambling.
So what does it take to be Cathie Wood?
First off, thereâs no timeline in life nor should you compare yourself to her.
History does repeat itself but it isnât guaranteed to present the same opportunities that she went for.
ARK is unlike any other money management firm, not just in its investment strategy and products but in its community.
Following an unconventional approach isnât common in a traditional field like finance but it tends to work best. Change is hard for this industry because everything is argued to work as is. But in order to beat the market, you have to look at what isnât popular today.
Having a balance between actively managed ETFs and traditional mutual funds is Cathieâs forte. Along with being transparent about her investment decisions reaching millions of followers gives her appeal in so-called âboringâ or âconfusing industriesâ of biopharmaceuticals and EV. Shielding profits and only disclosing holdings once a quarter is not ethical nor promotes legitimacy and fair dealings. This helps her ideas reach a wider community and not seem so secretive or shady.
Now she is turning into Musk with her viral tweets and overload of free content on her investment strategies. With more power you are unstoppable until you eventually stop yourself. Read here how you can become a media mogul and influence markets. (If you really want to).
After disclosing her purchases of more than 1.5 million shares of Robinhood earlier this year, the price surged and jumped more than 50% on August 4th . Overseeing $85 million in assets is a big feat that Cathie can only lead for ARK.
Future of ARK
Once your investment portfolio hits a couple million in AUM, you have to carefully weigh every decision and know what you are really getting into. When starting out, you take all the risk you can to try to get somewhere.
Although Cathy is known to be on the side of data, her picks tend to appear highly correlated which makes her clientsâ holdings vulnerable to big hits.
Rule of thumb: Strive to have negatively correlated assets so they work against each other not together. This is through the essence of diversification. Never put all your eggs in 1 basket. Yes it has worked for Cathie but for a couple months this year.
The Ark Innovation fund plunged by 35% between February and May as it over indexed in tech and NASDAQ listed stocks. Although Cathie is not traditionally risk averse, she needs to step into that role more as ARK is currently down 7% for the year opposed to the S&P 500 which is up about 18% and Nasdaq up roughly 15%.
Even banks are on for the ride of selling their first transparent actively managed version of ETFs. Active transparent ETFS align with Arkâs offerings as Cathie is a proponent of democratizing finance and making financial content free for all without a pay-wall.
All thanks to Cathieâs diligence and lucky bets on seemingly unprofitable companies a few years back, ARK Investâs gains have been incredibly impressive. Whatâs certain is uncertain so who knows what will happen next but all we know is that nothing lasts forever.