Cathie Wood says ‘the tide is turning’ after painful tech sale

“Our stocks aren’t in the benchmarks, and we’ve focused our portfolios on our strongest names over the past year,” she said, noting that Ark’s flagship strategy in the states United had narrowed from 58 to 35 names last year, with a focus on “pure-play” companies.

Inflationary push faced by countries

On the inflationary spurt facing many developed countries today, Ms. Wood acknowledged that global supply chain problems had lasted longer than she had expected, but insisted that the deflation, not inflation, was a much bigger risk.

“This idea that the supply chain [pressures] and commodity prices were going to find their way into long-term prices, I think that’s seriously in question right now,” she said.

Ms Wood added that long-term bond markets “didn’t buy that inflation talk”, saying the 3% yields on 10-year US government bonds suggest nominal GDP growth is picking up. will be between 3% and 4% for the next 10 years. years.

“That narrative ignores 5, 6, 8 percent inflation unless we have 10 years of negative growth,” she said. “I think the tide is turning, and it couldn’t have come too soon for us.”

She expects retail giants such as Walmart and Target, which have indicated intensifying inflation-related cost pressures, will reduce their huge inventories by cutting prices.

“What I believe we’re going through right now is a massive inventory cycle, and Target and Walmart are basically telling us that we’re going to empty our shelves by cutting prices,” she said.

Ms Wood’s comments come after a dramatic turnaround in fortunes for ETF Ark Innovation after delivering over 300% gains to investors from market depths in March 2020 to a high in February last year . Since then, the fund has followed a downward trajectory, taking with it investors who bought into the hype in its later stages of growth.

Inflows, however, have remained positive, benefiting from net inflows of $1.3 billion ($1.8 billion) so far in 2022, according to reports, which she attributed to the commitment of the transparency funds.

Tesla’s $10 trillion opportunity

Wood pushed back against criticism that Ark’s incredible success in 2020 was the result of accommodative fiscal and monetary policy, saying “the reason our portfolios soared back then was because innovation solved the problems.”

Moving on to some of her more prominent positions, Ms Wood said investors had unfairly beaten stocks such as Zoom, Teladoc and Roku.

On Zoom, which has fallen 80% from its peak, she said institutional investors missed the video communications platform’s long-term growth potential, predicting it would be one of only two. enterprises to dominate the cloud.

Tesla shares have fallen nearly 40% this year, hovering at US$725 on Thursday. Bloomberg

“For institutional investors to dismiss Zoom when more than half of its revenue is now from businesses, it’s just telling me they’re not doing their research,” she said. “They should know better.”

Zoom is Ark’s largest position, accounting for almost 10% of the portfolio. Ms Wood said the company’s introduction of conversational AI and contact centers would be a game-changer for the company.

“We’ve been going through the first replacement cycle in the enterprise part of the tech stack since the early 90s. We’re going from [a hardware-centric world] in the cloud which will be dominated by two companies – Microsoft with Teams and Zoom.

Similarly, Ms. Wood remains a bull on Tesla, which is the portfolio’s second-largest holding. She described the electric vehicle company as having the largest total addressable market in the world.

“Our sizing of the self-driving taxi platform market, we have sized that market, from a revenue perspective, as approaching $10 trillion by 2030, from 0 today,” he said. she declared.

She added: “$10 trillion is about 10% of current global GDP and about 10% of current global market capitalization. It’s a very big idea and Tesla is in pole position in the United States for self-driving taxi platforms.

Asked if Elon Musk was taking too much with the Twitter takeover Alongside leadership roles at SpaceX and The Boring Company, Ms Wood said she had faith in “the Renaissance man of our time” given that he surrounds himself with incredible people.

“I’m not worried about it. I’ve seen him multitask over the past 10 years,” she said.

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