David McNew/AFP via Getty; ARK Invest; Patricia De Melo Moreira/AFP via Getty; Bitcoin; Samantha Lee/InsiderSummary List Placement
Cathie Wood has come full circle.
She started her investing career covering "fall-through-the-cracks" stocks and was ridiculed for buying Amazon when it was just a $5 billion market cap company in 2002.
The internet was considered "a figment of Wall Street's imagination," Wood said in a Wednesday interview with Benzinga. At the time, Amazon was down 80% from its peak during the dot-com bubble.
But Wood was convinced. She had three little kids and no time to shop in physical stores. Amazon, whose e-commerce services were a life-saver for working moms like her, was going to become a big deal one day, in her view.
However, the aftermath of the tech bubble had made any bet on companies with no earnings or trajectory to earnings seem foolish and reckless.Valley of death
Nineteen years later, Amazon has grown into a $1.56 trillion behemoth with business lines in e-commerce, cloud computing, and movie studios. And Wood is vindicated.
Now, as the head of an investment firm that solely bets on disruptive technologies — many of which have yet to prove they can generate sustainable earnings — Wood is again seeing what she calls the "valley of death."
"Sometimes when the sentiment is so negative and we have good reason to believe that something differentiated is going to happen unexpectedly, those are great times [to pick stocks]," she said.
Indeed, rising bond yields and interest rates, along with the continued rotation into value and cyclical stocks, have weighed on many of the high-flying tech stocks in Wood's portfolios. Her flagship ARK Innovation ETF (ARKK) was down as much as 25% on Thursday since its record close on February 12.
But Wood remains unfazed. In a correction, she will move to concentrate on high-conviction names, much like how she focused on the 33 names in ARKK during the coronavirus-induced market crash in March last year.Excited about NFTs
An investor known for making bold bets on new technologies, Wood said she is "very excited" about non-fungible tokens — the red-hot emerging digital assets that are part of the ethereum blockchain.
She highlighted Async Art, an NFT platform where digital artists can create works of art as the base layer and other artists can modify the underlying layers by paying royalties to the original designer.
"I think the great thing about NFTs is the original artist is on record there forever. There's no way to change it," Wood said. "That's the wonderful thing about blockchain technologies — immutability."
She continued: "The idea that someone who could create a base layer of art and have others build on top and pay a royalty in order to build up the ecosystem, that's so fascinating."Bitcoin — a deflationary currency
Another digital asset that continues to fascinate Wood is bitcoin, which she thinks is a "deflationary currency" and "great insurance policy" for corporations looking to diversify their balance sheet.
"If we go into an inflationary period, cash will lose its purchasing power. Bitcoin will not," she said. "In fact bitcoin, as you can see recently, is gaining purchasing power pretty dramatically."
The digital token has swung between sharp gains and losses since Tesla followed MicroStrategy and Square to allocate about 8% of its treasury reserves to bitcoin. It was trading just above $48,000 as of Thursday afternoon.
"If all the corporations in the United States were to do that somewhere in the 1% to 10% range, just diversifying into bitcoin, that would add anywhere from $40,000 to $400,000 to the bitcoin price," she said. "It would double the bitcoin price at a minimum if it were only 1% diversification, it would push the price up almost 10 times at 10%."Insights into 4 stocks
Despite the continued sell-off in some of the high-growth stocks in ARK portfolios, Wood remains bullish on their long-term prospects.
Roku (ROKU), which has fallen 14.8% in the past week, is going to be the beneficiary of "the $70 billion of linear TV advertising dollars" that are going to leave for streaming TV.
In Wood's view, Roku, which has started its own channel and is starting to buy content for it, is effectively competing with industry titan Amazon.
"We think those two, certainly in the United States, are going to take the lion's share of the connected TV market," she said. "And Roku is moving internationally and is finding really good success. I think that's an upside that many people don't anticipate."
Zoom (ZM), a beneficiary of the work-from-home trend during the pandemic, has declined 8% in the past week as investor sentiment on the stock turned negative.
But Wood sees it as an undervalued stock because investors have started to forecast lower growth estimates for the firm as economic reopening accelerates.
"Zoom is playing in the largest part of the technology stack out there, the $1.5 trillion telecommunications part of the stack," she said. "And I think it's going to usurp a lot of the old telco infrastructure, so I don't think people understand that."
DraftKings (DKNG) is another stock that has been pressured by the back-to-normal narrative in the market lately, but Wood believes that sports betting will become a part of life post-pandemic.
"States in crisis with huge deficits are going to capitulate [to sports betting] one after another," she said, adding that the mature sports betting market in New Jersey is a telling example.
Nano Dimension (NNDM) is another company that's benefiting from a government-related tailwind. Despite a 35% plunge in the stock over the past week, the Israeli 3D-printed technology device company is getting "incredible business from defense agencies around the world."
"We always look for where the defense is putting their money, where they think a technology is highly differentiated, and we get to know the company," Wood said. "We're very impressed with the new management, the founder is still very involved."
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