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Wall Street’s hottest investor is betting big on a handful of stocks. Critics say she’s playing with fire

At a time when many investors are content to follow the crowd and buy top techs like Apple, Amazon and Microsoft, Cathie Wood is looking for the next big innovators in buzzy fields like robotics, fintech and space exploration.

It’s a high-flying, high-risk, high-reward tier of investing. And it’s put Wood’s fans on a white-knuckle ride in 2021. Last year, Wood’s strategy paid huge dividends for investors in her flagship Ark Innovation (ARKK) exchange-traded fund. It surged nearly 150% in 2020 and helped turn her into a Wall Street superstar — sort of the Warren Buffett of momentum investing. But this year hasn’t been nearly as kind to Wood as the last. The Innovation ETF was down 2.5% through late August, despite a red-hot market for tech with the Nasdaq up more than 18% so far in 2021.

Wood wasn’t available to comment for this story, but she doubled down in an interview with CNBC in August. She’s not worried that the Ark strategy of looking for new tech leaders will end badly, and she maintains that this current rally will not be a repeat of the epic 2000 dot-com implosion. “I don’t think we’re in a bubble, which is what I think many bears think we are,” Wood told CNBC. “We have nothing like that right now. In fact, you see a lot of IPOs or SPACs coming out and falling to Earth. We couldn’t be further away from a bubble.”

Wood speaks from experience. She’s no millennial or Gen Z investor for whom the 2000 tech implosion is merely a war story told by older traders. The 65-year-old Wood lived through the last major tech crash, as well as the infamous Black Monday of 1987. She worked for Prudential-owned money manager Jennison Associates for 18 years in the 1980s and 1990s and then spent a dozen years at AllianceBernstein before leaving in 2013. But then, AllianceBernstein passed on her idea to launch a suite of actively managed exchange-traded funds. So she struck out on her own and started Ark in 2014.

“I have been watching disruptive innovation for my entire career — why don’t I help my own sector along?” she told Forbes in a 2014 interview. That focus on disruption means Wood ties her ETF’s fortunes to visionary but mercurial leaders. In the most prominent example, Wood remains an unabashed fan of Tesla (TSLA) and CEO Elon Musk. The EV maker is the top stock, by far, in Ark’s Innovation ETF, accounting for more than 10% of the fund’s holdings. It’s also the biggest position in Ark’s Autonomous Technology & Robotics (ARKQ) and Next Generation Internet (ARKW) ETFs.