ARK Invest CEO Cathie Wood takes risks in everything she does, whether it’s investing in disruptive tech or relocating her team to St. Petersburg.
“The last two years were not very kind to ARK Invest as I’m sure you all know,” Wood said Monday evening inside The Birchwood hotel in St. Petersburg. “And yet every day I walk out of my condominium, and I feel joy. There’s just something about this community.”
Wood, who relocated her New York City-based team to St. Petersburg in 2021, openly discussed ARK’s tech and investment predictions while serving as the keynote speaker for the Tampa Bay Innovation Center’s ClimateTech accelerator pitch event.
She recognized ARK’s exchange-traded fund (ETF) has lost more than $2 billion since 2022 from selling stocks during the market crash; however, she remains confident about ARK’s investment strategy.
ARK is breaking the mold on the traditional investors’ perspective, Wood explained, as the firm looks ahead at strategic investments rather than solely concentrating on present market conditions. “We are not a momentum strategy investor,” she said.
According to Wood, the “biggest opportunity of our lives” will be investments in the autonomous mobility cluster, which she defines as the convergence of robotics, energy storage and artificial intelligence.
The numbers game
“You’ll see a stock traded down by 10 to 30 percent because a company has missed its operating margin,” Wood said. “We will look at that and understand the reason is the company decided it needed to invest more in R&D [research and development]. It needed to invest now to capitalize on these massive opportunities. We think that’s a big positive. While the traditional world is selling that stock, we are typically buying it.”
ARK, she noted, releases a daily investment report.
Wood explained that her team scores companies based on certain variables, the first being the management and culture – determining if the company has a strong visionary leader who is militant on standing up to short-term holders who want their dividends and profits today, and are unconcerned about the future.
“We want a Jeff Bezos, Steve Jobs, an Elon Musk to stand up to them,” Wood said.
Wood said when there’s a company experiencing “super growth,” the industry assumes it’s going to decay within two to three years due to gross domestic product (GDP) growth, but that’s not always the case.
Wood recalls in the early 2000s, her team forecasted that e-commerce giant Amazon would grow 25% at a compound annual rate over 25 years.
“No one believed it. If they believed it and bought into a dividend discount model, you would have been buying that stock every day,” she said.
Taking today’s valuation out of the equation
“People think we don’t spend any attention on valuation – that could not be further from the truth. We think about valuation, but we almost don’t care about what the valuation is right now. We think about if the company is strategically positioned with the right management and barriers to entry,” Wood said. “We want them to be spending, investing and sacrificing short-term profits to gain a lion’s share [the majority of the market].”
She used electric vehicle manufacturer Tesla Motors as an example.
“Elon [Musk] said he would sacrifice pricing and still be twice as profitable as some of the OEMs [original equipment manufacturers] in order to fill the manufacturing lines and get cars, effectively robots, out as fast as he could to collect more real-world driving data than any other company in the world.
“We don’t think anyone will catch up to him, he has four million robots on the road. The company with the ability to transport people the safest and fastest is going to win – and we think that’s Tesla.”
Wood said 85-90% of vehicle-related fatalities are caused by human error. On average, with traditional vehicles, there’s one accident for every 500,000 miles.
In comparison, on average, Tesla’s fully autonomous vehicles experience a single accident (not a fatality) in every 3.2 million miles traveled, making it six times safer than the standard vehicles on the road today.
Wood said ARK is making the assumption that in five years, Tesla’s enterprise EBITA value (earnings before interest, taxes, and amortization) will multiply.
Wood also commented that the self-driving taxi sector, currently dominated by the California-based Waymo and Cruise companies, is demonstrating the proof of concept, but true commercialization has not yet started.
Tesla is planning to rollout its line of robotaxis by 2024. ARK previously reported Tesla’s robotaxi business could create $613 billion in revenue by 2027.
In addition to the global autonomous mobility industry, which is estimated to become an $8 to $10 trillion market, Wood said the rise of delivery drones and air taxis, electric passenger-carrying aircraft, can bring another $2 trillion to the industry.