Cathie Wood is one of the greatest investors of our time.
Like me, she places a major emphasis on disruptive technology within major mega trends including genomics (DNA science) and renewable energy.
Wood isn’t looking to score a quick 20% in a value stock. She wants to earn massive, quadruple-digit gains in companies poised to turn the world upside down.
Wood’s flagship ARK Innovation ETF (NYSE: ARKK) was up 156% in 2020. Its track record in the five years leading up to that incredible year put it in elite company as one of the best-performing funds in recent history.
Unfortunately, it’s been rough for ARKK ever since. The exchange-traded fund (ETF) was down 23% in 2021, and it’s down more than 50% year to date as I write this.
Investors are scared. They’re eyeing conservative safe havens in lieu of game-changing new tech. And that’s understandable.
I wouldn’t worry too much about Wood. She’ll be back because the disruptive tech she targets isn’t going anywhere. Investors will jump back in one day because the growth is too strong to ignore.
In the meantime, let’s see what she has to say about the ongoing bear market and a potential recession.
Cathie Wood’s Recession Hot Take
For a woman that’s known for her uber-bullishness, Wood mentioned in a CNBC interview last week that she believed we were already in recession, even if no one has made it official yet:
“We think a big problem out there is inventories … the increase of which I’ve never seen this large in my career. I’ve been around for 45 years.”
My friend Charles Sizemore mentioned some of the inventory issues plaguing the economy in his write-up of mass retailer Target (NYSE: TGT).
Between the end of the pandemic and the spike in inflation, companies suddenly found themselves with a lot of excess inventory.
Well, excess inventory at the store level means fewer orders for the wholesalers … which in turn means fewer orders for the raw materials going into that inventory … as well as less demand for labor.
We’ll see if we get an official recession. But I’d agree with Wood that at least some sort of slowdown is already underway.
Wood’s Deflation Warning
She had some interesting things to say about inflation as well.
Inflation has distorted the economy and forced consumers to make choices about what they buy. But as Wood sees it: “Inflation has been a bigger problem, but it has set us up for deflation.”
Let me break that down a bit.
Deflation is the opposite of inflation, when prices fall rather than rise. It’s not all bad. Technology has always been a big driver of “good” deflation, or the kind that comes from productivity eliminating costs and boosting supply.
Unfortunately, there’s also that other kind of deflation … the kind that results from falling demand. Wood believes inflation is sapping our ability to buy.
But don’t underestimate the disruptive power of technology.
Good News for ARKK
ARKK is full of companies that have massively reduced costs.
Consider her biggest holding, Tesla Inc. (Nasdaq: TSLA). Yes, its cars are expensive. But the cost of operating a Tesla over its life is a fraction of the cost of maintaining a similar gasoline-powered luxury car.
Top ARKK fintech holdings Block Inc. (NYSE: SQ) and Shopify Inc. (NYSE: SHOP) have also slashed payment processing and order fulfillment costs.
And speaking of ARKK, Wood mentioned that new investors are buying into her top-billed ETF at a nice clip, even after its awful run of late.
As Wood puts it: “Innovation solves problems.”
We need more of that!
I mentioned earlier that innovation is a major focus for me. Disruptive tech in market-crushing mega trends is well set to lead the next stock rally.
And we have multiple ways to play the disruption that’s already taking place in the biotech, renewable energy and artificial intelligence spaces within our Green Zone Fortunes model portfolio.
To see why my highest convictions lie in some of these downtrodden sectors, click here to watch my “Infinite Energy” presentation.
I understand if you are hesitant to buy any stock right now. But these are mega trends that I believe have years of runway in their future.
As I just mentioned to my Green Zone Fortunes subscribers in my latest weekly update: “These mega trends are so powerful, they will overcome the shorter-term difficulties in the market cycle.”
Even if you aren’t looking to buy right now, I urge you to take a little time to watch my presentation. The company behind the main thesis of that presentation (along with my other top renewable stock recommendations) are working to upend the global energy industry that’s worth multiple trillions of dollars.
All that work is set to make healthy profits for investors in these companies.
So click here to watch my presentation and see how you can join my Green Zone Fortunes subscribers for a nominal fee and see how you can position yourself for the next wave of disruption.
To good profits,
Adam O’Dell
Chief Investment Strategist