When Ark Investment Management LLC first came into being in 2014, it started as an investment management firm under the leadership of its CEO, Catherine Wood. It analyzes public markets in order to help investors make the right decisions about where to channel their resources. As of 2020, this company was reported to be managing assets worth over 29billion dollars. This is quite amazing given that it hasn’t been up to a decade since it commenced operations.
Apart from being one of the most innovative investment advisers, Catherine is widely admired for her investment portfolio which most consider to be “huge and impressive”. These include finance and insurance (valued at $755Million), manufacturing (valued at $11.8Billion), professional, technical and scientific services (valued at $1.6Billion), health technology (valued at $272million) and more. There are different companies in each field or industry.
The debates generated by such portfolio
Given such an impressive portfolio, there is no doubting the fact that debates and arguments are bound to arise amongst experts. For instance, there is this debate about what has influenced Catherine’s decision in the management of such a portfolio. In case you are amongst those asking such questions, you have come to the right place.
We will try to explain why Catherine Wood has chosen to manage these investments. Lets see what makes her to be considered as one of the best investors of our time.
This is perhaps the first factor amongst others that have greatly influenced the decisions of Catherine over the years. Her major area of focus has been on innovation and this is quite evident on how she managed to analyze Tesla in 2019. Of course, this is an automobile giant that seems to be making waves right now based on the development of electric vehicles. However, it looked as if Tesla would go bankrupt in 2019 given how it was being pummeled by hedge funds. However, Wood claimed they were buying instead of backing out. As a matter of fact, this was during the month of May 2019 when tesla stock stood at $200.
Fortunes would later change as the stock rose to over $800 after only 8 months. According to her, their returns were much better as compared to what most private-equity firms were earning. Don’t forget that she made a prediction about Tesla hitting $4,000 within 4years which created lots of headlines. Was she really right on this one?
In January 2021, it was reported that Tesla had hit 4,000 due to the increment it experienced. For instance, Tesla experienced huge success in 2020 despite the pandemic and not being able to reach its target of 500,000 units. According to Bloomberg, its shares increased in 2020 by a whopping 743%. This is a typical example of investment analysis and decision premised on innovation.
Tesla has been quick to embrace the idea of electric vehicles which have been predicted to dominate the market in the coming years. The EVs on the roads in the US are expected to hit 18,700million by 2030. If this becomes a reality, Tesla may even go beyond the predicted $8,000 it is expected to hit by 2024 according to Catherine. The automobile industry is one of the most innovative at the moment and Catherine is right on Tesla.
There is no doubting the fact that natural factors have also played a crucial role in influencing the investment decisions of Catherine Wood in recent times. A typical example of this is the pandemic which has encouraged companies to be more innovative. Most American firms experienced a major boom over the last 7-8 years without ever thinking about how to improve the deliveries of their end-products. For instance, consumer spending in 2019 was reported to be over $13 trillion. Some of the biggest companies which have been affected by this negative event are Schlumberger, Abbott Laboratories, Caterpillar, Lockheed Martin, General Dynamics, Intel, Honeywell International, Tyson Foods and many others.
Reports claimed that the impact of the pandemic has doubled that which was experienced during the great depression. Simply put, one in every 4 Americans is claiming to be unemployed at the moment. According to Catherine, companies would have performed much better during the pandemic if they were innovative enough. Due to lack of innovation, their activities were stifled to a great extent. For instance, General Dynamics, a company reported to be generating $36.2billion in revenue claimed that its realized revenue was 5.4% lesser than what it expected in 2020. This impacted its shares hugely in a negative way. The same can also be said of other companies.
Catherine analyses companies based on their ability to adapt and deal with changes that can occur in their respective industries. She claimed that the pandemic and other natural factors are negatively affecting the performances of most major brands in the stock market. Being innovative in this case implies using the digital space more. The ecommerce industry seems to be thriving due to how it reduces the risk of endangering the lives of workers. In her opinion, companies need to devise ways of rendering their services without making workers vulnerable to danger.
Based on the above, it is very obvious that Catherine’s recent investment decisions have been reached based on how companies have been able to survive amid the pandemic.
It is no secret that political factors can play a major role in determining the position of companies in the stock market. The year 2020 proved to be very wild in the stock market. For instance, earnings of most companies got overshadowed by political happenings. This is based on the fact that administrations vary with policies. There are policies and practices which may seem good for an administration. However, other administrations may have different views. Catherine Wood once pointed out in 2020 that the outcome of the US presidential election will determine the future of most companies.
This has only made experts to explain that her investment decisions in the field of Health Technology (valued at $272million) is based on political factors. The health sector is expected to experience a huge boom. This is due to most companies carrying out research on how to produce vaccines. It is expected to generate far more than most sectors. The Biden administration may be in its early days but there are signs that it is fully focused on the health of the people. Some of its goals are adopting a strategy for vaccine administration, changes to prescription drug prices, and many others.
Political factors have succeeded in either increasing or decreasing the stock of most companies. In the same vein, it is greatly influencing the decisions of stock investors. For instance, some stocks will likely benefit from the long-awaited stimulus checks as compared to others. These funds are expected to act as a lifeline for so many companies which will in turn affect their stock in a positive way. Two major factors affected the US stock market in 2020. These are the pandemic and elections. Businesses and individuals had invested heavily into stock hoping that events would turn out as predicted.
There are numerous economic factors that influenced the investment choice of Catherine over the years. These became even more obvious in the year 2020 when companies were struggling for survival. Some of these factors are GDP, unemployment, GDP, interest rates, and inflation. In one of her interviews, Catherine was quick to point out how unemployment rate seemed to be increasing with some companies laying off staff in order to survive the impact of the virus.
The stock market is greatly dependent on economic news for survival. For instance, favorable economic news means that companies are doing well. On the other hand, stocks of companies’ suffer whenever there is unfavorable economic news. The reason for this is that the profitability of companies are tied to the economic factors that are listed above. For instance, inflation means that a company will not make too much profits as earlier projected.
As the economy seems to be expanding, people are given the chance to engage in various business activities. This means companies will survive with their shares improving in the stock market. However, the opposite can mean reduced value of shares. Although Catherine Wood has become popular for making positive predictions about Tesla in the past even when it looked like the company wasn’t performing well, there is every reason to believe that economic factors have played a crucial role in helping her reach vital investment decisions.
Having seen the above, it is obvious that Catherine Wood investment decisions have been greatly influenced by 4 major factors. These are innovation, economics, natural, and politics. Of course, every smart investor usually takes these into consideration when trying to compare overall performances of companies in the stock market.