Ark's Cathie Wood on Strategy, Rize ETF Deal, Tesla

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moomoo News Sep 20, 2023 13:06 · 9120 Views

ARK Investment Management CEO Cathie Wood discusses investment strategy, the acquisition of Rize ETF Limited, and outlook for Tesla on "Bloomberg Surveillance."

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Transcript

  • 00:00 I want to know with all you've been through the last number of years,
  • 00:05 are you going to shift to a more long term strategy?
  • 00:08 I look at Morningstar one year, three-year, five year, your bottom quartile, but your claim is more short term.
  • 00:14 With your new ETF effort and with what you're doing with ARC,
  • 00:17 are you going to be still on trend or do you invest more for long term?
  • 00:22 We we've always invested for the long term
  • 00:25 and what interrupted what was a very nice move up in
  • 00:31 innovation stocks especially disruptive innovation
  • 00:35 was a massive increase in interest rates the likes of which we have never seen
  • 00:39 24 fold increase.
  • 00:41 So all long duration assets, especially in 2022 were destroyed, including bonds which are usually a flight to safety.
  • 00:50 They had their worst year last year
  • 00:52 since the 1700s.
  • 00:53 There's no way in that environment that our strategy would have done well.
  • 00:57 But I do think
  • 00:58 that what's happening this year is that the market is starting to look
  • 01:03 over the feds moves, whether there's one more or not
  • 01:08 into
  • 01:09 falling interest rates.
  • 01:11 You know, we started underperforming in 21 just with the anticipation of rising rates.
  • 01:17 So how are you going to change?
  • 01:18 I want to know how you're going to change the sobering quarters you've been through.
  • 01:24 What is the new Kathy Wood approach
  • 01:27 to macroeconomics?
  • 01:30 Frankly, pandemic economics intruding on your belief in innovation.
  • 01:34 If anything, innovation gains traction during tough times.
  • 01:39 And if you look at how the reason our, our portfolios are outperforming this year
  • 01:45 and they
  • 01:45 are and they are
  • 01:47 is
  • 01:47 it is because they are gaining share in what is becoming a difficult environment,
  • 01:53 right.
  • 01:54 And so
  • 01:55 one by one, we're going to earn our way back and it's all about revenue growth, margin expansion.
  • 02:01 In the Wall Street Journal, they do a fabulous thing with old farts like me and it's people with over $5,000,000 and they believed in Kathy Wood to a person.
  • 02:11 Those retirees bought innovation.
  • 02:14 They bought tech, They bought Apple, Apple, Apple, Apple, and they didn't listen to financial TV
  • 02:19 or radio.
  • 02:20 Can you
  • 02:21 do the Kathy Wood approach for 135 years given the volatility you've seen?
  • 02:28 Yes.
  • 02:28 I think we're on the other side of that massive interest rate increase, which did destroy
  • 02:34 a lot of performance.
  • 02:36 That's the most important thing and
  • 02:38 we are ready for prime time.
  • 02:40 Many people are concerned about our kind of strategy
  • 02:43 and
  • 02:44 and
  • 02:45 the company we just acquired rises
  • 02:48 because in Europe, in London, here for all of Europe and UK
  • 02:54 they're focused on global mega trends as well.
  • 02:57 And you know the interest rates hurt everyone in that space.
  • 03:01 If we are right
  • 03:03 and rates are going to come down at some point in the next year, you know there's the market is a discounting mechanism,
  • 03:10 then
  • 03:11 I think that
  • 03:13 the muscle memory that that hurt our strategy and it all has everything to do with the tech and telecom bust
  • 03:19 and people thinking, Oh my gosh, are we here again?
  • 03:22 No, what happened during the 20 years that ended in the tech and telecom bubble is the seeds
  • 03:29 for,
  • 03:29 for what is happening now we're planted and and this, John, is really important and that the profitability stream down the income statement of new tech is very different than 2000 tech.
  • 03:40 Let's talk about EVs.
  • 03:41 Yes.
  • 03:41 And not just Tesla.
  • 03:42 Yes.
  • 03:43 Is it good news for Tesla, what's happening in Detroit right now?
  • 03:48 Yes, because if there's a strike, of course there will be more production shortfalls.
  • 03:55 You know, I think that there's just now the the supply chain has freed up.
  • 03:59 So unfortunately we'll have all kinds of questions about that.
  • 04:03 But you know, I don't, I don't think it has anything really to do with the strike.
  • 04:06 It has
  • 04:07 everything to do with the consumer preference shift
  • 04:10 towards better vehicles, electric
  • 04:14 that are falling in price.
  • 04:16 Tesla's leading that
  • 04:18 that price decline simply by passing cost declines on to its
  • 04:24 customers.
  • 04:25 So I think that's what's good for Tesla.
  • 04:28 The complaint we hear is that people can't afford these vehicles.
  • 04:31 What we're seeing is changing in the UK as you can see Rishi Sunak is pushing back targets to get rid of all of these internal combustion engines to 2035 from 2030 and we've been unrealistic about this transition.
  • 04:42 We don't think so, no,
  • 04:43 no, no, we do not think so.
  • 04:45 We actually the total cost of ownership now this is in the United States, it's a little bit different here,
  • 04:51 but the total cost of ownership of an electric vehicle
  • 04:56 fell below that of a gas powered vehicle about two to three years ago.
  • 05:00 Soon Sticker prices.
  • 05:02 Does that include insurance?
  • 05:04 Yes.
  • 05:05 Includes insurance.
  • 05:06 Yes,
  • 05:06 as I said, local differences.
  • 05:09 But yes, in the United States that does include insurance.
  • 05:12 And in fact,
  • 05:13 Tesla is so sure that its cars will have
  • 05:17 fewer accidents and fewer fatalities that it's well willing
  • 05:21 to provide insurance.
  • 05:23 So yes, that does include everything.
  • 05:25 All in, you were USC, you didn't get AB.
  • 05:28 Laffer called up Robert Kirby, a Capital Group, and said, just shut up and hire her.
  • 05:31 So you walk into Capital Group, which is the land of an R-squared and 98 Washington Mutual Fund Investment Company of America.
  • 05:38 Everything is completely diversified out.
  • 05:41 You're the polar stream they threw you out.
  • 05:43 You almost fell into the Pacific Ocean.
  • 05:45 They were so upset with you.
  • 05:46 So you go out and you say I'm not going tie R-squared to SPX, I'm going out and do my own thing.
  • 05:53 People have prospered off of innovation and technology.
  • 05:58 How does that continue in America?
  • 06:00 Can you be less diversified and win five years out?
  • 06:05 Well, you mentioned Capital Group and that is where I did start my career and that is where
  • 06:10 I saw
  • 06:11 tremendous research
  • 06:13 and a long term time horizon.
  • 06:16 So really what we're doing with ARC is just going back to the future.
  • 06:20 My initial experience which was in the late 70s when I was in college
  • 06:24 and
  • 06:25 we're doing deep research first principles based white sheet of paper, but you're away from an R Square like Washington Mutual of the other funds.
  • 06:33 What's your R-squared right now
  • 06:35 to be honest we're
  • 06:37 the correlation of our
  • 06:39 performance to broad based benchmarks is very low
  • 06:44 for better or worse.
  • 06:45 What it tells, what it tells our clients and prospective clients is
  • 06:49 we we have a very good diversification strategy our
  • 06:54 our funds the active weight, if you're comparing to MSCI World
  • 06:58 or S&P or NASDAQ, the active weight is less than 5%.
  • 07:03 So really good diversification strategy focused on companies
  • 07:07 that are going to transform the way the world works.
  • 07:11 We look at the broad based benchmarks and sure, there are companies that are sustaining innovation like an apple, but they are not going to transform the way the world works from here.
  • 07:22 Our companies are.