When Catherine Wood launched her firm six years ago to focus on disruptive innovation, it was a bold move. But the former chief investment officer of global thematic strategies at U.S.-based AllianceBernstein was convinced of the opportunities in new technologies ranging from driverless cars to genomics. Today, the firm oversees US$11.1 billion in assets, and the firm’s U.S. flagship ARK Innovation ETF has outpaced the S&P 500 Total Return Index handily since inception. In Canada, ARK manages the new Emerge ARK ETFs. We asked Wood, 64, why she is bullish on Tesla and bitcoin, and bearish on banks.
Why did you bet on disruptive innovation?
I watched the traditional asset management business heading toward passive indexation. But I also saw five innovation platforms—artificial intelligence, energy storage, robotics, genome sequencing and blockchain technology—that were evolving and spawning new technologies. Indexes are backward looking. I felt there was a void to fill, and we could also be disruptive to our own industry. I consider ARK to be the first sharing-economy company in asset management. We push our original research into social media [for feedback].
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How will focusing on disruptive innovation help you outperform passive indexes?
You need to go back to the late 1800s and early 1900s to see multiple innovation platforms happening at the same time. Back then, it was the telephone, electricity and the internal combustion engine. We expect today’s five innovation platforms to dwarf the productivity gains and wealth creation from those three. If we are right, traditional benchmark indexes are going to be populated by value traps—companies disrupted by innovation.
Where are the value traps?
We think digital wallets, such as Square’s Cash App and PayPal’s Venmo, are going to take the place of banks. They will become bank branches in our pockets. This is going to happen in the United States and emerging markets. In the era of disruptive innovation, flat to inverted yield curves are going to be more the norm and that’s not good for banks’ net interest margins. We think oil companies will be disrupted by electric and autonomous vehicles. Railways will probably face a threat from autonomous truck platoons, and retailers from more online sales as drone technology gets regulatory approval. If pharma and biotech companies don’t invest in new technologies, such as CRISPR gene editing to cure diseases, they will be lost.
You have a five-year target of more than US$7,000 a share on Tesla. Why are you so bullish despite Elon Musk’s antics and tweets?
We keep our eye on the prize. Tesla has competitive advantages versus other automakers in moving toward electric and autonomous vehicles. They include advanced artificial intelligence chips, lower battery costs, more than 13 billion miles of real-world autonomous driving data and over-the-air software updates. I bought my Tesla Model 3 in September 2018, and today I have a better car than I had then. We forecast 37 million electric vehicles will be sold in 2024, and Tesla will keep its 17%-to-18% market share. We don’t think regulators will permit driverless taxis until late 2021, but the expected gross margins are 80% to 90%, and Tesla could win the lion’s share of the U.S. market.
What other potential high-growth stocks do you own?
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We own Illumina, a DNA gene-sequencing company that enables breakthroughs in genomics, and Invitae, a genetic-testing company. We have three gene-editing stocks: CRISPR Therapeutics, Intellia Therapeutics and Editas Medicine. Stratasys is a 3-D printing company making strides in aerospace—it can produce small engine parts cheaply.
Grayscale Bitcoin Investment Trust helped boost your flagship ETF in 2017, when bitcoin soared to nearly US$20,000 before plunging. Why did you sell?
It was a business decision, even though we are extremely optimistic about bitcoin. We do believe it is the reserve currency of the crypto-asset ecosystem. But most wirehouses [major U.S. brokers] would not let our flagship ETF on their trading plat- forms with bitcoin [in the portfolio]. It’s the same in Canada. But ARK Next Generation Internet ETF still owns it. Bitcoin is also one of the largest positions in my retirement account.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
