Cathie Wood: Who Is She and Why Do So Many People Follow Her Investing Advice?

When looking at famous investors, it’s common to focus on notable names like Warren Buffett. However, in recent years, someone else has been making a splash in the investing world. Cathie Wood, the founder, CEO, and chief investment officer of ARK Investment Management LLC has made a name for herself as a stock picker and leader when it comes to investing in disruptive technologies.

So who is Cathie Wood? Let’s look at who she is, how she rose to investing fame, and why others follow her investment advice.

Who is Cathie Wood?

Even though Cathie Wood has more than 40 years of investment experience under her belt, she became better known on a wider scale in 2020. Her ARK Innovation fund returned almost 150% that year, catapulting her into a level of notoriety she hadn’t yet experienced. In the past five years, the ARK Innovation fund has returned about 45% annually.

These numbers have turned Wood into something of a star in the investment space, especially when it comes to technology and innovation. Her asset management firm ARK Invest is known for its bets on technology and innovation considered “disruptive.” ARK’s fund offerings include investments in robotics, genomics, artificial intelligence, blockchain technology, and clean energy.

Wood is also known for sometimes making big claims about the future. She’s an advocate for bitcoin, and she insists that electric vehicle maker Tesla (TSLA) is still an undervalued company and predicts it will be worth $3 trillion at some point. Although others scoffed at her when she first made that prediction, with Tesla’s market cap at $923.77 billion as of May 4, 2022, that prediction might not seem so wild. In fact, these predictions are one of the reasons investors follow Cathie Wood and invest in her funds.

Cathie Wood has also received various accolades and has spoken at a variety of conferences and summits.

Early life and career path

Cathie Wood was born in 1955, in Los Angeles. Her parents were Irish immigrants, and she is considered a self-made millionaire. Wood attended college at the University of Southern California, studying economics. She was a student of Art Laffer, who famously theorized a tie between tax revenue and tax rates and created the Laffer Curve. Laffer was one of Wood’s mentors.

After graduating summa cum laude in 1981, Wood went on to work at The Capital Group as an economist. Following her time at The Capital Group, Wood spent 18 years at Jennison Associates LLC, working in various capacities as an economist, researcher, and portfolio manager. She eventually became a portfolio director.

Taking this knowledge, she helped fund Tupelo Capital Management, a hedge fund that managed about $800 million. Tupelo was known for using thematic strategies when choosing investments for the fund, and today, ARK Invest also uses a thematic approach.

After her time at Tupelo, Wood joined Alliance Capital, where she stayed for 12 years and was CIO of Global Thematic Strategies. In this role, she managed a portfolio of more than $5 billion. Wood developed a reputation as a fund manager and director, gaining influence as she managed increasingly large funds.

Finally, in 2014, Wood founded ARK Invest and took on her roles as CEO and CIO. Her long history with thematic investing prompted her to look at disruptive innovation and focus on investments that are designed to solve big problems.

Wood has received recognition in the world of investing. Forbes recognized her as one of its Power Women in 2021, as well as recognizing her as one of its 50 Over 50. She has also been recognized by Bloomberg and Fortune and has been a featured speaker at the World Economic Forum.

Cathie Wood’s estimated net worth is $250 million, and ARK Invest is estimated to have about $60 billion in assets. It’s hard to pinpoint her exact net worth because, like many famous investors, her net worth depends on how well her investments are doing, and earned income isn’t always disclosed. Estimates for net worth often come as a result of looking at filings with the U.S. Securities and Exchange Commission and through other methods of trying to estimate net worth. Forbes, for example, also interviews those it intends to include on its lists.

Cathie Wood’s investment philosophy

Cathie Wood (and, therefore, ARK Invest) focuses on thematic investment strategies. A thematic approach to investing focuses on overarching long-term trends. Rather than looking specifically at sectors and companies or chasing short-term trends, thematic investing looks for disruptors that are likely to impact what the world could evolve into. Mostly, a thematic strategy tries to identify what could change the world — even if the underlying technology isn’t fully developed.

As a result, if a technology or disruption appears to be on the verge of a breakthrough, or if there are advancements and news around a specific related company, there could be short-term spikes in the price of a company or a fund.

The thematic approach is one that is less concerned about whether a company is a pharmaceutical company or an agricultural company and more concerned about how technology — such as gene editing — could impact multiple sectors and change how we solve the big problems of our time.

ARK Invest looks for companies that have different capitalizations, geographies, and other features that are likely to underpin what’s coming in the future. Wood and ARK Invest believe that traditional investment strategies will be outstripped by a thematic approach.

As a result, many of Wood’s stock picks — and what she includes in ARK’s funds — include companies that are researching and implementing various cutting-edge technologies and potential solutions, including:

• Artificial intelligence
• DNA sequencing
• Genomics
• Robotics
• Energy storage
• Blockchain technology
• Autonomous technology
• 3D printing

Wood’s focus on technology and disruption has earned her a reputation on Reddit. Investors in various subreddits about investing and even focusing on Wood herself include such nicknames as “Queen Cathie” and “Cathie Bae.”

Additionally, even when ARK Invest is embattled, Wood remains optimistic about the future. She insisted, even as Michael Burry (of The Big Short fame) started shorting ARK funds, that she’s looking into the future five years and beyond.

ARK ETFs

To get a better sense of Wood’s investing philosophy and interests, here are ARK’s active exchange-traded funds (ETFs) as of May 4, 2022:

• ARK Innovation Fund (ARKK): This fund includes companies that are perceived to be on the edge of innovation. This includes self-driving cars, automation, robotics, blockchain technology, software development, and more.
• ARK Next Generation Internet ETF (ARKW): Exposure to companies involved in blockchain technology, big data, artificial intelligence, cybersecurity, and mobile technology
• ARK Autonomous Tech & Robotics ETF (ARKQ): Focus on self-driving vehicles, robotics, energy storage, space exploration, and 3D printing
• ARK Genomic Revolution ETF (ARKG): Includes bioinformatics companies, CRISPR technology, stem cell research and development, agricultural biology, and targeted therapeutics
• ARK Fintech Innovation ETF (ARKF): Exposure to frictionless funding, blockchain technology, transaction innovation, changes to risk assessment, and backing for customer-facing platforms
• ARK Space Exploration & Innovation ETF (ARKX): This ETF focuses on various companies involved with various aspects of space exploration, including aerospace companies that make orbital and sub-orbital equipment and vehicles as well as companies that support the development of associated components

Wood’s investment performance

In the past year or so, ARK’s investments haven’t fared as well as they did in 2020. Part of the reason that 2020 was such a breakout year for Cathie Wood and ARK Invest was due to how the pandemic put new technology in focus. For example, the flagship fund, ARK Innovation ETF (ARKK), was weighted to include Zoom (ZM), which saw a big spike in performance during 2020.

As of May 4, 2022, ARKK is down 52.21% year-over-year. Year-to-date, ARKK is down 50.52%. However, if you go back five years, ARKK is up 136.48%. Additionally, between January 17, 2022, and early March 2022, flows into the fund reached nearly $1 billion.

Wood points out that innovation is seeing a bear market right now, with people pulling back and re-assessing their portfolios. However, she insists that thematic investing is here to stay for the long-term and that disruption is coming — and that ARK Invest will be on the cutting edge. She compares ARK Invest, and especially ARKK, to a venture capital fund available to the public.

For now, even though ARK Invest’s funds are down in the short term, there are those who believe that, for the long haul, Cathie Wood’s predictions are likely to prove right, just as they did when people doubted her support of Tesla five years ago.

Who should consider following Wood’s philosophy of investing?

Those most likely to be interested in Cathie Wood’s investing philosophy are those who are relatively young and those interested in disruptive and emerging technologies. Additionally, those with a risk tolerance that allows for a longer time frame might benefit from Wood’s approach to thematic investing, which takes a long-term view, rather than focusing on short-term profits, though technology and disruption could see a lot of growth.

In general, those who are looking to potentially take advantage of large-scale shifts in the way we live and work are likely to be drawn to Wood. It could also make sense for those who want to add potential growth to their portfolio while still maintaining a more traditional asset allocation. For example, some investors consider ARK Invest funds to be alternative assets and invest in them for diversity while limiting their exposure in an overall portfolio.

The easiest way to follow Cathie Wood’s investing philosophy is to buy shares of one of ARK’s ETFs, available on U.S. exchanges through your broker or investment app.

FAQs

Bottom line

Cathie Wood is one of the most influential high-profile investors today. If you’re interested in profiting off her knowledge and advice, you could use one of the best brokerage accounts or best investment apps to purchase shares of one of ARK’s ETFs.

However, it’s important to note that no one knows the future, and that following Wood comes with risks as well as potential rewards. Even though she has built a career on being ahead of the curve, there’s a possibility that she will be wrong at some point and you could lose money by following her advice or buying into ARK’s funds. Carefully consider your portfolio goals and strategy before putting money into any investment.

Disclosure: The author owns shares of ARKK.