This article is from WeChat official account:Aotekuaitan (ID: aotekuaitan) , author: Tian days, editor: Ott fast, Publisher: far-international group, the title figure from the visual China
In the past year, when the global economy was hit hard by the epidemic, some financial institutions made a lot of money against the trend. In addition to the BlackRock we talked about last time, there is also the recently famous “female Buffett”, Catherine ·Wood(Cathie Wood).
“Women’s Buffett”, Cathie Wood
Wood was called “Sister Mu” by the people of the world because of his surname “Wood”. She founded Ark Investment (ARK Investment) when she was 58 years old, focusing on “disruptive innovation”, style focused on extreme growth, and long-term investment in technology stocks .
In 2020, 5 of ARK’s 7 ETF products have an average return rate of over 140%. ARKG, which mainly invests in gene editing and health care, is even the top one, with a return rate of 185%. “Female Buffett” And because of this.
Among the top ten ETFs in 2020, ARK products account for three
However, since 2021, with the adjustment of the technology sector, ARK’s funds have also experienced a substantial correction, with a maximum of nearly 30% retracement in March. What followed was a huge question on the sustainability of ARK’s ultimate growth style.
So, why does “female Buffett” value technology stocks so much? What is the biggest difference between her and Buffett? Can her success in 2020 last? This is the question that this article hopes to answer.
“Technology Faith”, where does it come from?
On March 30, 2021, ARK launched a sci-fi product: Space ETF.
This fund, which is called the Space Exploration and Innovation ETF(ARK Space Exploration & Innovation ETF), mainly tracks the United States and the world and “God” Relevant companies include not only Boeing, Airbus, and Virgin Galactic, but also TSMC, Nvidia, and Honeywell.
Space ETF is the eighth fund launched by Ms. Mu Mu. Among the previous seven, except for two index products, the other five active ETFs all focus on innovation fields such as automation, cloud computing, biotechnology, and financial technology. “Shigekura Technology Growth Stocks” can be said to be Mumu’s consistent investment style, but this style actually came from an accident at first.
During her studies in USC, the diligent and studious Mu Sister was appreciated by the business school professor Laffer. (Yes, that’s the one who drew Laffer on a napkin Laffer, who endorsed Reagan’s tax cut by the curve), was recommended to the Capital Group when he was in school (Capital Group)Interned, and joined Jennison Associates after graduation, and eventually moved to work as a stock researcher. As a newcomer, she can only cover the remaining tracks that are picked by others.
At the time, the remaining track turned out to be the technology industry.
In the 1970s and early 1980s, the fiscal expenditures brought about by the Vietnam War and the “Great Society” welfare program and the lack of independence of the Federal Reserve ignited continuous great inflation. High inflation expectations keep the nominal interest rate (real interest rate + inflation rate) high, which has adversely affected the financing and valuation of technology companies .
Therefore, most of the companies that performed well in the 1980s were concentrated in the fields of daily necessities, public utilities, medical and health, and the overall performance of the technology industry was mediocre.
In the early 1980s, technology stocks (green line) performed poorly
At the time, even economists like Friedman believed that inflation was deeply embedded in the economic system. But Ms. Mu predicted that inflation and interest rates have already peaked and will soon enter a downward channel. At first no one believed her prediction, but thanks to Fed President Volcker’s strong inflation suppression policy, inflation expectations began to be anchored. After that, interest rates and inflation entered a long-term downward trend-the spring of technology stocks has come. .
Lower interest rates have created a relatively loose financial environment and also created room for the growth of technological innovation companies. Personal computers, semiconductors, and wireless devices have begun to enter the stage of history.
By the end of the 1990s, six of the top ten companies on the US stock market were technology and communications companies that symbolized innovation, including the familiar Intel, Cisco, Microsoft, IBM, and Oracle.
Low interest rates have opened up the spring of technology stocks
As an analyst and fund manager, Mu Jie has witnessed all the way that technological innovation companies have created amazing financial returns for investors and changed people’s lives. Since then, she has been committed to discovering and supporting disruptive innovations, and investing in disruptive innovations (Invest in disruptive innovation) has become the future ARK logo Declaration of sex.
After working for Jennison Associates for 18 years, Wood and his partners co-founded Tupelo Capital, a hedge fund that manages a portfolio of approximately US$800 million. After that, Wood joined AllianceBernstein (AllianceBernstein) as the chief investment officer of global theme strategy, managing a $5 billion portfolio and focusing on high growth , Looking for opportunities in high-risk, relatively small market capitalization companies.
In the Internet bubble of 2000, Ms. Mu, who was heavily involved in growth technology stocks, performed very well. But during the 2008 financial crisis, her portfolio experienced a steeper decline than the market as a whole.
Because when there is a liquidity crisis in the market or interest rates rise sharply, if the holdings are too concentrated in growth stocks, they are often forced to face the embarrassing situation of stocks moving in one direction, which means that her portfolio cannot provide enough for customers Diversification of risks.
Because of this, Ms. Mu’s strategy of “deadly long in technology stocks” often refuses to invest in investors thousands of miles away. Her employer, UniBo, once thought that her portfolio was too volatile and hoped that she could hold on to it. There are some index products like the S&P 500.
In Sister Mu’s view, investment based on certain standards has gone to extremes. What is really lacking in the market is a product directly related to innovation. She believes that only by creating a new institution can it be possible to break through the internal constraints of these traditional institutions and truly focus on scientific research.Long-term opportunities in the field of technological innovation.
In 2014, Mu Sister left AllianceBernstein. In the same year, ARK was born.
Heavy warehouse Tesla
ARK is composed of the first letters of the three words “active, research, knowledge” (Active Research Knowledge), and it also points to the The Ark of the Covenant (Ark of the Covenant) with the “Ten Commandments of Moses” in Egypt.
Sister Mu Mu does indeed have an almost religious belief in technological innovation. She founded ARK with the hope to allocate funds exclusively to the field of transformative technological advancement.
It didn’t take long before she turned her attention to Bitcoin.
In 2015, the highest price of Bitcoin was only US$496. JPMorgan Chase, which was recently brewing cryptocurrency products, vowed to declare that “trading virtual currencies is a waste of time”.
But Ms. Mu believes that Bitcoin will become a reserve currency similar to the US dollar in digital currencies, so ARK not only became one of the few funds that recruited digital currency analysts at the time, but also launched the first Bitcoin ETF-ARK Web x.0 ETF.
Although Mu Sister has the same knowledge and action, there is inevitably a gap between ideals and reality. In the first three years, ARK did not have any external investors, and Ms. Mu could only cover her own money. At first there was no office, and employees could only work in public offices. According to MorningStar’s data, the performance of the ARK flagship fund in the first three years was at the bottom of its class.
Sister Mu Mu bet all her personal wealth on ARK, and her faith in technological innovation supported her through the darkest moments of ARK’s initial stage. By 2017, as the stock prices of Netflix, Salesforce, Illumina, Square, Athenahealth and other technology companies rose, ARK gradually got on the right track and avoided the initial survival crisis.
One year later, a letter from Sister Mu Mu directly affected Tesla’s later destiny.
In 2018, Tesla’s stock price hovered around $3405″ data-w=”700″ data-h=”500″>
After the financial crisis, Berkshire Hathaway’s performance was significantly worse than before. Source: FT
As the launch of the Covid-19 vaccine has accelerated, the economy has recovered from the suspension of production last year, and funds have begun to rotate to sectors closely related to economic growth, such as banking and energy. These companies usually have lower valuation multiples and are representative of traditional value stocks. Value stocks are beating growth stocks by the biggest margin in two decades.
The Russell 1000 Value Index has recently outperformed the Growth Index significantly. Source: WSJ.
It is true that the progress of technological innovation will profoundly change our lives in the long run, but now that the profit prospects of value stock companies are becoming brighter, what does this mean for ARK, which has always been heavily involved in technological growth?
Reference material:
[1] ARK official website, https://ark-funds.com/
[2] Cathie Wood pledges to buy the dip as ARK flagship rebounds, FT
[4] ARK Invest: big stakes and a short swing, FT
[5] How Cathie Wood beat Wall Street by betting Tesla is worth more than $1 Trillion, Forbes< /p>
[6] ARK’s Cathie Wood disrupted investment management. She’s not done yet., Forbes
[7] Value investors finally have reason to celebrate—for now, WSJ
[8] Cathie Wood persuades investors to stick with ARK, WSJ
This article is from WeChat official account:Aotekuaitan (ID: aotekuaitan) , author: Tian days