How can I invest like Cathie Wood in 2023?

Cathie Wood is the founder, CEO, and CIO of ARK Invest, an asset manager that invests in disruptive innovation — essentially a type of growth stock.

In 2020, Wood was named the best stock-picker of the year by Bloomberg News editor-in-chief emeritus Matthew A Winkler.

In his Ark portfolio – named after the Ark of the Covenant – Wood has six actively managed ETFs (Exchange Traded Funds), two index funds and one ETF venture fund.

During 2020, all six ARK ETFs returned more than 100% – when S&P 500 an increase of only 16%.

So, how can you invest like the best investors of 2020 in 2023?

Invest in disruptors

Wood’s portfolio focuses on high-impact innovations, such as artificial intelligence, DNA sequencing, robotics, energy storage, and blockchain technology. These are the five main areas that Wood believes will be important areas of growth and change for the global economy.

So, if I want to invest like Cathie Wood, I should start with that sector.

The premise of all his investments is that the concepts and technology behind the company are designed to solve big problems. “Innovations tend to gain traction during difficult times because they solve problems“said a prominent asset manager in a recent webinar.

The technology also offers a cost-saving element that encourages rapid adoption. And that makes sense, innovations that create large-scale efficiencies often generate their own momentum.

He also took a fairly short timeline for his investment – just five years. This, he argues, maximizes investor returns for these disruptive innovators.

Criticism

However, Wood is not immune to criticism. In fact, he’s made quite a bit of it over the past year as his portfolio has dwindled.

He has been accused of investing in “capital concept“and unprofitable companies. Meanwhile, with her portfolio collapsing, Cathie Wood continued to invest in stocks shunned by other investors, such as Tesla.

Wood remains steadfast in his support of Elon Musk’s Tesla, insisting that he will “dominate“When the world really transitions to the electrification of transportation.

Do I want to invest like Wood?

Wood’s flagship fund, Innovation Ark, now lags the S & P 500 over five years after a disastrous 12 months. The fund is down about 63% over the year.

In fact, his entire portfolio has been successful in the past year. In December 2022, total assets in Ark’s nine ETFs had fallen to $11.4bn from a peak of $60.3bn in February 2021 – a loss of almost $50bn.

And, over Wood’s preferred five-year timeline, returns are either negative or up slightly.

So, is an investment like Wood a good idea for me?

The reality is that 2022 is a challenging year for the growth sector in general. And I would suggest that Wood’s investments, which may have been speculative – particularly in treatments and medicines – have suffered more.

Take a look at biotech stocks like Beam Therapeutics and CRISPR Therapeutics. These companies are very volatile and there are concerns that the technology will make its way into the market.

I don’t think 2023 will be bad for Cathie Wood. In fact, I wouldn’t be surprised to see his portfolio increase as macroeconomic conditions improve in H2.

But, for me, his approach is far too risky. I stick to value investing and compound return strategies.