Stock investing strategies from the star stock picker Cathie Wood

Highlights

• Catherine Woods is the founder, CEO and CIO of Ark Invest.
• Owing to her investing performance, she now holds a near cult status on Wall Street.
• Several of her funds were listed among the top 10 ETF performers of 2020.

Cathie Wood, titled the star stock picker by Forbes, is a lady riveting attention amidst the male-dominated world of Wall Street. Ark Invest is a money management company and was founded in 2014 by Cathie wood. She is the CEO and CIO of the company. The company is known for its thematic exchange-traded funds and has gained much attention since 2020 when her flagship ETF called the Ark innovation gained 150% amidst the pandemic headwinds.

As of 25 August, the top ten holdings of Arc Invest are as follows-

• Tesla Inc
• Teladoc Health Inc
• Roku Inc
• Coinbase Global Inc- Class A
• Unity Software Inc
• Zoom Video Communications- A
• Square Inc- A
• Shopify Inc- Class A
• Twilio Inc- A
• Spotify Technology SA

Related Read: Are ETFs good for investment?

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Following are learnings we can derive from Cathie Wood’s prowess and her brainchild Ark Invest.

Market is not linear

According to Wood, given that the market is so volatile and the world we live in is so dynamic, it is essential to keep tracking the disruptions that happen in the market. The market neither was a linear phenomenon nor can it ever be. So an aversion to disruption can end up disrupting the returns.  Wood is known for unmasking unconventional investment opportunities, which is much needed in the current times.

Forget not the fundamentals

Sometimes the markets don't move as predicted. However, wood is known to hold firm to her convictions. She is confident about her fundamental and technical evaluations. Thus, she ensures that her opinions don't drown out among the naysayers who could be the herd in the wrong direction.

Brainstorm

Another thing to learn from how Ark Invest works is that a lot of brainstorming goes into what could be the path-breakers or the disruptors in the economy. A good amount of awareness about the possible change the market will experience could be the edge to gain a better return from an investment.

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Innovation at the heart of portfolio

Anytime while creating a portfolio, it is a very good idea to include innovation at the nucleus. Ark's Innovation ETF has shares like Tesla, Square, Zoom etc. These are companies that have the latest technologies in place. Any new technology that can change the way the world functions can have the potential to fetch high returns.

Looking long term

Cathie Wood is known to focus on long term gains. Time and again, she has mentioned that their company lets go of short-term profits so that they can win in the long run.

Listening to expert opinions

Even with the robust knowledge base and strictly research-based approach to buying stocks, she still considers expert opinions before making any final decision. She collaborates with academicians, venture capitalists and start-up entrepreneurs to learn more about their thoughts and opinions. With all these insights, the stocks are selected.

Bottom- up analysis

At Ark, a bottom-up analysis is followed, and then the winners are picked up amongst the high growth potential stocks. The company first identifies what the disruptors or game changers are, like for exaample, electric vehicles.  At Ark they would decide to invest in a company like Tesla, which is the topper in the category.

Beyond numbers

The buying decision is taken based on the company, its culture, its goal achievement history and potential, industry-specific barriers to entry, determining the market power of the players, the leadership, the financial valuation based on past numbers and the risk evaluation.

Bottom Line

Adapting to change, evolving with game-changing technologies, being aware of prospective market disruptors, watching out for path-breaking innovations and eyeing the first-mover advantage are all seen in the moves made by Cathie Wood. Therefore, it is insightful to track her working style and operational strategy to become a better investor.

Related Read: How do I buy Exchange-traded funds (ETF) in the UK?