Pay Attention to Cathie Wood
….as she beats and eats Warren Buffet over the next decade.
When Noah was building an ARK, people were laughing and ridiculing. But when the flood came, only the people and animals that onboarded the ARK were safe from the flood.
There is a technological flood coming. The old word order is going to be destroyed and a new world is going to emerge. ONLY the ones who get to onboard the ARK in time will be saved.
Cathie Wood (Noah’s parallel in the world of finance) has recently been under a lot of attacks because growth stocks are repricing. The attacks are of course out of ignorance of the big picture and the long game that Cathie Wood is playing.
The attacks are emanating from persons who mostly don't really understand the power of technology and truly believe that there is no huge wave of converging technologies about to hit us.
One such critic is CNBC's Jim Cramer, who is an incredibly smart guy but not very good with technology. He demonstrably understands very little about automation and the progress being made on that front.
Consider the areas that ARK is focusing on.
ARK Funds:
- ARKK — ARK Innovation ETF
- ARKQ — Autonomous Technology & Robotics ETF
- ARKW — Next Generation Internet ETF
- ARKG — Genomic Revolution
- ARKF — Fintech Innovation ETF
- ARKX — Space Exploration & Innovation ETF
Jim Cramer is naturally inclined not to pay serious attention to these areas. He spent half of his career analyzing General Motors, and General Electric. That's his contextual root understanding of technology. His roots create boulders that prevent him from understanding “Tesla Motors”, and “Tesla Electric”.
There is nothing wrong with not understanding something. However, to criticize something that you do not understand on the basis that you don't understand it, is disingenuous and unwise.
On a 5 to 10- year time horizon, the world would have fundamentally transformed. Some of the companies within the ARK funds are authoring that future. Some will not survive, some will flourish. Cathie Wood has spread her bets across most of the players in those spaces and will be set to win either way, whichever player wins, Cathie Wood wins.
ARK has chosen big ideas, big investment themes, big revolutions that are about to change life as we know it. If we pick just two (genomics and robotics) we can see how life as we know it will change. Genomics revolutions especially the CRISPR advancements are about to alter human life, the longevity of it, and healthcare, whilst robotics will ensure human beings don't work. Just these two techs will disrupt the labor market (humans replaced by robots), healthcare (gene therapy curing ailments and illness), insurance (longevity will drive life insurance companies into bankruptcy), among many other areas of life.
It's a flood of technologies about to be unleashed onto the earth. Winner-take-all type of outcomes in technology spaces due to network effects will result in only a small subset of companies eating the bigger share of the economic pie. Entire value chains and industries will be disrupted. It's inevitable. Not even legislation will stop the advancing and relentless power of technology.
The winners, in the winner-take-all lottery, will feed on the carcasses of the old companies currently know as value companies. The power and pace of technological advancement are such that the high-growth companies that dominate their markets will quickly and abruptly become value companies as they swallow value from the old incumbent value companies. That’s how Cathie will beat Warren.
Eating Warren Buffet
The coming technologies are about to eat everything on their paths, including the traditional value stocks that Warren Buffet usually invests in. When this happens, Cathie Wood’s investments will slowly and gradually eat Warren’s investments because Warren is not used to a new definition of value.
Tech is changing how value is captured and distributed. Our understanding of value itself is changing. Coders create value out of thin air and Warren does not really understand that. He knows value comes out of bottling and selling a can of coke for people to drink, and maybe selling a laptop with Microsoft products.
Software businesses, platform businesses, businesses that dematerialize products and sell them as a service are very difficult to understand and value for the traditional good old investors. Take transport, for example, they know value is generated from manufacturing cars, buses, lorries, trains and maybe operating a bus company plying certain lucrative routes. It is hard to think of transport being offered as a service, to an extent that a person does not need to own a car.
The dematerialization of a family car as a product is difficult to fathom, foresee and analyze. Usual forecasts by the usual analysts usually fail in estimating potential revenue because they do not see how dematerializing a product expands the market for that product.
The chart below compares Cathie Wood’s portfolio to Warren Buffet’s since the first ARK ETF was launched.
Cathie Wood is 732% up on the Innovation ETF and Warren Buffet is 76% up. Cathie Wood’s investment themes haven't even started to eat the world. When autonomous technologies and robotics begin to massively infiltrate all areas of life, Cathie’s portfolio will massively appreciate whilst Warren’s depreciate as it is primarily the prey, and Cathie’s portfolio is the predator.
Cathie Wood is not irrational or crazy. She understands what most of us fail to understand and time will prove her right.
I am unrepentantly rallying behind the superstar fund manager. I will watch as she turns billions into trillions. 10X in the next decade. Let's go.
Ciao!
