The Best Stock Picker of 2020 Wins
With Disruptive DNA
How Cathie Wood left all the other top competitors far
behind.
By Matthew A. Winkler
December 31, 2020, 10:00 AM GMT
2020 was a very good year for Cathie Wood.
That's because whatever benefits central bankers bequeathed
to shareholders with next-to-zero interest rates and the record $14 trillion
global money supply increase in 2020, Wood beat every stock picker by betting
on the innovators in DNA development who are rescuing the world from the global
pandemic.
Among the 367 U.S.-based mutual funds with 60% of their $5
billion (or more) in American equities, her ARK Genomic Revolution ETF, ARK
Innovation ETF and ARK Next Generation Internet ETF are far ahead, reaping
bonanzas of 203%, 159% and 157%, respectively.
Wood left her closest competitor trailing by 60 percentage
points. She also delivered a total return (income plus appreciation) that is 11
times the gain for the S&P 500; 19 times the average of equity-exchange
traded funds; 17 times the advance for the health-care benchmark, and 5 times
the similar measure for technology, according to data compiled by Bloomberg.
Wood achieved these feats with investments she considers so
transformational that they have created enough wealth to change the economy's
trajectory before and after the coronavirus killed more than 1.7 million people
this year.
Her five favorites in ARK Genomic Revolution appreciated a
combined 431%. They comprise Arcturus Therapeutics Holdings, the San
Diego-based biotech focused on treatments for diseases, including the
coronavirus, representing 4.7% of the fund and returning 750% in 2020; Teladoc
Health Inc., the Purchase, New York-based health-care services company, 4.6% of
the fund and up 136%; Crispr Therapeutics AG, the Basel, Switzerland-based
biotech maker of gene-based medicines, 6.2% of the fund and returning 177%;
Pacific Biosciences of California Inc., the Menlo Park life science and
diagnostics maker of inexpensive DNA sequencing, representing 7% of the fund
and returning 432%; and San Francisco's Twist Bioscience Corp., specializing in
synthetic DNA, including genome engineering, which gained 661% and is 5.9% of
the fund, according to data compiled by Bloomberg.
The 65-year-old Wood, a summa cum laude graduate in finance
and economics from the University of Southern California, has made disruptive
innovation her calling card ever since Ark Investment Management LLC became a
registered adviser in January 2014 at a point when money management increasingly
was a passive, index-driven business. Her focus on genome sequencing, robotics,
artificial intelligence, energy storage and blockchain technology proved
prescient: ARK Genomic Revolution has attracted record monthly inflows in
December, bringing the fund's new money total for 2020 to $4.7 billion,
according to data compiled by Bloomberg.
Unlike most of her competitors, who rely on market
benchmarks to determine the size of their holdings, Wood enabled ARK Genomic
Revolution to increase 225%, or $5.2 billion in the most recent quarter, by
purchasing an additional 1.5 million shares of Arcturus Therapeutics, keeping
its weighting at 4.7%. She added 7 million shares of Pacific Biosciences of California,
raising its weighting to 7.1% from 5.6%, and boosted Twist Bioscience by 1.4
million shares, pushing its weighting to 5.9% from 4.7%. She reduced her
Invitae Corp. holding to 3.6% of the fund from 12% and cut Crispr Therapeutics
to 6.2% from 8%, according to data compiled by Bloomberg.
All of which proved her prowess for dynamic and transparent
investing to the extent her ARK Innovation ETF, the second-best performer among
the 367 funds this year with a total return of 159%, dethroned JPMorgan in
December as the largest actively managed ETF. Among ARK Innovation's top three
holdings, Palo Alto-based Tesla Inc. appreciated 696% this year and contributed
39 percentage points to the fund's performance; Roku Inc., the San Jose
internet media company gained 154%, or 11 percentage points, and Crispr, 9
percentage points.
Wood is best known for championing Tesla soon after
launching Ark seven years ago when more than 60% of analysts surveyed by
Bloomberg were bearish on the maker of zero-emission, battery-electric
vehicles. She made Tesla No. 1, or 10% of the fund, in 2018. She still
considers it undervalued as legacy automakers lose money on their EVs, while
Tesla becomes increasingly profitable because of its battery and chip
technology.
Asked earlier this month what's it like having one of the
best years in the history of money management, Wood told Bloomberg's Erik
Schatzker on the Front Row program:
“The
coronavirus created a tremendous number of problems, and our portfolios are all
about solving problems, and our investors have been rewarded for helping to
solve some of the world's most profound problems. I love bringing to life new
ways of looking at the world, helping people understand how the world is going
to change not only in their investment portfolios but also in their own lives,
their children's lives, their grandchildren's lives — helping them understand
how to move everyone to the right side of change and really benefit from the
exponential growth trajectories that are just taking off now.”
(With assistance from Shin Pei, Brian Pennisi.)
This column does not necessarily reflect the opinion of the
editorial board or Bloomberg LP and its owners.
To contact the author of this story:
Matthew A. Winkler at mwinkler@bloomberg.net
To contact the editor responsible for this story:
Katy Roberts at kroberts29@bloomberg.net
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