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Cathie Wood Is Buying

Written by Briton Ryle
Posted October 4, 2021

I’ve crossed path with ARK Invest founder and chief visionary Cathie Wood a few times over the last 18 months or so…

If you don’t know who Cathie Wood is, that’s OK. She’s kind of the rock-star investor for the current market environment. Every bull market worth its salt has one.

From the mid-1980s to well into the '90s, there was value investor Bill Miller. He was Baltimore-based Legg Mason’s shiny star. For well over a decade, he could do no wrong. He beat the S&P 500 for 15 years running and could pretty much write his own ticket. 

Value investing started losing its luster during the internet bull market. Trying to sound smart and apply Benjamin Graham-analysis and value on the internet companies of the late '90s and early 2000s was laughable, because there was no value and no earnings... just a story.

Back then, the new "growth" investors would tell you that valuation didn't matter anymore. The internet would make sure that whatever valuation a company had on Monday, well, it’d be higher on Tuesday. Profits didn’t matter anymore. And neither did things like return on equity (ROE), rational thought, or a solid business plan.

It was all about IPOs and eyeballs. People like Goldman Sachs’ sage market strategist Abby Joseph Cohen became the stars of the new internet era.

Value guys like Miller were fish out of water. Seems like I remember him buying a yacht and semi-retiring until the housing bubble popped. 

Stocks got hit pretty hard in the first few months of 2008. Bear Stearns failed in March of that year. The rout was on and, looking ashore from the crow’s nest of his yacht, Miller thought he recognized something: value. He went all-in at his first port of call, probably a year before the market actually bottomed.  

It wasn’t pretty. But premature allocation never is. 

I suppose we’d have to give the recovery bull market of the 20-teens to Bill Ackman and Carl Icahn. America was angry about the global financial crisis. It seems fitting that angry men like Ackman and Icahn would represent that time.

I heard Bill Miller is currently working on a comeback. I don't know what his aspirations are. I figure he must’ve gotten bored being out of the game, because I know he won't manage to take any of the shine out of Cathie Wood's star. This COVID market is hers and hers alone.

Message in a Tesla

I can tell you most of what you need to know about Wood with one word: Tesla. Wood is wildly bullish on Tesla. And not just because the stock helped make her a billionaire.

Wood says Tesla is going to $3,000 a share because the company has already won the artificial intelligence sweepstakes due to its pioneering work on the automation software that’s been loaded into its cars for years...

She and, I guess, Elon Musk are the only ones that know this. I feel kinda bad for Google, Facebook, and Apple — they have no idea that they’ve already lost the AI race.

This is typical of Wood’s MO. She is a big thinker making big predictions about the future and then putting the appropriate stocks in her exchange-traded funds (ETF) that have names like ARK Genomic Revolution, ARK Autonomous Technology & Robotics ETF, and the flagship ARK Innovation ETF. 

Now, predicting the future is not easy. Fifty years ago, it was common knowledge that we would all be gallivanting around with flying cars and jetpacks by now. 

The thing is, humans certainly could’ve had those things by now if they were really as cool as they seemed 50 years ago. Our priorities changed along the way. I mean, would you rather have an iPhone or a jetpack? 

I’m not saying Cathie Wood is on a fool's errand, either. She’s pretty damn smart. She’s got a whole team of very smart people to help her game-plan ideas. And she’s got Elon Musk on speed dial.  

What really interests me about the Cathie/ARK Invest phenomenon is that, while l don’t consider myself a visionary or a futurist, she and I keep ending up in the same stocks. Only I tend to recommend them to my Wealth Advisory subscribers well before they show up in one of the ARK ETFs…

Huh, Maybe I AM a Visionary…

The first time I noticed that Wood and I were in the same stock, it was with the telemedicine company Teladoc (NYSE: TDOC).

Doctor appointments on your phone or laptop... pretty good idea after what we went through with COVID.

Wood was buying Teladoc around $150 a share after lockdown.

But Wealth Advisory subscribers already owned Teladoc when the pandemic hit, at $60 a share. We sold Teladoc last year at $200. 

It happened again about a week ago. I saw that Wood was a heavy buyer of a genetic testing company called Invitae (NYSE: NVTA). Shares had recently dropped down to the $30 area. Wood was loading, because Invitae has a truly mammoth opportunity. 

Wealth Advisory subscribers got there first taste of Invitae back in 2016, at $6.55 a share. The ARK Genomic fund was barely a year old at that point. We sold it the very next year for a tidy 45% profit. But we weren't done...

Invitae went back in the Wealth Advisory portfolio in 2018 at $12 a share, and it's around $28 right now. 

I've talked about Invitae here in Wealth Daily before. This was a pretty entertaining article...

Anyway, I'm bringing it up today for two reasons. One, the stock is down 50% from its highs and I think there's an opportunity. And two, I hear Cathie Wood feels the same way. She's apparently been buying quite a lot of NVTA over the last couple weeks. It's probably just a matter of time before she gets on CNBC to tell the world how awesome she thinks that stock is.

Until next time,

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Briton Ryle

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.

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