Here's how Cathie Wood beat Wall Street by betting Tesla is worth more than $1 trillion:
esla shares were limping along around $200 in May 2019, about where they had traded five years earlier, when Elon Musk’s biggest Wall Street booster tried a gutsy experiment. Cathie Wood and her Ark Investment Management were already well-known for their way-out-there predictions that Tesla would build a fleet of robo-taxis worth $1 trillion and that its shares would soar 20- or 30-fold by 2023. Now she stirred the pot again by publishing online Ark’s new bull’s-case valuation of $1.
Meanwhile, Wood, 64, is perfectly happy to have a chorus of critics: “It almost makes me feel comfortable, to be honest, because it means if we’re right, then the rewards will be pretty enormous.” Its Tesla position and a pandemic that has accelerated adoption of the technologies embedded in the 35 to 55 companies in each Ark ETF have helped its assets nearly triple in 2020, to $29 billion. “Coronavirus has catapulted our innovative platforms into high gear because they solve problems,” Wood says. “Innovation solves problems.” conservatively values Ark at $500 million, or about 2% of assets under management, roughly the same multiple as publicly traded T. Rowe Price commands.
In 2017, Ark took off, buoyed by surging prices for stocks like Netflix, Salesforce, DNA sequencer Illumina, digital-payments processor Square and digital health provider Athenahealth. Assets rose tenfold, and Ark began to build its brand on the back of bold predictions, an active Twitter presence and the free research it put online.
With all successful innovations, of course, come copycats. Gimmicky themed ETFs have proliferated in everything from pets to sports gambling to work-from-home. Fund giants Dimensional Fund Advisors, Fidelity Investments and T. Rowe Price have all recently launched their own slates of actively managed ETFs.
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