In 2014, Cathie Wood founded ARK Invest to focus on disruptive innovation. Since then, the American fund house has regularly published statutes, reflections and other reports on innovation in the broad sense, in an investment context.
Check out Cathie Wood’s recent analysis on what stock markets may have missed in 2022.
ARK Invest, an “Innovation-First” Mindset
In 2014, Cathie Wood founded ARK Invest to focus on disruptive innovation and create a transparent research ecosystem. The idea was to share information on the convergences between and among five main innovation platforms: multiomics sequencing, robotics, energy storage, artificial intelligence and blockchain technology. Since then, the American fund house regularly publishes statutes, reflections and other reports on innovation in the broad sense, in an investment context.
In 2022, everyone experienced market ups and downs. Especially down when you think about it! Even more if you were invested in technological and scientific disruption like ARK Invest who suffered a lot last year. Just look at the performance of its flagship ETF, ARK Innovation (ARKK):
Cathie Wood nevertheless believes that an allocation to disruptive innovation can balance a comprehensive wealth portfolio by providing access to potential exponential growth opportunities and protecting against the risk of disruption from incumbents. On this point, I agree: this is why I have a more dynamic allocation in my portfolio on disruptive (and speculative) stocks.
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In a recent analysis, Cathie Wood gives examples of game-changing innovations, but which stock markets would have been largely ignored in 2022, according to her. She says disruptions can come in surprising forms and at unexpected times, and that innovation solves problems and has historically gained market share during turbulent times.
Growth Vectors for the Future
ChatGPT, for example, registered a million users in just five days and is already above the national average on the Scholastic Assessment Test (SAT). Remember that SAT is a must for anyone who wants to enter at an American university, demonstrating its potential to revolutionize the way we approach intellectual work. You have certainly heard about it in recent weeks as the hype was great!
The social commerce, as measured by Shopify’s gross merchandise volume, increased by 312% over the past three years and has taken a significant share of traditional e-commerce and offline retail sales.
Electric vehicle sales for Tesla increased 49% in 2022 in the United States, as auto sales fell 8% year-over-year. Proof that a paradigm shift is taking place on electric cars! And that extends to the energy sector, with demand for crude oil possibly peaking in 2019, with the change in consumption patterns in terms of cars leading to lower demand.
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In January of this year, Amazon and Walmart began deliveries using drones in select US cities. The use of industrial robots has seen a 30% increase in 2021, despite trade tensions with China and the impact of COVID-19. So many signs that artificial intelligence, robotization and automation of transport are well and truly underway!
On the space side, Elon Musk’s SpaceX nearly doubled the number of rockets launched in a rolling year, with 61 launches in 2022. The company reused the same rocket in just … 21 day, a dramatic improvement over the 356 days it took to first reuse it.
Finally, in the field of biotechnology, new forms of gene editing, such as base editing and prime editing, have been developed and have the potential to provide more effective treatments for cancer. CRISPR gene editing, which received the 2020 Nobel Prize in Chemistry, has already provided functional cures for beta-thalassemia and sickle cell disease and other therapies are in development. In addition, liquid biopsies enabled the early detection of colorectal cancer, resulting in a 38% decrease in the colorectal cancer mortality rate from 2000 to 2020.
A Bright Future?
What is certain is that this retrospective shows that innovation can continue to thrive during difficult times. Personally, I invest in these themes every month in DCA in a dedicated ETF (the HANetf HAN-GINS Tech Megatrend Equal Weight UCITS).
We will therefore see in the years to come if ARK Invest was right. If you want, go read again the Big Ideas ARK Big Ideas 2021 and 2022 editions to see, with hindsight, the foresight or the error of judgment of ARK Invest!
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This article is for educational and entertainment purposes only and shouldn’t be considered as financial or legal advice. Not all information will be accurate, but all the data is sourced. Consult a professional before making any significant financial decisions. This article shouldn’t be seen as an incentive to buy or sell any of the securities mentioned therein, nor endorsement to any presented strategy. I own long position on Tesla (NASDAQ: TSLA). Some links can be affiliated ones.