Cathie Wood's Investment Strategy

Cathie Wood is the founder, chief executive officer, and chief investment officer of Ark Invest, an asset manager that invests in disruptive innovation. Ark has more than $10 billion in assets under management spread across six actively managed exchange-traded funds (ETFs), nine index ETFs, and a private equity fund.

Read on to learn more about Cathie Wood, her investment style, and the top stocks in Ark ETFs.

Who is Cathie Wood?

Who is Cathie Wood?

Wood earned wide respect as a famous investor in 2020 when all six Ark ETFs notched returns greater than 100% -- while the S&P 500 grew a mere 16%. The annihilation of market returns by six separate funds gave credibility to Wood's premise that disruptive innovation is the shortest path to growth.

Unfortunately, Wood's wild success was short-lived. After peaking in 2021, the Ark funds fell about as quickly as they grew. All six of the actively managed Ark funds are more than 30% below their all-time highs as of the fourth quarter of 2024.

Education, career, stats

Cathie Wood's education and early career

Wood grew up in California and attended the University of Southern California (USC), where she earned a bachelor's degree in economics and finance. At USC, she was mentored by economist Arthur Laffer. Laffer is known for creating the Laffer Curve, which shows the non-linear relationship between tax rates and the government's tax revenue. Laffer was also an economic policy adviser to President Ronald Reagan and other politicians.

Wood began her professional career as an assistant economist for asset manager Capital Group. Three years later, she accepted a role as chief economist for Jennison Associates. She stayed at Jennison until the late 1990s, when she made the jump from economics to portfolio management.

After leaving Jennison, Wood co-founded a hedge fund, then went to work for AllianceBernstein as a portfolio manager. Her specialty was -- no surprise here -- risky, small-cap stocks with high growth potential. That space served her well initially, but she was criticized for holding too much risk through the 2008 financial crisis.

In 2014, Wood left AllianceBerstein to launch Ark Investments.

Cathie Wood's personal stats

• Age: Wood was born on Nov. 26, 1955.
• Source of wealth: Wood is self-made. She began her career as an economist and then worked as a portfolio manager before founding Ark Invest.
• Marital status: Wood is not currently married. She divorced Robert Remington Wood in 2003. He passed away after a fight with cancer in 2018.
• Residence: Wood lives in Wilton, Connecticut.
• Children: Wood has three children.
• Education: Wood graduated from the all-girls Catholic high school Notre Dame Academy in Los Angeles. She then completed a bachelor's degree at USC, majoring in finance and economics.

Investment approach

Cathie Wood's investment approach

Wood's investment approach centers on identifying high-impact innovations. The high-level areas of focus are artificial intelligence, DNA sequencing, robotics, energy storage, and blockchain technology. These are five platforms Wood predicts will be prominent areas of growth and change for the global economy.

Two key concepts underpin Wood's strategy. The first is that not all innovation produces the same opportunity. To Wood, investable innovation cuts costs, spans sectors and geographies, and fosters more innovation. The second is that identifying appropriate investments takes both big-picture and granular research.

1. Investable innovation cuts costs, spans sectors and geographies, and fosters more innovation

The cost-cutting component is essential because it encourages quick adoption. New solutions that create large-scale efficiencies often generate their own momentum and demand.

The breadth of impact defines the size of the growth opportunity for investors, and innovations that launch follow-on disruptions create longer-lasting growth cycles.

You can see these qualities in play with Palantir Technologies (NYSE:PLTR), an Ark investment. Palantir develops software that uses artificial intelligence (AI) and machine learning (ML) to help businesses identify opportunities and risks from complex data sets.

In its early history, Palantir helped governments fight terrorism around the world. Today, the company has expanded into more than 50 industries with its high-level promises of reducing costs, shortening product development timelines, and accelerating growth.

2. Both top-down and bottom-up research are needed to identify the best investment opportunities

The Ark team finds specific investment opportunities with two layers of research. First, researchers look at big-picture trends to identify innovation platforms and quantify the affected market size. Then, they dive into granular data to identify companies that will either lead or benefit from disruptions.

Potential investments are scored individually on factors such as culture, execution, barriers to entry, product leadership, valuation outlook, and risk. Researchers also gather company data from social media and crowdsourcing, as well as traditional sources such as company reports.

Wood's investment timeline is five years. In her view, that duration maximizes investor returns on these disruptive innovators. In fewer than five years, these stocks can be volatile. Beyond five years, the growth potential slows down.

When projecting a stock's potential over the five-year horizon, Wood looks for a minimum average annual return of 15%.

Investments Cathie Wood avoids

Disruptive innovation is a narrow focus, which leaves a lot of stocks off the table for Wood, including popular safe-haven securities. You generally won't find consumer staples, premium dividend payers, and other low-volatility picks in Ark funds. You also won't see value stocks, the bread-and-butter of Warren Buffett's portfolio.

Wood doesn't like meme stocks either, even though Wood herself is a popular subject on Reddit. GameStop (GME 0.45%), AMC (AMC 0.11%), and others may be shaking up the investment community, but they are not innovating to Wood's standards.

Ark funds also do not replicate the S&P 500. Many of these premier U.S. stocks do not meet Ark's growth potential or innovation requirements. There are exceptions, though. Ark has a sizable position in Tesla (TSLA 0.0%), along with exposure to Meta Platforms (META 0.13%), Nvidia (NVDA -1.78%), Alphabet (GOOG -0.27%), Amazon (AMZN -0.12%), and Microsoft (MSFT 1.16%).

Biggest stock investments

Cathie Wood's biggest stock investments

The table below shows the five largest positions across Ark ETFs.

Related investing topics

More from Cathie Wood

• Wood on Twitter
• Wood on Linkedin
• Ark Invest on YouTube
• The Ark Podcast

Cathie Wood: High-risk, high-reward

Wood specializes in picking high-growth stocks. She's proven her skill at beating the market, but it hasn't been a smooth ride. After earning triple-digit returns in 2020, Ark ETFs have struggled.

Through the rough patch, Wood is standing by her commitment to disruptive innovation as the best path to growth. The performance of Ark ETFs is a reminder to investors that there's no achieving high growth without some volatility.

Cathie Wood FAQ