Cathie Wood says her ‘innovation’ stocks are ‘undervalued’ & recent losses ‘temporary’

Cathie Wood of Ark Invest appeared on Thursday on CNBC and said that the technology companies in her innovation-focused fund are drastically undervalued, and she believes that her fund’s recent loses are temporary.

“We’ve had a significant decline,” Cathie Wood said on CNBC’s “Halftime Report.” “We do believe innovation is in the bargain basement territory. … Our technology stocks are way undervalued relative to their potential. … Give us five years, we’re running a deep value portfolio.”

Her famous fund Ark Innovation ETF has suffered from the tech sell-off in 2022. It is down more than 26% year to date. Some of her big loses, include Zoom, Teladoc Health and Roku. All of them have tumbled more than 70% this year on expectations of rising interest rates.

What is her biggest concern? “Our biggest concern is that our investors turn what we believe are temporary losses into permanent losses,” Wood said.

Higher interest rates typically punish growth stocks that rely on low rates to borrow for investing in innovation. Their future earnings look less attractive when interest rates are on the rise.

Cathie Wood said that she doesn’t invest in mature Big Tech companies such as Microsoft. ARKK bets on companies in the forefront of disruptive technology in a variety of industries from DNA to automation, robotics and artificial intelligence. Her current top holdings are Tesla, Exact Sciences, UiPath and Coinbase.

“Today we have investors doing the opposite of what they did in the late ’90s. They are running for the hills. It’s risk-off because of inflation and interest rates. And the hills are their benchmarks. They are running to the past. If we are right and the disruptive innovation that is evolving is going to disintermediate and disrupt the traditional world order, those benchmarks are where the risk is. Not our portfolios.”

Cathie Wood

Surprisingly, despite the big underperformance, ARKK has attracted more than $70 million in net inflows year to date.

“A lot of what’s going on is supply chain related,” Wood said. “I do think the deflationary forces building in the economy are pretty strong.”