Ark CEO Wood on Buying 'Solution' Stocks

How's everybody at you, you know, at you, you know, your team doing, your family? Hope everyone's okay? Yes, thank you everyone. Everyone really is doing wonderful. I mean, we we had a seamless transition just because we were so digital to begin with. And uh so everyone both both of my family's ARC and my family at home. In fact, I'm going to have all three of my children home at the end of this week, which is fabulous. Yeah. Absolutely,

And I do wonder. You know, you talked about, you know, sort of the shift to digital, Cathy, uh, and that certainly has been a theme every time we we've talked to you. I mean, I do wonder and we want to get into everything you feel about the investment world, but tell us a little bit about running the firm. At this point, it's sort of what that's like. And any even like subtle or or maybe more than subtle changes that you made in terms of managing because you

have a very cohesive team. You know, we've talked to you a lot about that over the years, and a very engaged team with each other. Yeah, it's been very interesting. I was I was concerned. We didn't want to lose any of that. And so to this day, every morning meeting, everyone in the firm is on and UH, we talked. I just we checked one of our our client PM and his wife just had a baby, So you know, we start a conversation that we just keep in touch

and keep you know, showing concern for one another. Uh. And then we get into our research meeting. So I actually think we've bonded even more closely throughout this ordeal. And our productivity has been incredible. Marketing, UH, Marketing launched a completely new website in the middle of all of this. Um, you should take a look. It's really phenomenal. And UH and and our communication and marketing is key to this.

We've been over communicating. I don't know if people feel that way, but uh, their mantras over communicate, over communicate, So we are we are, We've become pretty prolific in this time period. I feel like you can't over communicate at a time like this, Kathy. One thing I want to ask you, and then we want to get into

your thoughts about the market and what's going on. But you know, you are someone that we do go to to talk about our worlds being you know, the innovation that's going on, the disruption that's going on, and I feel like you invest very logically watching those trends, but you also do with a heart and soul. So I have to ask you about you know, everything that's gone on the last three months and really the last two weeks.

You know how you see it in the discussion and you're having with your investment team and your employers just generally, you know, your employees generally about how it impacts our world. And I guess ultimately, you know, I get you know our investment world at all, you know as well, it's all connected. Yeah, I think you know. We have a very young team and so for those who are in New York and have had to be in New York the whole time. For some of them, it's been lonely.

That's why I wanted to make sure that we kept engaged. And we we get together many times during the week, different kinds of meetings, but that first one in the morning,

I think is really important just to gauge how everybody's feeling. Um. So I think that many of our employees though, have gone to their homes and uh, we have Morocco, we have Germany, we have Canada, uh and and really I think we've all worked really hard to to you know, keep the communication lines completely open so we have no trouble. We have us trouble getting hold of one another then we did before when we were all in an open

space office where there were a few conference rooms. So um, I think our you know, our video and uh, we we used teams off just because for for security reasons. But um we've been using Zoom as well depending on the call. So I mean, I think these tools have improved our productivity enormously. Kathy, you're someone who invested in a lot of the big tech names. Right. We've talked about Amazon, We've talked about Tesla, We've talked about so

many of them. A lot of them have also been very vocal about especially we just talked about Jeff Bezos and what he has talked about Black Lives Matter and kind of an exchange he's had with some folks on social media. And I do wonder, you know, as you look at big tech and their response and maybe their responsibilities to society, you know, as a whole, I just

wonder how you see it. Well, UM, you know that obviously, I think compassion is the order of the day, and I think showing compassion for you know, the communities and the people, and I think it's all of us actually have been hurt and distraught over all of this. UM that's been important. We UM. If you, if you were to take a look at our team page at our dash invest dot com, you will see how diverse a team we have and how we all had to rally

around each other. And uh you'll also see the statement we put up and uh you will see, Uh you won't see some things that you might expect to see because we don't want to get caught in a crossfire, a political cross fire, so to speak. Uh, we just want to lay it out there. We're doing. We're certainly talking to talk at our invest in terms of the kind of team, and I have never had a better team never. I think the diversity has been phenomenal for us. So you know, we like to lead by example. That's

certainly what I think we're doing now. We weren't afraid to make a statement. Uh and you know, many asset managers I think stay away from all of this completely. We felt it was important, especially given who we are and what we were going through. UM. But other than that, you know, I think there is a lot of politics going on and we don't want to get caught in

the middle of the politics. So as you look at your key holdings, what do you make of the way some of your companies have reacted to sort of circle back to some of the things that Carol was saying, because you know, CEOs do feel, especially CEOs of consumer facing companies, do feel compelled to to speak out. We've only got about a minute left, then we're going to

continue the conversation. Yeah, Well, what happened during the correct the teeth of the coronavirus is algorithms were out there aiming for companies with UH low cash buffers and higher cash burn and they because growth Companies oftener in that situation, they took some of our stocks to the cleaners, and we brought them up aggressively to you in VT Zerlo

and they have been some of our best stocks. They're great opportunities and they're all they're all all of the stocks were involved with our salute include solutions to the problems we're having today. Uh and, so you know it was innovation gains traction during top five. We have quoted you a lot about that um throughout the last three months because as as whether it's healthcare or other systems are certainly being disrupted and that's when you bring a

bat change. So, Kathy, you were talking about some of the moves that you made based on essentially what the al Goos did in the depths of all of this, and we just heard Charlie Pellett talk about the amazing

rebound of the SMP. Take us a little more inside some of these trades and help us understand how you make those decisions, because we know from talking to you over the years, you make decisions with conviction, uh and and with a lot of enthusiasm to say, at least help us understand the process and some of the decisions you made about specific names. Yeah, sure, Jason. Uh, it's during risk off periods that we get some of our best opportunities. So we have a five year time horizon.

All of our forecasts are based on learning curves and cost declines that are pretty consistent over time and uh and so that's where our conviction starts. But during crises, what happens is a lot of investors uh really try to get back to their benchmarks. They feel they figure that's a low risk place to be. Uh. And so what they're doing is they are usually selling our stocks, which are either not in indexes or they're very small parts of indexes and um and there's you know, our

stock to go on sale. This particular time, algorithms came through. I saw them, I we I was watching them in real time. It was fascinating. Uh. And they were they were shooting at companies that involve solutions to the problems we're having. To you is an online education company. It is so busy right now. It doesn't know what to do. I mean, it does know. It's a very well managed company, but they can't believe how busy they are. That stock went from thirty dollars to eleven and a half dollars

in two weeks. When we know it's one of the solutions to our problems. We piled into that in Vita, a molecular diagnostic testing company, say the same thing. UH small cash cushion, cash burn algoes went after it, and uh, I think it was down as well. UM square Tesla, we can use Tesla. Tesla had gotten almost to a thousand dollars earlier this year, it dropped all the way down to three and fifty dollars. We bought it up to ten percent. Every time it dropped below ten percent,

we can only buy up to ten percent. And look today it hits an all time closing high at nine fifty roughly. So in a very short period of time, what was very clear to us is that this this coronavirus was going to make a lot of companies who was going to throw them into turmoil while he was going to turbo charge some of our companies. So just

take Tesla. You've got the traditional auto companies. Now they are pulling back on their e V budgets and cruise automation for GM, laying off I think nine percent of its employees. UH, today, Unlike one year ago practically to this day, UM, when people were saying Tesla was going to run out of cash and it was selling at dollars, Tesla's balance sheet looks like a fortress with eight billion dollars in cash and it's moving into exponential growth, Kirk,

because it's taking so much share. China's numbers today to slot number one e V manufacturer in China, even though they're about a hundred manufacturers going after e V s, it's it's unbelievable. Yeah, and you can't like ignore the numbers and listen. I usually when we bring you on, Kathy, I mean I was looking at some of your funds. I mean it's just remarkable and consistently, you know, I think innovation, the our innovations up around twenty eight maybe

a little bit more. I think I was looking as of closing numbers on Friday, UM our Next Generation is up thirty four percent this year. Genomic Revolution e t F is up thirty four I mean, you consistently your targets, your picks, they definitely perform. I do wonder when you look at this time and again, as you've said to us during times of stress and turmoil. We see more disruption happening. You just talked about, you made the case

for Tesla. What else is happening now that you think longer term are going to be those smart investment plays, and those are going to be those companies that are going to kind of rise up out of this disruption. Okay. Another one I would add is where UH and PayPal as well. But I think our conviction and Square is higher. UH. I think many people were learned or surprised to learn that one of the most serious virus spreaders out there

is not cash but credit and debit cards. And so this idea of contact less payment digital wallets, I think is gaining momentum. And the more we dig into the cost of acquisition for a Square cash app customer or a Venmo customer versus a bank a traditional bank, the more we're sure that traditional banks are going to be disintermediated and disrupted in a way that they do not

now expect. Uh. There's a network effect taking place with if you think about it, the the viral virility of these digital wallets is is it's taking place twice as fast as social networking did in the early days of Facebook and UH and Google. And the reason is while children didn't want their parents to follow them on Facebook, they're quite happy to have them in their payment sequences to send their allowance every once in a while. Yeah,

I can confirmed that that is true. And the mockery that I faced when I initially couldn't venmo my kids was withering, to say the least. All right, so what used to take two years for social network to accomplish is taking one year for cash happens then to a ven Moo to accomplish. We've done some fabulous work. They're just a Max Friedrich just published our white paper on square cash up then mo versus banks. Um, all right, well we're getting Unfortunately we're gonna have to leave it there.

Cathy would We as always could talk to you for hours on end, but we really appreciate you taking some time today from Connecticut. CEO c IO of ARC invest Cathy would, Uh, top performer. I mean we talked about it all the time, and you're right. We woke her uh frequently about disruption