Fund manager: innovation grows the most during difficult times

Fund manager: innovation grows the most during difficult times
  • Times of crisis allows some companies to shine in terms of innovation.
  • Fund manager Cathie Wood told CNBC she sees opportunities in stocks that have been "trounced."
  • Tesla is an innovative darling and should continue gaining market share.

The current environment is certainly a difficult one for the world but the one silver lining is we can expect to see a lot of new innovation, according to ARK Invest founder and CEO Cathie Wood.

Buy ‘trounced’ names

ARK focuses on finding investment opportunities among companies that show disruptive innovation. The current environment encourages companies to innovate and those who succeed will see market share growth in whatever area they operate in, Wood said on CNBC’s “Squawk Box” segment Friday morning. This is a common characteristic across any crisis and provides a unique opportunity for some of the “beaten up” names.

Wood said she has been a seller of some of the stocks which “held up” in the early stages of the current selloff. For example, she sold online health care platform Teladoc Health Inc (NYSE: TDOC) and Inovia Pharmaceuticals Inc (NASDAQ: INO) despite it being a pure play on the rush to create a coronavirus vaccine.

She said she also sold a small position in streaming video giant Netflix Inc.(NASDAQ: NFLX), despite “holding in beautifully.”

The reason for selling these names wasn’t due to a loss of leadership, rather a move to free up cash to allocate to other stocks that have been “trounced” and represent a superior opportunity.

The math on oil

Despite oil prices plunging to multi-year lows, the case for owning an electric vehicle can still be made from a mathematical point of view, Wood said. Her math found that the total cost of ownership of an electric vehicle versus a gas-powered vehicle is still lower. This is partly due to falling battery prices which tend to decline by 18% whenever sales of electric vehicles double in terms of deliveries.

Also important to consider, the sharp fall in oil prices are unlikely to last forever, especially at a time when oil companies are slashing their capital spending. But from a non-mathematical perspective, electric vehicles are simply better.

Granted, near-term sales for electric vehicles are likely to be hit “really hard” along with sales of gas-powered cars. The consumer is currently in a state of “shock” but once the current environment eases consumers could flock the auto market, aided by a high level of savings.

Looking forward, Wood said she believes Tesla’s share of both the electric vehicle market and the overall auto market will go up and it is considered the “secular grower” in the industry. Tesla is “leading the charge” 

By Jayson Derrick
Jayson Derrick has been writing professionally about stocks since 2011. He is particularly interested in alternative investments, hedge funds, and activist investing. He is a big fan of NHL hockey and lives in Montreal, Canada with his wife and four year old daughter.
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