Cathie Wood of Ark Investment Management says her stocks are in “deep value territory,” not in a bubble, and should generate hefty returns over the next five years.
“After correcting for nearly 11 months, innovation stocks seem to have entered deep value territory, their valuations a fraction of peak levels,” Wood wrote in a blog.
“Historically and according to our research, … concentration of our portfolios during corrections has led to significant, absolute performance and relative outperformance as the market rebounds.
“According to our current estimates, our more concentrated flagship strategy today could deliver a 40% compound annual rate of return during the next five years. Only one other time in Ark’s history, at the end of 2018, has the five-year return projection been that high."
Wood sees evidence that Ark investors agree with her. “Year-to-date, our inflows have outweighed our outflows significantly, suggesting that on balance, investors understand our active management investment process and long-term investment time horizon.”
She noted the recent move against her stocks in favor of sectors like financial services and energy. “These Pavlovian responses will prove just as wrong as those in the early days of the coronavirus crisis,” Wood said.
Of course, the proof of the pudding -- her argument -- will be in the eating. Some deep-value stocks stay in deep-value territory forever. Some don't.