Cathie Wood's ARK Investment Management is well known for betting big on disruptive technologies through its exchange-traded funds, headlined by the ARK Innovation ETF (NASDAQ:ARKK). Wood is one of the loudest bullish voices on Wall Street regarding the potential upside of the tech sector in the long term. However, those tightly held beliefs have led to a volatile performance. The ARK Innovation ETF rose 35% in 2019 and 153% in 2020. It dropped 23% in 2021 and 67% in 2022. As of writing, the Innovation ETF is up 28% year to date, while the S&P 500 and Nasdaq Composite are up about 6% and 10%, respectively. For her part, Wood has remained adamant that her investments will be successful in the long run. Wood's investment approach centres on identifying high-impact innovations. The high-level focus areas are artificial intelligence, DNA sequencing, robotics, energy storage, and blockchain technology. Wood predicts that these five platforms will be prominent growth and change areas 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. Is Wood on the money or just a marketing whiz?Every year, ARK Investment Management releases a report to "enlighten investors on the long-term impact of innovation, " which typically rallies confidence from Wood's fans and criticism from detractors. The firm released its Big Ideas for 2023 report last week, and, as you'd expect, it's packed with bold predictions. It is easy to note how Wood's bullish outlook doesn't translate to her funds' performances. Critics relish the opportunity to kick any fund manager when they're down, especially prominent names who make big calls like Wood. Yet the report has plenty of gems that should interest investors looking for ideas to grow their capital. One such area is what we call "Global Mobility", and Ark Investment divides into three sectors: Electric Vehicles, Autonomous Ride-Haul and Autonomous Logistics. The Transportation RevolutionThe road to an autonomous transportation future will be the most significant technological revolution of our lifetime – creating new industries and ecosystems and transforming an industry that hasn't changed in decades. Three key pillars underpin the future of mobility: sharing and connectivity, electrification and automation. Investing directly in electric vehicle stocks is one way to profit from this mass transition. Another is investing in the companies that supply the batteries, which are electric vehicle's most critical and costly components. If electric vehicle production significantly increases over the next decade, the demand for EV batteries will similarly skyrocket. Defying The Skeptics With Exponential GrowthInvestors once questioned whether the future was electric. In recent years, accommodative government policy, declining costs, consumer preference, and technological improvement have supported the swiftly increasing adoption of EVs. Global EVs saw sales jump from 3.2 million in 2020 to more than 10 million in 2022. Demand for EVs continues to scale in 2023 despite a pause in cost declines caused by commodity price shocks. Now investors doubt whether or not the growth will be exponential. ARK believes the entire industry will accelerate vehicle electrification efforts and projects the industry will spend more than $1 trillion, cumulatively, on EV development over the coming 10 years. The money would go for platform development, plants and battery capacity. Like many high-flying tech and growth investors, Wood loves Tesla (NASDAQ: TSLA). In just January 2023 alone, Wood snapped up more than 806,000 shares (more than US$105 million worth) and made the bold prediction that Tesla's stock could jump by 500% over the next five years. Whilst this is a bold prediction, and forecasts like the above should always be taken with a pinch of salt, it's clear that the electrification transition is happening. ARK's Big Ideas report highlights how the debate around EVs has shifted from demand to supply. Based on Wright's Law, ARK forecasts that EV prices will decline and sales will increase more than 7-fold, or 50% annually, from roughly 7.8 million in 2022 to 60 million units in 2027. The price of lithium-ion battery cells declined by 97% in the last three decades, and ARK suggests this leads to: “explosion in form factors, enabling Autonomous Mobility systems that collapse the cost of getting people and things from place to place. Electric drivetrain cost declines should unlock micro-mobility and aerial systems, including flying taxis, enabling business models that transform the landscape of cities. Autonomy should reduce the cost of taxi, delivery, and surveillance by an order of magnitude, enabling frictionless transport that will increase the velocity of e-commerce and make individual car ownership the exception rather than the rule. These innovations combined with large-scale stationary batteries should cause a transformation in energy, substituting electricity for liquid fuel and pushing generation infrastructure towards the edge of the network.” Currently, autonomous ride-hail services delight riders across ~15 cities internationally and could scale into widespread commercial adoption within the next ten years, according to ARK. Autonomous technology should reduce the cost of mobility to ~12% of the average cost of human-driven ride-hail service today. ARK's research suggests that global autonomous ride-hail platforms will create $14 trillion in enterprise value, based on US$4 trillion in revenue during the next five years. Additionally, autonomous logistics—including trucks, drones, and robots— should lower delivery costs and increase convenience. Based on assumptions on pricing, ARK estimates that autonomous logistics revenue could scale from nearly zero today to US$1-2 trillion by 2030. Autonomous delivery charges could range from $0.20 to $10 per trip. A highly autonomous future filled with flying cars may sound like Hollywood fantasy, but so too did the ideas of mass-produced internal combustion engine cars and the internet at particular points in history. A more measured approach for individual investorsCathie Wood is undoubtedly committed to disruptive, high-growth names in the tech industry, a volatile strategy as investors have seen over the last few years. While such a focus carries lots of potential, retail investors shouldn't abandon proper diversification in their investing strategies.
The TAMIM Global Mobility Fund aims to invest in a diverse portfolio of global companies exposed to the $10 trillion autonomous transportation revolution. The Fund invests in a basket of companies that will benefit from the future of mobility, including electric vehicle makers and autonomous driving technology, and picks and shovel enterprises such as semiconductors and rare earth miners. In parallel, the Fund takes short positions against companies that will suffer losses from the same tailwinds, such as car dealers and incumbent vehicle manufacturers. We will be releasing a free video and special report on the future of Global Mobility soon. Keep your eyes on an announcement from us to discover the potential benefits of being exposed to this rapidly growing and transformative industry.
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