Cathie Wood is the founder, CEO and chief investment officer of Ark Funds, an investment management firm that focuses solely on disruptive innovation and offers investment solutions to investors seeking long-term growth in the public markets.

ARK has more than $40 billion in assets under management spread across six actively managed ETFs and three index ETFs. Wood was named “top stock picker” in 2020 by Bloomberg News after all six of her ARK ETFs closed the year with returns greater than 100%. 

Wood’s investment approach centers around discovering high-impact innovations that include five markets that Wood believes will be prominent areas of growth in the global economy: robotics, energy storage, blockchain technology, artificial intelligence and DNA sequencing. 

Here’s what Wood thinks you need to know to invest in companies at the cutting edge of innovation.

Diversify into liquid stocks during a bull market.

Wood says she started to diversify her portfolios and “move toward names that are larger and more liquid but are still very much focused on innovation.” Higher liquidity means lower risk since there is a higher probability of another buyer or seller on the other side of the trade.

Seek exponential growth rates.

When evaluating a stock, it’s important to look at the company’s growth rate to estimate how it will increase its cash flows in the future. Wood says “Exponential growth means something like growth rates somewhere between the 20% and 50% range in revenues consistently over the next five years, and in some cases even higher than that.”

Explore opportunities in the crypto market

As the market capitalization of the crypto markets increases, it’s giving investors more confidence to move their money into digital assets, Wood says. Ark started investing in Bitcoin in 2015 and Wood said she believes “we’re just at the beginning.”

Pursue electric vehicle investments.

Wood has been outspoken in her conviction with electric vehicles, shown in her investment in Tesla (NASDAQ: TSLA). ARK has the prominent EV company as its largest holding with a roughly 8.4% allocation.

Watch for opportunities in biotech.

Investors can behind the innovation by allocating capital to groundbreaking technologies in health care. Wood says “The convergence of DNA sequencing and artificial intelligence will be able to help doctors spot when a body is setting up to mutate … it would be amazing to head that off at the pass.” 

Monitor disruption in artificial intelligence.

“Every industry is going to be transformed by artificial intelligence,” Wood says. AI could be a promising area for investment given that many companies have yet to break into these markets. Wood says there will be widespread utility among companies across many industries where businesses and consumers will adopt AI in the years to come.

Monitor disruption in artificial intelligence

“Every industry is going to be transformed by artificial intelligence,” Wood says. AI could be a promising area for investment given that many companies have yet to break into these markets. Wood says there will be widespread utility among companies across many industries where businesses and consumers will adopt AI in the years to come.