Tech stocks have taken a hit lately as investors continue to seek comfort in banks, big oil and other value sectors. But some fans of trendy momentum stocks aren’t giving up on them just yet.
That’s the message from Cathie Wood of Ark Invest — who has become one of the more influential voices on Wall Street and is a major backer of Tesla (TSLA) — and two other titans of growth investing, who shared their investment insights Thursday.
“We’ve seen higher valuation stocks hit hard this year. But the growth for these innovative companies will still be treated well over time,” Wood said during a webcast hosted by Cboe (CBOE) Global Markets.
Wood joined Kevin O’Leary of “Shark Tank” fame (he also runs a family of O’Shares ETFs) and Jan van Eck, whose firm recently launched the BUZZ ETF that tracks stocks popular on social media, for the Cboe chat.
Wood noted that investors are shifting their money into more so-called cyclical areas — those dependent on the success of the economy, like retailers and airlines — and said that’s a good thing. She’s encouraged to see that the broader market rally is broadening even further.
The bullish case for growth stocks still exists
As the economy continues its fragile recovery, fears about bond yields and inflation have been high. But all three of the fund managers said they are not too worried about these trends hurting growth stocks.
They also stressed that younger individual investors will continue to play a big role in the market thanks to the rise of zero commission brokerage firms: “There are a lot of retail investors playing in the market thanks to Robinhood and Coinbase. Individual investors are more engaged,” van Eck said.
He says investors should flock more to companies that have a big competitive advantage, such as those in his firm’s Wide Moat ETF (MOAT) — which invests in stocks that are dominant in their respective fields, like its key holdings including Charles Schwab (SCHW), Intel (INTC), Microsoft (MSFT) and Amazon (AMZN).
O’Leary, too, believes the stock market boom can last, saying he $1.9 trillion in new stimulus is “free money” for many investors. But he’s not buying into the notion that cyclical stocks can continue to outperform tech for much longer.
“Yes, people are seeking quality. But some sectors are permanently damaged and airlines are one of them due to technology,” he said. “I don’t need to fly to Dubai as much anymore for meetings when were doing Zoom calls every week.”
O’Leary said he is also willing to make some speculative bets on emerging industries that aren’t getting a lot of attention. For example, O’Leary’s firm owns shares of MindMed (MMEDF), which is working on developing legal psychedelic medications that can be used to help treat depression, anxiety and other mental health disorders.
Wood is also investing in innovative health care companies, with one Ark ETF devoted to genomics (ARKG). And she thinks younger investors, many of whom are inheriting money from baby boomers, will continue to gravitate toward more dynamic fields like robotics and alternative energy. So she’s not too concerned that the recent rebound in value stocks spells an end to the tech renaissance.
“A lot of companies catering to short-term investors who wanted profits now invested more in stock buybacks and dividends over innovation,” Wood said. “That puts them in harm’s way.”
‘Prime time’ for bitcoin coming?
Wood also thinks bitcoin is ready for “prime time” and that prices will continue climbing over the long haul as more companies will adopt crypto-friendly strategies like Tesla and Squar (SQ)have done. In fact, Wood said she thinks it makes sense for investors to have between 2.5% and 6.5% of their assets in bitcoin, adding that her funds are betting on crypto primarily through the publicly traded Grayscale Bitcoin Trus. (GBTC)
O’Leary, meanwhile, had been somewhat skeptical of bitcoin a few years ago. But he said Thursday that he is growing more convinced that bitcoin will gain traction, and he believes it makes to have about 3% of a portfolio in bitcoin as well as crypto miner stocks.
And van Eck noted that the upcoming market debut of Coinbase will be one to watch — at a potential valuation of $100 billion following its direct listing, the stock would dwarf the roughly $24 billion market value of Nasda. (NDAQ)
With that in mind, van Eck expects more big investment firms to try to cash in on bitcoin or risk being left out. Fidelit, (EFIPX) for example, just jointed a growing list of firms filing to launch a crypto ETF with the SEC.
“Crypto Wall Street will be a disruptive threat to traditional banks and institutions,” van Eck said.