Stock picking rockstar Cathie Wood is the anti-Warren Buffett

Buy the dip.
Buy the dip.
Image: Reuters/Carlo Allegri/File Photo
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Warren Buffett and Cathie Wood are polar opposites when it comes to investing. The former is a stock-picking legend with a history of skepticism of hyped-up technology concerns, while the latter seemingly can’t get enough of them.

That’s actually a good thing for Stephanie Link, chief investment strategist at wealth management firm Hightower Advisors, who says she has both in the $1 billion division she manages. “When you run money, you want to be very diversified,” she said in an interview. “These two strategies from Warren and Cathie could not be any more different. It really is the definition of diversification.”

Each have cult followings—Buffett’s flock to see him at the company’s annual meeting, while Wood’s show their adoration on Twitter and TikTok. Lately the funds managed by Wood, the founder of ARK Invest, have blown away the stock of Berkshire Hathaway, Buffet’s $565 billion conglomerate that owns America’s largest railroad, as well as stakes in everything from Coca-Cola to Chevron. Since it was created in October 2014, Wood’s flagship Innovation exchange traded fund has rallied more than 500%, while Berkshire’s A shares have gained about 80%.

How Cathie Wood and Warren Buffett invest in stocks

Buffett made his billions by digging into the fundamentals of companies and finding intrinsic value that isn’t appreciated in the market, Link said. In the past, Buffett has said he prefers companies with easy-to-understand business and reliable returns. In Berkshire’s most recent letter to shareholders, the 90-year-old said the company’s ownership of railroad operator BNSF and its 5.4% stake in Apple were two of its top assets, and it was “pretty much a toss-up” which was the most valuable.

Cathie Wood
Cathie Wood.
Image: ARK

Which is completely different than Wood. Her strategy often starts by figuring out the total addressable market of a technology, like battery storage, and then finding companies that can benefit from such a fast-growing area of opportunity. The former chief investment officer of global thematic strategies at AllianceBernstein says she seeks out what she calls technology platforms, from genome sequencing to blockchain, that can disrupt and transform the economy. The bitcoin evangelist made a name for herself in part with a bold call on Tesla, and her fintech ETF has reduced its position in Apple during the last 12 months, according to FactSet data.

That said, no investor is infallible. ARK’s ETF focused on fintech had a position in Wirecard, a German payment company that turned out to be a fraud and collapsed. ARK increased its position in Wirecard even after the Financial Times began publishing articles about irregularities at the company, according to FactSet. Wood’s flagship fund has whipsawed recently, falling some 6% in a single day, as investors trim their holdings of high-flying tech stocks.

Likewise, Buffett has acknowledged missteps. He overpaid in 2016 for Precision Castparts, which makes aerospace products, he said in the latest letter to investors, leading to an $11 billion write-down. Berkshire stock has, overall, outperformed the S&P 500 Index since 1965, but has lagged that benchmark for the past two years.

Warren Buffett.
Warren Buffett.
Image: Reuters/Rick Wilking

Link at Hightower says Buffett hasn’t lost his touch, noting that Berkshire tends to outperform the broader market when stocks are in the red. “He’s a very, very smart investor, but he is acting very disciplined and he’s not going to change his process,” she said. “He may not crush it, but guess what—he’s going to be steady Eddie.”

She says Wood is also “brilliant”: When the types of high-growth companies ARK invests in go up, Wood is likely to beat the market. But her funds may also fall even more than the benchmarks during the tough times.

“That’s why I say it’s such a great balance to have a little bit of both,” Link said. “We want to preserve money, but we also want to make money. And I think over the long run you will if you have a combination.”