Speaker 1: This is Bloomberg Business Week with Carol Messer and Jason
Speaker 1: Kelly on Bloomberg Radio. I have to say, last time
Speaker 1: she joined us, I got a bunch of tweets that like,
Speaker 1: you didn't have enough time with her, and we never do.
Speaker 1: Kathy Wood is back with us. She's CEO at ARC Investment.
Speaker 1: She's someone who I certainly looked too regularly for her
Speaker 1: view on how our world is changing, the technologies and
Speaker 1: trends and companies that you really need to pay attention.
Speaker 1: You can say as a result week. Yes, I'm going
Speaker 1: to say week because you and I always are talking
Speaker 1: about her all the time. Yeah, exactly. From what I understand,
Speaker 1: she's pulled aside. Uh, she's in a car pulled on
Speaker 1: the side of the road and joins us as we speak. Kathy, UM,
Speaker 1: great to have you back with us. How are you?
Speaker 1: I'm great, Carol and Jason, thank you so much for
Speaker 1: having me well. I have to say I was looking
Speaker 1: up all of your funds, man, you are just hitting
Speaker 1: it out of the park again this year. I mean,
Speaker 1: the Innovation Fund is up more than sixty next Generation
Speaker 1: Internet Fund is up like sixty six percent, Genomic is up.
Speaker 1: I think at least seventy two percent this year. I mean,
Speaker 1: it is unbelievable. How do I mean, tell me how
Speaker 1: you're managing this environment. Well, it's been very interesting. I
Speaker 1: always say during risk off periods that innovation gains traction
Speaker 1: during tough times because it solves problems and because consumers
Speaker 1: and businesses are willing to do things differently when they're afraid.
Speaker 1: And that's exactly what's happened. I mean the coronavirus crisis.
Speaker 1: You know, we had a we had a few days
Speaker 1: of the indigestion in terms of performance that we started
Speaker 1: to pull away. When this notion you know, we've been
Speaker 1: beating the drum long enough on it that innovation is
Speaker 1: going to get in traction here really began to sing.
Speaker 1: And I think that's what's happened this year. So I
Speaker 1: have to ask you, Kathy. We're gonna talk a little
Speaker 1: bit about Tesla in a minute, but you know a
Speaker 1: name that we've been talking a lot about this week
Speaker 1: is Nvidio, you know, eclipsing Intel as the world's biggest
Speaker 1: chip maker by market value. Tell us about that name,
Speaker 1: because I feel like people who weren't watching it closely
Speaker 1: that caught them by surprise. Uh. Well, actually I was
Speaker 1: just discussing this with our analysts are artificial intelligence analysts
Speaker 1: who who came from in Video. He was there for
Speaker 1: for nine years and has just done a bang up
Speaker 1: job on the whole AI world with us. Uh in
Speaker 1: Video is the number one AI chip company out there,
Speaker 1: and it just acquired Melanox, and so it's probably going
Speaker 1: to gain a bigger share of the data center generally
Speaker 1: from a networking point of view. Uh. So we we
Speaker 1: still think it's a great story, but we will also
Speaker 1: tell you that it has dropped below our percent hurdle.
Speaker 1: We have a five year minimum of fifteent annualized returns
Speaker 1: uh and it has dropped below that. I think it's
Speaker 1: dropped maybe two eight ten percent. So it will still
Speaker 1: be a productive stock. We think that we've pulled it
Speaker 1: out of our flagship portfolio. It's still in our next
Speaker 1: Generation Internet and it still is also in our Autonomous
Speaker 1: Technology and Robotics fund because it's so key to the
Speaker 1: data center and artificial intelligence and also to autonomous driving,
Speaker 1: which is an AI project. UH. And that's what we've
Speaker 1: primarily focused on in a r k Q. Well, you
Speaker 1: cute us up really well for what we got on
Speaker 1: Tesla today and Elon Muscus he put out that he
Speaker 1: is on the verge of developing technology that will make
Speaker 1: his vehicles fully capable of driving themselves. He said this
Speaker 1: though you know, Kathy, before he's not been able to
Speaker 1: achieve it. Do you think something is different this time around? Well,
Speaker 1: it's interesting when we heard the words he used last year,
Speaker 1: he was using that it would be featured, which by
Speaker 1: the end of the year. Now he's saying it will
Speaker 1: have basic functionality. That sounds like it's it's more real
Speaker 1: and it's more realistic. Right, baseline functionality, my guess is
Speaker 1: it will start out slowly and and learn as as
Speaker 1: AI machines, algorithms and so forth do over time. So
Speaker 1: baseline functionality sounds like we're getting very close, Kathy, Kathy,
Speaker 1: I want to ask you because you you've had the
Speaker 1: benefit of spending time with him, and I know you
Speaker 1: had a virtual seminar I think a while ago where
Speaker 1: you were you know that went out online where used
Speaker 1: at and talked with him. I mean, what is it
Speaker 1: that we need to understand about Elon musk Uh. Well,
Speaker 1: he's a visionary and and Carol, you were so kind
Speaker 1: to have me on your show when in two thousand
Speaker 1: and fourteen, I believe when we had not even forty
Speaker 1: million dollars under management, and I remember talking about him
Speaker 1: at that time as our the Edison of our time,
Speaker 1: and I do believe that's what he is. You know,
Speaker 1: he's uh, he's seen the future, and he's seen the
Speaker 1: convergence of technologies that is going to take us to
Speaker 1: the future. In the case of autonomous vehicles, it's uh robotics.
Speaker 1: Autonomous vehicles are robots. It's energy storage, they will be electric.
Speaker 1: Those costs are dropping dramatically, and and and we'll wipe
Speaker 1: out the gas powered world. And uh, artificial intelligence. Uh.
Speaker 1: He saw those coming together. And he also took a
Speaker 1: leaf from Apple's book and basically said, you know what,
Speaker 1: I'm going to design my own AI chip. I am
Speaker 1: so far ahead of the other auto manufacturers. I have
Speaker 1: to do this, just like Apple had to do this
Speaker 1: against Nokia, Motorola, and ericson the rest was history, right,
Speaker 1: You think the same things about to happen in the
Speaker 1: auto market. Uh. And it's not because in videos doing
Speaker 1: anything wrong. It's not. It's just there's a four to
Speaker 1: five years design cadence at the traditional auto manufacturers and
Speaker 1: US lose in the one year design cycle, so you know,
Speaker 1: two different paradigms. So, Kathy, let's talk a little healthcare,
Speaker 1: because obviously the entire scientific and medical world, it feels like,
Speaker 1: is focusing a huge amount of energy on COVID nineteen.
Speaker 1: Solving this riddle. As an investor who invests in the
Speaker 1: notion of innovation and disruption, where do you look here. Well,
Speaker 1: one of the most exciting things happening in healthcare is
Speaker 1: there's a convergence and we use that word a lot,
Speaker 1: convergence of free technologies DNA sequencing, so the flagship there's
Speaker 1: a Lumina artificial intelligence. So of course we've mentioned in
Speaker 1: video and Crisper gan editing, and we're actually looking at
Speaker 1: not just looking at seeing diseases being cured very early stages,
Speaker 1: early human trials, but when it comes to fickle cell
Speaker 1: disease in betaslasmia, we're seeing cures and Cristper Therapeutics UH
Speaker 1: has been leading the charge there, so it's it's been
Speaker 1: a very productive stock UH. And then of course Illuminate
Speaker 1: has been has been great. We sequenced the coronavirus, the
Speaker 1: COVID nineteen in two days. I shouldn't say we it
Speaker 1: was China, but it was with aluminium machines. We we
Speaker 1: believe two days, whereas in OH three to sequence the
Speaker 1: Stars coronavirus it took five months. We couldn't have had
Speaker 1: any of the tests today that we have had it
Speaker 1: not been for that sequencing and Twist Biosciences, a synthetic
Speaker 1: biology stock which was able to take the reading of
Speaker 1: the genome UH that that the sequencers were able to
Speaker 1: generate and then write the instructions to the testing company.
Speaker 1: So Abbott's test said owned by Danaher. All of the
Speaker 1: testing companies they would not have had their tests either
Speaker 1: were it not for some for a company like Twist
Speaker 1: bio Sciences, it just wasn't possible before. So we're in
Speaker 1: the golden age for healthcare for for for this reason,
Speaker 1: that convergence of of sequencing AI and Crisper gene editing,
Speaker 1: and we think the R and D, the return to
Speaker 1: R and D dollars spent in healthcare generally are going
Speaker 1: to triple or quadruple from here. We had the first
Speaker 1: golden age that Jeannette Tech launched in UM in the eighties,
Speaker 1: that launched really the biotech industry. We got up to
Speaker 1: the sort of twenty two per cent returns back then.
Speaker 1: We are now down to seven percent because of generics,
Speaker 1: a lack of innovation. We weren't ready for some of
Speaker 1: the breakthroughs UH. And now we think we're getting ready
Speaker 1: for those companies that use these three technologies to shorten
Speaker 1: the trial times, reduce the failure rates, and actually cure disease.
Speaker 1: We think the returns are going are going to UH
Speaker 1: triple or quadruple from here, Cathy, what is it mean
Speaker 1: for traditional UM pharmaceuticals then do they go to the wayside?
Speaker 1: Do they make acquisitions of these companies? How do you
Speaker 1: see you know their role going forward? Well, traditional pharma
Speaker 1: companies had to get with the program. When the biotech
Speaker 1: age UH began really in earnest in the eighties and
Speaker 1: so far, pharmacists or pharmaceutical companies increasing were populated by
Speaker 1: chemists had to bring along molecular biologists. They did that.
Speaker 1: And for those who are harnessing these three technologies correctly,
Speaker 1: meaning using companion diagnostic testing as they're taking as their UH,
Speaker 1: doing their trials and targeting the right patients. If they
Speaker 1: are using these three some of these value stocks out there,
Speaker 1: and they are very low multiple stocks because they've been
Speaker 1: down and out for so long. They actually could see
Speaker 1: a resurgence, a rejuvenile shin uh now. And these technologies
Speaker 1: have been around long enough, these these three that I'm
Speaker 1: talking about now that we're seeing, we're seeing a Regeneron
Speaker 1: certainly is embracing them, Vertex certainly is embracing them. Bristol
Speaker 1: Myers of course. So we're seeing progress. But our funds
Speaker 1: tend to be populated more by the pure plays and
Speaker 1: less like what we would consider conglomerates. Yeah. Well, I
Speaker 1: feel like we always learned so much, Kathy Um, thank
Speaker 1: you so much. We were so grateful that you were
Speaker 1: available today so that we could just tap into some
Speaker 1: of the news, certainly with Tesla, and just really dig
Speaker 1: a little bit deeper into the world that you invest in.
Speaker 1: So thank you, Thank you. Kathy would she is CEO
Speaker 1: at our investment, joining us on the phone from her car.