Speaker 1: This is Bloomberg Business Week with Carol Masser and Jason
Speaker 1: Kelly on Bloomberg Radio. So I want to get right
Speaker 1: to it because Kathy Wood is back with us. You
Speaker 1: know her well, top performing fund manager, thoughtful observer of
Speaker 1: our investment world and really our world at large. She
Speaker 1: is CEO at ARC invest UH and also chief investment
Speaker 1: Officer at ARC invest. She joins us on the phone
Speaker 1: from Connecticut. Kathy, it is good to have you back
Speaker 1: with us. Um. First of all, how are you doing.
Speaker 1: How's everybody at you, you know, at you, you know,
Speaker 1: your team doing, your family? Hope everyone's okay? Yes, thank
Speaker 1: you everyone. Everyone really is doing wonderful. I mean, we
Speaker 1: we had a seamless transition just because we were so
Speaker 1: digital to begin with. And uh so everyone both both
Speaker 1: of my family's ARC and my family at home. In fact,
Speaker 1: I'm going to have all three of my children home
Speaker 1: at the end of this week, which is fabulous. Yeah. Absolutely,
Speaker 1: And I do wonder. You know, you talked about, you know,
Speaker 1: sort of the shift to digital, Cathy, uh, and that
Speaker 1: certainly has been a theme every time we we've talked
Speaker 1: to you. I mean, I do wonder and we want
Speaker 1: to get into everything you feel about the investment world,
Speaker 1: but tell us a little bit about running the firm.
Speaker 1: At this point, it's sort of what that's like. And
Speaker 1: any even like subtle or or maybe more than subtle
Speaker 1: changes that you made in terms of managing because you
Speaker 1: have a very cohesive team. You know, we've talked to
Speaker 1: you a lot about that over the years, and a
Speaker 1: very engaged team with each other. Yeah, it's been very interesting.
Speaker 1: I was I was concerned. We didn't want to lose
Speaker 1: any of that. And so to this day, every morning meeting,
Speaker 1: everyone in the firm is on and UH, we talked.
Speaker 1: I just we checked one of our our client PM
Speaker 1: and his wife just had a baby, So you know,
Speaker 1: we start a conversation that we just keep in touch
Speaker 1: and keep you know, showing concern for one another. Uh.
Speaker 1: And then we get into our research meeting. So I
Speaker 1: actually think we've bonded even more closely throughout this ordeal.
Speaker 1: And our productivity has been incredible. Marketing, UH, Marketing launched
Speaker 1: a completely new website in the middle of all of this. Um,
Speaker 1: you should take a look. It's really phenomenal. And UH
Speaker 1: and and our communication and marketing is key to this.
Speaker 1: We've been over communicating. I don't know if people feel
Speaker 1: that way, but uh, their mantras over communicate, over communicate,
Speaker 1: So we are we are, We've become pretty prolific in
Speaker 1: this time period. I feel like you can't over communicate
Speaker 1: at a time like this, Kathy. One thing I want
Speaker 1: to ask you, and then we want to get into
Speaker 1: your thoughts about the market and what's going on. But
Speaker 1: you know, you are someone that we do go to
Speaker 1: to talk about our worlds being you know, the innovation
Speaker 1: that's going on, the disruption that's going on, and I
Speaker 1: feel like you invest very logically watching those trends, but
Speaker 1: you also do with a heart and soul. So I
Speaker 1: have to ask you about you know, everything that's gone
Speaker 1: on the last three months and really the last two weeks.
Speaker 1: You know how you see it in the discussion and
Speaker 1: you're having with your investment team and your employers just generally,
Speaker 1: you know, your employees generally about how it impacts our world.
Speaker 1: And I guess ultimately, you know, I get you know
Speaker 1: our investment world at all, you know as well, it's
Speaker 1: all connected. Yeah, I think you know. We have a
Speaker 1: very young team and so for those who are in
Speaker 1: New York and have had to be in New York
Speaker 1: the whole time. For some of them, it's been lonely.
Speaker 1: That's why I wanted to make sure that we kept engaged.
Speaker 1: And we we get together many times during the week,
Speaker 1: different kinds of meetings, but that first one in the morning,
Speaker 1: I think is really important just to gauge how everybody's feeling. Um.
Speaker 1: So I think that many of our employees though, have
Speaker 1: gone to their homes and uh, we have Morocco, we
Speaker 1: have Germany, we have Canada, uh and and really I
Speaker 1: think we've all worked really hard to to you know,
Speaker 1: keep the communication lines completely open so we have no trouble.
Speaker 1: We have us trouble getting hold of one another then
Speaker 1: we did before when we were all in an open
Speaker 1: space office where there were a few conference rooms. So um,
Speaker 1: I think our you know, our video and uh, we
Speaker 1: we used teams off just because for for security reasons.
Speaker 1: But um we've been using Zoom as well depending on
Speaker 1: the call. So I mean, I think these tools have
Speaker 1: improved our productivity enormously. Kathy, you're someone who invested in
Speaker 1: a lot of the big tech names. Right. We've talked
Speaker 1: about Amazon, We've talked about Tesla, We've talked about so
Speaker 1: many of them. A lot of them have also been
Speaker 1: very vocal about especially we just talked about Jeff Bezos
Speaker 1: and what he has talked about Black Lives Matter and
Speaker 1: kind of an exchange he's had with some folks on
Speaker 1: social media. And I do wonder, you know, as you
Speaker 1: look at big tech and their response and maybe their
Speaker 1: responsibilities to society, you know, as a whole, I just
Speaker 1: wonder how you see it. Well, UM, you know that obviously,
Speaker 1: I think compassion is the order of the day, and
Speaker 1: I think showing compassion for you know, the communities and
Speaker 1: the people, and I think it's all of us actually
Speaker 1: have been hurt and distraught over all of this. UM
Speaker 1: that's been important. We UM. If you, if you were
Speaker 1: to take a look at our team page at our
Speaker 1: dash invest dot com, you will see how diverse a
Speaker 1: team we have and how we all had to rally
Speaker 1: around each other. And uh you'll also see the statement
Speaker 1: we put up and uh you will see, Uh you
Speaker 1: won't see some things that you might expect to see
Speaker 1: because we don't want to get caught in a crossfire,
Speaker 1: a political cross fire, so to speak. Uh, we just
Speaker 1: want to lay it out there. We're doing. We're certainly
Speaker 1: talking to talk at our invest in terms of the
Speaker 1: kind of team, and I have never had a better
Speaker 1: team never. I think the diversity has been phenomenal for us.
Speaker 1: So you know, we like to lead by example. That's
Speaker 1: certainly what I think we're doing now. We weren't afraid
Speaker 1: to make a statement. Uh and you know, many asset
Speaker 1: managers I think stay away from all of this completely.
Speaker 1: We felt it was important, especially given who we are
Speaker 1: and what we were going through. UM. But other than that,
Speaker 1: you know, I think there is a lot of politics
Speaker 1: going on and we don't want to get caught in
Speaker 1: the middle of the politics. So as you look at
Speaker 1: your key holdings, what do you make of the way
Speaker 1: some of your companies have reacted to sort of circle
Speaker 1: back to some of the things that Carol was saying,
Speaker 1: because you know, CEOs do feel, especially CEOs of consumer
Speaker 1: facing companies, do feel compelled to to speak out. We've
Speaker 1: only got about a minute left, then we're going to
Speaker 1: continue the conversation. Yeah, Well, what happened during the correct
Speaker 1: the teeth of the coronavirus is algorithms were out there
Speaker 1: aiming for companies with UH low cash buffers and higher
Speaker 1: cash burn and they because growth Companies oftener in that situation,
Speaker 1: they took some of our stocks to the cleaners, and
Speaker 1: we brought them up aggressively to you in VT Zerlo
Speaker 1: and they have been some of our best stocks. They're
Speaker 1: great opportunities and they're all they're all all of the
Speaker 1: stocks were involved with our salute include solutions to the
Speaker 1: problems we're having today. Uh and, so you know it
Speaker 1: was innovation gains traction during top five. We have quoted
Speaker 1: you a lot about that um throughout the last three
Speaker 1: months because as as whether it's healthcare or other systems
Speaker 1: are certainly being disrupted and that's when you bring a
Speaker 1: bat change. So, Kathy, you were talking about some of
Speaker 1: the moves that you made based on essentially what the
Speaker 1: al Goos did in the depths of all of this,
Speaker 1: and we just heard Charlie Pellett talk about the amazing
Speaker 1: rebound of the SMP. Take us a little more inside
Speaker 1: some of these trades and help us understand how you
Speaker 1: make those decisions, because we know from talking to you
Speaker 1: over the years, you make decisions with conviction, uh and
Speaker 1: and with a lot of enthusiasm to say, at least
Speaker 1: help us understand the process and some of the decisions
Speaker 1: you made about specific names. Yeah, sure, Jason. Uh, it's
Speaker 1: during risk off periods that we get some of our
Speaker 1: best opportunities. So we have a five year time horizon.
Speaker 1: All of our forecasts are based on learning curves and
Speaker 1: cost declines that are pretty consistent over time and uh
Speaker 1: and so that's where our conviction starts. But during crises,
Speaker 1: what happens is a lot of investors uh really try
Speaker 1: to get back to their benchmarks. They feel they figure
Speaker 1: that's a low risk place to be. Uh. And so
Speaker 1: what they're doing is they are usually selling our stocks,
Speaker 1: which are either not in indexes or they're very small
Speaker 1: parts of indexes and um and there's you know, our
Speaker 1: stock to go on sale. This particular time, algorithms came through.
Speaker 1: I saw them, I we I was watching them in
Speaker 1: real time. It was fascinating. Uh. And they were they
Speaker 1: were shooting at companies that involve solutions to the problems
Speaker 1: we're having. To you is an online education company. It
Speaker 1: is so busy right now. It doesn't know what to do.
Speaker 1: I mean, it does know. It's a very well managed company,
Speaker 1: but they can't believe how busy they are. That stock
Speaker 1: went from thirty dollars to eleven and a half dollars
Speaker 1: in two weeks. When we know it's one of the
Speaker 1: solutions to our problems. We piled into that in Vita,
Speaker 1: a molecular diagnostic testing company, say the same thing. UH
Speaker 1: small cash cushion, cash burn algoes went after it, and uh,
Speaker 1: I think it was down as well. UM square Tesla,
Speaker 1: we can use Tesla. Tesla had gotten almost to a
Speaker 1: thousand dollars earlier this year, it dropped all the way
Speaker 1: down to three and fifty dollars. We bought it up
Speaker 1: to ten percent. Every time it dropped below ten percent,
Speaker 1: we can only buy up to ten percent. And look
Speaker 1: today it hits an all time closing high at nine
Speaker 1: fifty roughly. So in a very short period of time,
Speaker 1: what was very clear to us is that this this
Speaker 1: coronavirus was going to make a lot of companies who
Speaker 1: was going to throw them into turmoil while he was
Speaker 1: going to turbo charge some of our companies. So just
Speaker 1: take Tesla. You've got the traditional auto companies. Now they
Speaker 1: are pulling back on their e V budgets and cruise
Speaker 1: automation for GM, laying off I think nine percent of
Speaker 1: its employees. UH, today, Unlike one year ago practically to
Speaker 1: this day, UM, when people were saying Tesla was going
Speaker 1: to run out of cash and it was selling at dollars,
Speaker 1: Tesla's balance sheet looks like a fortress with eight billion
Speaker 1: dollars in cash and it's moving into exponential growth, Kirk,
Speaker 1: because it's taking so much share. China's numbers today to
Speaker 1: slot number one e V manufacturer in China, even though
Speaker 1: they're about a hundred manufacturers going after e V s,
Speaker 1: it's it's unbelievable. Yeah, and you can't like ignore the
Speaker 1: numbers and listen. I usually when we bring you on, Kathy,
Speaker 1: I mean I was looking at some of your funds.
Speaker 1: I mean it's just remarkable and consistently, you know, I
Speaker 1: think innovation, the our innovations up around twenty eight maybe
Speaker 1: a little bit more. I think I was looking as
Speaker 1: of closing numbers on Friday, UM our Next Generation is
Speaker 1: up thirty four percent this year. Genomic Revolution e t
Speaker 1: F is up thirty four I mean, you consistently your targets,
Speaker 1: your picks, they definitely perform. I do wonder when you
Speaker 1: look at this time and again, as you've said to
Speaker 1: us during times of stress and turmoil. We see more
Speaker 1: disruption happening. You just talked about, you made the case
Speaker 1: for Tesla. What else is happening now that you think
Speaker 1: longer term are going to be those smart investment plays,
Speaker 1: and those are going to be those companies that are
Speaker 1: going to kind of rise up out of this disruption. Okay.
Speaker 1: Another one I would add is where UH and PayPal
Speaker 1: as well. But I think our conviction and Square is higher. UH.
Speaker 1: I think many people were learned or surprised to learn
Speaker 1: that one of the most serious virus spreaders out there
Speaker 1: is not cash but credit and debit cards. And so
Speaker 1: this idea of contact less payment digital wallets, I think
Speaker 1: is gaining momentum. And the more we dig into the
Speaker 1: cost of acquisition for a Square cash app customer or
Speaker 1: a Venmo customer versus a bank a traditional bank, the
Speaker 1: more we're sure that traditional banks are going to be
Speaker 1: disintermediated and disrupted in a way that they do not
Speaker 1: now expect. Uh. There's a network effect taking place with
Speaker 1: if you think about it, the the viral virility of
Speaker 1: these digital wallets is is it's taking place twice as
Speaker 1: fast as social networking did in the early days of
Speaker 1: Facebook and UH and Google. And the reason is while
Speaker 1: children didn't want their parents to follow them on Facebook,
Speaker 1: they're quite happy to have them in their payment sequences
Speaker 1: to send their allowance every once in a while. Yeah,
Speaker 1: I can confirmed that that is true. And the mockery
Speaker 1: that I faced when I initially couldn't venmo my kids
Speaker 1: was withering, to say the least. All right, so what
Speaker 1: used to take two years for social network to accomplish
Speaker 1: is taking one year for cash happens then to a
Speaker 1: ven Moo to accomplish. We've done some fabulous work. They're
Speaker 1: just a Max Friedrich just published our white paper on
Speaker 1: square cash up then mo versus banks. Um, all right,
Speaker 1: well we're getting Unfortunately we're gonna have to leave it there.
Speaker 1: Cathy would We as always could talk to you for
Speaker 1: hours on end, but we really appreciate you taking some
Speaker 1: time today from Connecticut. CEO c IO of ARC invest
Speaker 1: Cathy would, Uh, top performer. I mean we talked about
Speaker 1: it all the time, and you're right. We woke her
Speaker 1: uh frequently about disruption