The tech-heavy Nasdaq has taken a beating this month, dropping nearly 4% since March 1.
The index has had more down days than up since hitting a high above 14,000 nearly a month ago as higher interest rates and optimism surrounding economic reopenings weighs on growth trades.
But even with the Nasdaq down more than 7% since its February high and just barely in positive territory for the year, Ark Investment Management founder and CEO Cathie Wood says the bull market is simply in the process of broadening out to make room for additional strategies.
“Right now, the market is broadening out and we think in an underlying sense the bull market is strengthening and that will play to our benefit over the longer term,” Wood said.
Wood manages five ETFs focused on “disruptive innovation” which have seen more than $15 billion in inflows this year alone. And while her firms funds are down for the year as tech stocks have slipped lower, she says the weakness is a buying opportunity for some of tech’s strongest names.
“We are getting great opportunities” amid the sell-off, Wood said. “When we get opportunities like this to invest in pure plays instead of more mature plays… we will move back into pure plays.”
As for which stocks Wood is stocking up on now, her firm has disclosed big purchases of some of the biggest Nasdaq names, including Tesla (NASDAQ: TSLA) and Zoom Video (NASDAQ: ZM), and has also bought the dip in Roku (NASDAQ: ROKU), and Zillow (NASDAQ: Z).
“We are becoming more and more optimistic about our portfolios in this sell-off,” Wood said. “The bull market was broadening out to incorporate value or more cyclical sectors and I thought that was going to be very good news for our strategies [in the] longer run.”
But what does this broadening out mean for the rest of the market? Tocqueville Asset Management’s John Petrides says its a good sign for the bull market.
“In 2020, it was growth, tech and momentum that led the markets, and really from November on, it’s been a reversal into value, dividends and quality,” Petrides said. “By this rotation in and out between value and growth, you’re having a horizontal construction of the board that is broadening out, which is an overall bullish sign for stocks in the long term.”