Cathie Wood and Warren Buffett couldn’t have less in common when it comes to investing strategy. Nonetheless, both have been wildly successful, demonstrating an uncanny ability to identify millionaire-maker stocks before the rest of the financial world.
While Buffett looks at companies’ fundamentals and chooses assets that can be purchased at value prices, Wood examines how technology will change the world – what she calls “disruptive innovation.” She finds the companies and industries that are most likely to lead that change, and she ensures that her funds are rewarded when her predictions come to pass.
In a head-to-head contest, which of these titans is on top? In other words, when it comes to Cathie Wood vs Warren Buffett, who wins?
What Does ARK Innovation Invest In?
Cathie Wood’s ARK Invest is home to a family of funds, all of which are devoted to disruptive innovation. The firm originally started with four funds in 2014, including the following:
- ARK Innovation ETF (ARKK)
- ARK Next Generation Internet ETF (ARKW)
- ARK Genomic Revolution ETF (ARKG)
- ARK Autonomous Tech. & Robotics ETF (ARKQ)
Since 2014, five additional funds have launched, including:
- ARK Fintech Innovation ETF (ARKF)
- ARK Space Exploration & Innovation ETF (ARKX)
- The 3D Printing ETF (PRNT)
- ARK Israel Innovative Technology ETF (IZRL)
- ARK Transparency ETF (CTRU)
All are dedicated to a particular area of technological advancement, except ARK Innovation ETF (ARKK). The ARKK fund brings all the areas of focus together, including:
- DNA Technologies
- The “Genomic Revolution”
- Automation
- Robotics
- Energy Storage
- Artificial Intelligence
- Next-Generation Internet
- Fintech Innovation
ARKK keeps at least 65 percent of its total assets (currently just over $16 million) in companies that have demonstrated their ability to impact these technologies. For example, ARKK’s top five holdings include:
- Tesla (autonomous vehicles),
- Zoom (virtual work),
- Teladoc (digital healthcare),
- Roku (digital entertainment), and
- Coinbase (cryptocurrency exchange).
Like all exchange-traded funds (ETFs), there are expenses associated with holding shares of ARKK. However, considering this is an actively-managed ETF, the ARKK expense ratio of 0.75 percent is generally regarded as reasonable.
What Exactly Does Berkshire Hathaway Do?
Berkshire Hathaway (BRK.A) started off as a textile company, but after Warren Buffett took the helm in 1965, it became something entirely different. In fact, by 1985, Berkshire Hathaway didn’t have any relationship with the textile industry at all.
Instead, Buffett transformed the enterprise into a holding company for a wide variety of wholly and partially-owned subsidiaries. Examples include Dairy Queen, Fruit of the Loom, Geico, and See’s Candies.
In addition, he made substantial investments in a collection of dependable businesses that could be counted upon to return value over time.
For example, Berkshire Hathaway’s top five holdings include:
Buffett’s philosophy is that short-term investments aren’t an effective way to build wealth. Instead, he chooses assets that are available at bargain prices and show strong potential for increasing earnings over time. His stock picks are rarely the subject of dramatic news coverage, and they are almost never related to an IPO that has the market excited.
Until September 2020, Berkshire Hathaway didn’t put money into IPOs at all. The streak was broken with participation in the Snowflake IPO, and Berkshire Hathaway invested in Nu Holdings (parent company of Nubank) before its December 2021 IPO.
However, generally speaking, Buffett can be counted upon to opt for less-flashy, less-volatile, and far more dependable opportunities that, he says, he would be happy to hold forever. Indeed, it’s been reported that these earlier stage investments were made by Buffett’s top lieutenants versus the Oracle himself.
ARKK vs BRK.B Stock: By The Numbers
Berkshire Hathaway held its IPO in March of 1980. At that time, there was only one class of shares, and they were initially offered at $290 each. Today, the original Berkshire Hathaway stock, BRK.A is valued at nearly $470,000 per share.
A second class of shares started trading in 1996 – BRK.B or “Baby Berkshire,” as it is sometimes called. This stock was intended to make Berkshire Hathaway more accessible for retail investors, and its initial price was 1/30 of the Class A shares.
BRK.B split 50-1 in 2010, taking the price of individual shares from $3,475 to $69.50. Today, BRK.B is trading above $300 per share.
Through Berkshire Hathaway, Warren Buffett has achieved an average annual return of more than 20 percent per year. Compared to the S&P 500, that’s an impressive track record. However, when Cathie Wood came on the scene with ARKK, some of Buffett’s most loyal followers began to reconsider their faith in his strategy.
ARK Invest’s ARKK shares doubled in value from the fund’s October 2014 launch through the March 2020 market crash. Then, while Berkshire Hathaway struggled through the pandemic, ARKK soared.
In March 2020, shares sold for around $40. By February 2021, they were over $150 per share. The tech-heavy pandemic stocks were prominently featured in ARKK, giving the fund’s shareholders extraordinary returns.
Meanwhile, Berkshire Hathaway had a down year, as many of its core holdings were hit hard by stay-at-home orders, travel bans, and quarantines. Berkshire Hathaway divested its positions in the airline industry and decided to ride out the world crisis with fundamentally sound holdings like Bank of America, Coca-Cola, and Kraft Heinz.
By February 2021, Berkshire Hathaway was on the road to recovery, but it wasn’t achieving the same growth as the ARK Innovation ETF. Some started to wonder if perhaps Buffett’s time had passed, and it was time for Cathie Wood to take over.
However, just a few months later, the world began to adjust to COVID life, and the unsustainable growth of pandemic stocks like Zoom and Netflix began to stabilize.
Suddenly, ARKK wasn’t showing the same shocking growth month after month, and its share prices began to decline. Meanwhile, BRK.B carried on as it always had, with Buffett making moves with the long game in mind.
In the end, over the two-year period since the pandemic began, the ARKK vs. BRK.B contest ended in something of a draw. Returns are close enough now that ARKK’s 2020 dominance over BRK.B has been all but erased.
Though ARKK might have another spurt of growth, chances are another fall will follow – that’s the nature of high-risk/high-potential reward disruptive innovation. On the other hand, BRK.B is likely to continue its steady ascent, building long-term, sustainable wealth.
Warren Buffett vs. Cathie Wood: The Bottom Line
Warren Buffett might not be on the cutting-edge of disruptive innovation, but he continues to demonstrate the truth of the old tortoise and hare fable: slow and steady wins the race.
While Cathie Wood’s ARK Invest family of funds saw stunning gains and heartbreaking losses with stocks focused on new, high-growth technologies, Warren Buffett’s Berkshire Hathaway kept its eye on building a solid foundation for long-term wealth. To date, that strategy continues to deliver strong returns over time.
Does that mean ARKK is a poor choice for your portfolio? Not necessarily. Cathie Wood is certainly onto something with her in–depth analysis of the entrepreneurs and innovators who want to change the world, and she has a special gift for choosing winners.
However, smart investors will consider the lessons of the tortoise and the hare when finding a balance between high-risk/high potential reward stocks and the more reliable options that consistently deliver for shareholders year after year.
#1 Stock For The Next 7 Days
When Financhill publishes its #1 stock, listen up. After all, the #1 stock is the cream of the crop, even when markets crash.
Financhill just revealed its top stock for investors right now... so there's no better time to claim your slice of the pie.
See The #1 Stock Now >>The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.