Cathie Wood went from the hottest investing guru around to cold fish in just a year. Her Ark Invest exchange-traded funds (ETFs) doubled investors' money in 2020, but subsequently collapsed when the tech stock bull market came to a screeching halt.
However, Wood's Ark Innovation ETF is running strong again in 2023, up over 23% since the start of the year compared to a 1.5% decline in Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B). Warren Buffett, of course, has an enviable 60-year track record under his belt and has generated returns of 3,600,000% in that time frame (yes, you read that right -- 3.6 million percent returns).
Image source: The Motley Fool.
The investing styles of Wood and Buffett could hardly be more different, though. Whereas the Oracle of Omaha generally sticks to a buy-and-hold philosophy, Wood trades much more frenetically as she's not opposed to jumping into and out of positions frequently, sometimes on a daily basis.
For all her trading and the collapse of the tech sector, Wood is still a sharp Wall Street guru who has 10-year annual returns of over 85%, indicating how well she did during the former bull market.
Do you prefer Buffett's more laid-back, big-bet style on solid businesses or Wood's in-and-out pace trying to capture a stock's trend? Let's take a look at the stock each of the investing gurus has made their biggest bet on.
Apple
For an investor who famously swore off tech stocks because he didn't understand them, Buffett has tightly embraced Apple's (NASDAQ: AAPL) stock, making it his biggest holding by far. The consumer gadget maker comprises 41% of Berkshire Hathaway's portfolio, some $136 billion in total.
No doubt Buffett likes the fact that this iconic brand commands the loyalty of tens of millions of consumers willing to pay a premium for its products, as well as being an innovative tech stock. Arguably its greatest product is the iPhone, which generates 85% of Cupertino's operating profits and 48% of its revenue.
Yet it has a strong presence across many gadgets, including computers and wearables. The Apple Watch has more than twice the market share of its nearest rival, for example. The tech giant now has an installed base of more than 2 billion active devices, or double what it was seven years ago.
Where Apple will likely be seeing future growth, however, is in services. The segment just achieved record revenue this past quarter, hitting $20.8 billion, or almost 18% of total sales. Margins for the services business are also generous, representing around 70% of revenue.
Although Wall Street seems to write off Apple every time there's a bump in the road, there may be a lot more success ahead for this growth-oriented tech stock.
Image source: Tesla.
Tesla
Wood seems to have a love-hate relationship with Tesla (NASDAQ: TSLA) as she is forever buying and selling the stock. Even so, it is the largest holding across her ETFs, representing almost 7.9% of the total. At last count, she owned over 5 million shares, making it a billion-dollar holding for her funds.
Yet, her holdings seem to track the rise and fall in the electric car stock itself, which not that long ago had a $1 trillion market valuation only to see it implode and lose over 60% of its value. It's marching higher once more as auto sales rose 35%, but questions remain about how sustainable that growth is.
Tesla cut prices, which may help to juice sales further, but it will reduce revenue and profit margins in the process. The automaker maintains that gross margins, however, will still exceed 20%, which is better than its rivals.
EVs will have a rough road ahead, no matter what. Challenges include dependence on tax credits to boost consumer demand; a shaky national electric grid that will only be stressed more as new EVs are sold; more manufacturers chasing finite resources, which will increase costs; and an increasingly competitive international marketplace.
Tesla remains the leading EV maker by far, but analysts see Ford and General Motors surpassing it sooner rather than later. It still has a place in the market, but growth may be lumpier and take longer to achieve than what investors hope.
Buffett or Wood?
Buying into Buffett's Berkshire Hathaway means its performance will be heavily swayed by how Apple's stock performs. Buffett's second top pick, Chevron, has just a 10% position in the portfolio and won't influence its returns nearly as much as Apple.
While Tesla commands Wood's top spot, four more stocks are not far behind with around a 5% or so weighting in her portfolio. No one company will unduly sway returns and it comes down to her stock-picking prowess.
Individual investors need to determine their own appetite for risk and decide whether they find themselves more on Team Buffett or Team Wood.
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Rich Duprey has positions in Chevron. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Tesla. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors, long March 2023 $120 calls on Apple, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
