Views on Ark innovation fund?

Hey everyone- after the recent falls, the Ark innovation fund seems very attractive, any views?

Here’s something interesting!
Shorting Growth Stocks - Backtesting a Moving Average Strategy on ARKK (substack.com)

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Found an interesting Twitter thread about Ark - https://twitter.com/tanayj/status/1485279657968562176?s=20

Also see: Warren Buffett closes in on Cathie Wood as tech stocks tumble | Financial Times

lol

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This piece made a case for ARK being a Buy in Dec 2021 itself when it was still about to drop further.

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“If I could avoid one stock, it would be the hottest stock in the hottest industry.” - Peter Lynch

I think ARK has one of the best actively managed strategy if you are a long term investor (at least 3-5 year). If you look at ark’s strategy they are focused on disruptive innovation. Cathie Wood was right about Tesla back in 2019 when every other analyst was crying wolf.

The top mega cap companies that exist now - AAPL/MSFT/GOOGL/AMZN all are tech companies that have disrupted a few industries in its rise, but this transformation did not happen in a year or two. The current bearish sentiment in the stock market is due to macro conditions is due to inflation and interest rate hike fears. This is punishing growth stocks the most. However in my opinion this will be short term pain. I strongly feel if you are a long term investor then Ark’s strategy is in deep value and heavy discount territory and this will be rewarded heavily in the long term.

Also if you want to compare charts I think its only fair to do so with a 5 year chart-

5 year return
BRK.A - 82.41%
ARKK - 186.65%

Even after such heavy beating from the market ARKK is giving more than 2X return than Berkshire over a 5 year period. ARKK is down from its highs of 550% return in August 2021 to just 186% in 5 year, looks like an amazing buy opportunity to me. I think ARKK could possible go a but lower in the short term but this pain will last 3-6 months and then we should see a sharp recovery. Thoughts?

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This is a really detailed analysis. I completely agree with you, but just that I don’t want to be in a dud stock, which corrects 20-30% more.

I’m already in losses on this, but slowly started buying these, especially stocks like teledoc etc are really interesting, I feel.

A couple of thoughts on what you said-

  1. It is not really a loss until you have sold and realised those. The market has just perceived it at a low valuation than what you bought it at. Do you think there has been a change with the underlying business models for these companies? If not, this is your opportunity to buy at an attractive valuation.

  2. You never know what the bottom is but keep following the macro trends and investing when you have the funds. Maybe not put all your funds in at once and keep averaging down if the market pulls it down.

  3. Are you really investing for the long haul? Do you have an emergency fund so that you don’t have to dip into your investments? Do you believe in the underlying strategy? Most investors who make it big is by going against the grain.

Be greedy when others are fearful and fearful when others are greedy :slight_smile:

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Thanks Rishabh! I think I’ll keep buying in small quantities now, and see where it lands up.

I really have high conviction on some stocks like Block, Teledoc, etc. So have been investing into them now little aggresively now.

Still making sure that none of individual stocks becomes more than 10% of total Portfolio.

Do let me know which stocks excite you.

Apart from Ark, I am also buying Taiwan semiconductor and Alibaba.

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Great to hear that Shubham! My highest conviction stocks are Tesla, Palantir, Sofi, and Ginkgo Bioworks. I do own a bit of ARK funds mostly ARKG and ARKK, and some Teladoc, Zoom and UIPath. However, about 75% of my investment is in my top 4 highest conviction stocks.

Also, do follow Cathie Wood’s monthly commentary “In the Know” on YouTube to understand their point of view on the macro trends in the economy and how their strategy is being perceived by the market. Here is the latest one - Tech Sell Off, Bubble Comparisons, China | ITK with Cathie Wood - YouTube

I’m also an investor in ArkkG fund.

Have seen the monthly commentary by Cathy, just that when someone has to come out and defend their strategy, it doesn’t reflect very well on the near term performance for sure.

And we don’t how long would the correction be, but I have start accumulating these and will buy more if it falls further.

Let’s connect offline aswell.

You can reach me on www.linkedin.com/in/shubhamjain01

Look forward

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just seeing this now, thanks for linking our article!

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Came across an article recently which is probably the best and most objective coverage on Ark’s strategy, performance and research yet - How ARK Invest's Big Idea Predictions Performed (NYSEARCA:ARKK) | Seeking Alpha

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Just saw this article at Barron’s that compares Ark ETF selloff to the dot-com crash…

Tesla, which is in many ways the flag-bearer for high-growth stocks with lofty prices relative to expected earnings, is down 23% in 2022. Even the slightly more diversified iShares Expanded Tech-Software Sector ETF has lost 22% since its peak in November.

Investing wisdom holds that bear market territory starts once losses pass 20%. By that metric, many high-flying tech stocks and funds exposed to them are already there.

“While many spicy and less- or un-profitable tech stocks surged higher during the first year of the pandemic, their downward trajectories over the last year are often likened to the bursting of the 1990s dot com bubble”

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“It’s an apples-to-apples comparison to today,” Rabe said. “But there are still other risks to consider in the present, especially when it comes to uncertainty about the U.S. economy as the Federal Reserve tightens monetary policy this year.”

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My take on the article is somewhat similar to what people have been talking about.

It’s odd to compare dot com to the technology that underpins ARK. Although some ARK assets are speculative, the vast majority are proven, cash creators. Is TESLA, it’s largest holding, a dot com?

Based on the statistics, one might easily conclude that ARK innovation is a buy after the interest rate shift is understood.

What’s more intriguing is that Cathie Wood appears to be unaware.

I’m curious if she’s a “good captain.” A decent captain perishes with the ship, sharing the fate of the worst of the people under their charge. Is she reimbursing fees?

I doubt it.