Growth stocks have collapsed in price since the beginning of the year.
Now that this has been going on for 3 straight months, I figured I'd share my opinion
on ARK Invest's strategy, their performance, and where I think things will go from here.
If you enjoy this type of market commentary and want to stay informed,
even as others continue to "sell in may and go away," consider liking this
video and subscribing to the channel with all notifications turned on. That way, you'll be the
first to know when I come out with new content, regardless of how YouTube tunes its algorithm.
Let's look at ARK Invest's top 5 holdings, which make up over 20% of their 6 actively
managed funds. What I'm showing you is a bar chart of ARK Invest's fund allocations,
where each color is how many dollars ARK has associated with this stock in a given fund.
For example, on May 20th 2021, ARK Invest had $1.9 billion in Tesla, ticker symbol T S L A, in ARKK,
their flagship innovation fund, another $500 million in Tesla in ARKW,
ARK Invest's fund themed around next generation internet technology,
and another $270 million in ARKQ, their fund themed around the autonomous revolution.
In total, ARK has over $2.7 billion dollars in Tesla today. However...
Cathie Wood had over $3.5 BILLION DOLLARS in Tesla 3 months ago. Tesla is down over 30% from there.
Cathie Wood had over $2.5 Billion Dollars in Teladoc,
ticker symbol T D O C, whose stock price is down over 50% in the last 3 months. 50. Five Zero.
Square, ticker symbol S Q, down over 25%. Roku, ticker symbol R O K U, down over 30%. Shopify,
ticker symbol S H O P, down almost 20%. Since ARK Invest focuses solely on innovation stocks,
many of ARK Invest's roughly 175 holdings are down by this amount.
So, do you think Cathie Wood is feeling the heat? Should she hedge her bets or
change course and capture some returns? Comment below on what
you would do if all eyes were on you and your investment strategy has been bleeding by 10,
20, 30% over the last quarter. Seriously, I read all my comments and your voice
matters. As for me, I think ARK Invest prepares for these kinds of things. Here's why.
That was January 8th's episode of In the Know with Cathie Wood.
The rotation out of growth stocks started around February 12th, just 1 month after that clip.
Let me know below hearing this changes your answer to my question. It's ok if it did,
that's the whole point of this channel -- to help you (and me) build up our own convictions
through research and analysis. Here's how Cathie Wood actually answered the question.
Side note: you can tell she really wants to say "we're
at bargain basement prices", but probably decided not to for compliance reasons.
Just my opinion, but watch her stop herself from saying it.
The math here is pretty simple. ARK Invest expects their stocks to double, on average,
every 5 years. That means they're looking for a 15% compound annual growth rate. But
now the prices of the stocks ARK picks are about 1/3 cheaper, so hitting that same price target
means they should grow at roughly 25% per year instead of 15. That's why Cathie is loving this
setup... so wait... is this market downturn actually good for Cathie Wood's business?
I want to clarify this because I get asked this a lot on Twitter and in my Discord community ever
since Jim Cramer told Cathie to close her funds a few months ago to protect herself from these
outflows. It's important to understand how much time ARK Invest spends managing flows
and other fund mechanics to keep their investors happy
versus actually researching technologies and companies to invest in in the first place.
Let me show you the original Jim Cramer clip and then Cathie's response to it.
Here's Cathie Wood on on Episode 9 of Benzinga's Raz Report responding to that Cramer clip,
explaining why she doesn't close her funds or change her strategy to focus on performance,
and how she manages her time as ARK Invest's Chief Investment Officer.
So, because the funds are regular old ETFs, ARK Invest is set up in a way where all they
have to focus on is research, specifically into technology and innovation. That's
how they come up with their list of stocks to buy and sell over time.
That's why this channel is so research heavy and focuses on ARK Invest -- because, in my opinion,
there's none of this other bullshit associated with managing flows, closing down funds,
worrying about leverage, or any other confusing market mechanics in an effort to impress
short-term shareholders. ARK just researches market needs, innovative solutions, and invests
in the companies they think will provide the best product-market fit down the road.
Now that I've shown you how all the pieces fit together: and keeping some powder
dry to take advantage of stock prices falling, stock picks based on research,
and performance based only on buying low and selling high, let's look at this incredibly
deep follow-up analysis on Cathie's comments by none other than Jim Cramer.
So, is Jim Cramer right? Or do you think Cathie is actually in a good position to,
and stick with me here, buy low and sell high?
(awkward pause) I know I definitely don't New from Core.
By the way, Nucor, ticker symbol N U E, is an American Steel production company whose stock
started to rally right as ARK's stocks started to fall. It's a stock that moves very differently
from advanced technology and growth stocks. Is that really the kind of company Jim Cramer thinks
we should be investing in? By the way, if you want to know my thoughts on Jim Cramer, check out
the video linked in the top-right corner of your screen now or you can find it in the description
below. I'm sure you'll get a good laugh or two. And, speaking of a good laugh or two...
(long awkward pause)
Hopefully this episode provided you with some clarity on why I'm covering ARK Invest,
even as their biggest positions tumble anywhere from 20-50% over the last 3 months and the
mainstream media continues to pummel them. If I helped you build your own convictions,
let me know by liking this video and subscribing to the channel with all notifications turned on.
What other people are seeing as ARK's collapse, I personally am seeing as a huge discount on some of
the most well-researched, innovative companies in the public markets and my conviction in ARK
Invest's performance only grows as share prices fall. Let me know in the comments below if you
see the same thing I do, or if you think I'm missing something. Your voice matters.
Until next time, this is ticker symbol you.
My name is Alex, reminding you, that the best investment you can make, is in you.