⚠️ MARKET BOTTOM? ARK Invest’s Data Reveals Cathie Wood’s Highest Conviction Stocks

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What pains me more than anything as a portfolio manager is when I know our clients are selling at the bottom, and it usually is that people sell, the big capitulation that I described earlier with Bitcoin is selling at the bottom. So you make a terrible mistake and you don't want to ever get in again. And it just pains me. So I'm just praying that we don't have a lot of that.

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Something big just happened between ARK Invest's holdings data and their publications, which makes me very bullish. In this episode, I'm going to show you some of the big indicators I follow, what Cathie Wood is buying and not buying, and how that guides my research and my investing habits. Stick around to the end, and I'll show you how you can track any of these indicators for yourself. If you enjoy this type of commentary and analysis, consider liking this video and subscribing to the channel with all notifications turned on.

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That way, you'll be the first to know when I come out with new research, regardless of how YouTube tunes its algorithm. Let's dive right into it.

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So I've been in the business more than 40 years, couldn't be more excited about all of the innovation taking place now, never seen anything like it. And I really do think some wonderful days are ahead for the exponential growth trajectories that are going to deliver superior investment returns. No matter what the environment is, we will have to go through our ups and downs and certainly with valuations where they are right now. I'm sure we're going to go through a doozy of a correction this year, at some point. I don't know when and I don't know why, but I do know it never hurts to take profits and to keep some powder dry so that you have the psychological wherewithal when the world seems to be falling apart to pick up on bargain basement prices.

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I seriously watch that clip a couple of times a week during markets like this because it helps me build good habits, like constantly reevaluating my own personal cash position to make sure that I can take advantage of bargain basement prices. But there's something pretty interesting about that statement coming from Cathie Wood, which is that her actively managed funds actually can't hold a lot of cash. In fact, here's how much cash those funds are holding right now. ARKK is 0.36% cash right now. ARKG, 0.31% cash right now.

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ARKW, 0.36% cash, ARKF and X are also under one half of 1% cash, which is much lower than the five to 10% or more that most of our portfolios contain. So what gives? It turns out that there are a few rules on how much non investment cash actively managed ETFs that charge fees can hold. So Cathy would instead holds cash like stocks that she can sell when she wants to be more aggressive in her investments. That's our first indicator. Cathy would just completely sold out of Apple ticker symbol AAPL.

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You're talking about Apple. So Apple was one of our cash like instruments. It's an innovative company. It's in the innovation zone, but its characteristics are very defensive. So we will add names like the Fangs, Apple, Google, Facebook. We will add to those positions or even reintroduce those stocks as a Bull market. Our portfolios were up 150%. We knew there was going going to be a correction and we just wanted to have very liquid stocks. Apple is a great company. It's going to do fine. It's a Fang.

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It's in a lot of portfolios. We are all about the next Fangs, but we will use the existing fangs if you see they are acting very defensively, become a defensive group. So we will fold them in, increase them when we see a move like we saw last year, when we see a decline like the one we're seeing now, we're seeing much higher returns from the other stocks in our portfolio.

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In my opinion, Apple is one of Arc Invests most cash like positions, meaning it's an early indicator for when Arc Invest is building up or spending cash. So let's look at when AR started selling it and see what we can find from their data over that period of time. Let's look at a chart of where Arcs investments are since the start of May. Each line is a stock that they hold and the height of the line is how many dollars they have in that stock. You combine their six actively managed ETFs.

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The top line here is Tesla ticker symbol Tesla and we can see that they had $3.5 billion of it at the start of the month and about $2.9 billion in it today, mostly because the price dropped 15% between then and now. Let's highlight Apple. We can see at the start of the month they held $80 million in Apple, making it their 105th biggest position overall. Remember, Apple acts like cash and it's not their only cash flow like position, so we never really expect it to have a very high rank compared to a company like Tesla or Square.

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Arc started selling Apple on May 7 where they sold 50% of their shares. Then they sold another 30% of their shares on May 11. Then they sold out of Apple pretty much completely on May 18 and 19th and sold their very last share on May 21. That's cash that Arc Invest had but is now deploying somewhere else. There are a couple other indicators that I want to share really quick before we look at what are actually buying and selling this month because all of them put together are what's making me so bullish.

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And they tell a really interesting story what we will do during a correction.

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Especially a severe correction. We will sell names creating losses to buy our highest conviction names. We use corrections toggling back and forth and so right now, our flagship portfolio has roughly 52 names in it. At the low point in the Corona virus. Last year, it was as low as 33.

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I believe the Cathy indicator is a measure of how concentrated the Arc funds are. Kathy Wood said that when the market bottomed in early 2020, RK had as little as 33 positions in it. Obviously, in hindsight, that was the best time to buy. So my logic is the fewer unique stocks there are in each fund, the fewer cash like positions Kathy Wood must be holding in them because she's selling out of them to buy more innovative companies she thinks are at bargain basement prices. So when the number of names in RK, RG and RW go down, we could be seeing a good time to buy those stocks.

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You can check out my full video on the Kathy indicator here if you're interested again, this isn't about timing the market. It's about putting myself in the best best position for whenever the time is right in the market. At the start of the week, RCK had 58 positions in it. At the end, it had 55. Rcg dropped from 60 to 58 names over that week, RCW 53 down to 51. Rcf dropped from 48 to 44 names, and one of those was Apple. Rcq dropped from 48 to 47.

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Rcx grew by two positions, but it's a brand new fund, so everything about it is going to look a little different until it has more time to settle. Apple was only in RCF when they sold out and the other funds are dropping other stocks that are not Apple. In case you think I could be double counting it so that's two bullish indicators Arc invest dropping Apple specifically and concentrating their funds down in general. Let me show you two more indicators and then show you what Kathy, what has been buying as these indicators continue to line up, the last quantitative indicator is the American Association of Individual Investors, or AI is Investor Sentiment Service.

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Each week they do a survey of market participants with a single question, Are you bullish, bearish or neutral on the stock market over the next six months? As you can see, the one year bullish high was at the week ending April 7, 2021, with more than five in nine market participants saying they were bullish. In my opinion, that's crazy high and not sustainable. Remember, sentiment doesn't move the market change in sentiment. Does people sell when their outlook changes from positive to negative? When five of nine people are bullish on the market, the only direction sentiment can go is down and down is where it went.

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Specifically, bullishness dropped from 44% to 37% over the last two weeks, with about half of those participants each moving to neutral or bearish. That's a big downward change in sentiment. Being greedy when others are fearful and fearful when others are greedy means you need to know when others are being fearful. And greedy. The AAII Sentiment Survey is one way to keep track of that, and it's saying greed is way down. The last indicator before we get into Arc Invest buys and sells comes from Kathy Wood herself or Invest just released a market commentary article written by Kathy Wood.

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The whole article is worth a read and I'll leave a link to it in the description below. But here are the highlights that make this a really focused bullish indicator for me. After rewarding innovation based strategies handsomely into 2020 in early 2021, equity markets have rotated aggressively towards cyclicals and other value based strategies during the last few months. In our view, this rotation has broadened and strengthened the Bull market, significantly, preventing another tech and telecom bubble and setting the stage for another leg up in innovation based strategies.

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I don't think Kathy Wood can be any more clear here. She's saying that innovation was due for a much needed correction and that this rotation prevented a bubble from forming and popping. It hurts in the short term, but this is great news for the long term. The article continues. Instead, valuations have reset, particularly in stay at home stocks, many of which have been cut by more than half since summer. In our view, the pandemic transform the world significantly and permanently, suggesting that stay at home and other innovation driven stocks will regain momentum.

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I personally agree here very strongly think about how much shopping, work, and entertainment has moved online. Sure, some fraction of that we'll move back to in person as things continue to open up. But people won't easily forget how productive, convenient, and frictionless their online experiences have been over the last year or more. Here's the other piece of the article I think is really relevant. The good news is that fear, uncertainty and doubt or food have provided investors with an opportunity to average down into some innovation strategies.

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Added an approximate 30% to 40% discount. This article came out on Friday, May 21, and the final indicator making me confident on buying more in the short term. Let's dive into what Arc Invest has been buying and selling since they started selling off Apple in the start of May. This is a table of all the stocks Arc Invest holds across all of their actively managed ETFs ordered by the total amount of money they have in that stock. So Tesla ticker symbol SLA is the highest since they currently have $2.8 billion in it.

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Teladoc ticker symbol Doc is currently second and so on there green the row. The more Arc Invest position has grown in that stock since they started selling Apple and concentrating down their funds. The most green roads are Tulio ticker symbol Two Coinbase C-O-I-N Palente P-L-T-R-U-I Path P-A-T-H which is the only stock to be in all six of our invest funds. Draft Kings D-K-N-G Skills, S-K-L-Z and Berkeley Whites Bli. All the stocks I just mentioned are in Arcane top 50 positions when you combine their funds and all of them have seen increases in share account by 20% or more in this month alone.

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Even as Arc Invests total assets under management in these funds shrank by over 10%. To me, that speaks a lot to Arcs conviction in these stocks. Note that almost all of them are in Arc Arc Invests fund themed around the next generation of Internet applications, reflecting Kathy's thoughts about online and stay at home stocks, Internet and AI focused companies where some of the hardest hit in this rotation out of growth and tech stocks. And it's nice to see Arcs commentary being so consistent with their trades.

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These are the stocks I'm going to be researching next to see if there's a great opportunity to invest in one among them. Likewise, here's what Arc Invest has been selling by ticker symbol bid was Arc Invest 9th biggest holding at the start of May with just under a billion dollars in it. It's now their 71st biggest holding with under 150,000,000 in it held by Arca across their funds. I think this reflects a massive shift in their conviction in Bed and I'm excited to figure out why Novartis Ticker Symbol, NVS Regeneron Pharmaceuticals, REGN Pure Storage, PST Intercontinental Exchange, Ice Lending Tree Tree HubSpot Hubs and this is not an exhaustive list.

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In my opinion. All of these companies are great companies where our invest wouldn't hold them in the first place. But something has changed in the last month that something could be the share price, new information during an earnings call or just an opportunity opening up elsewhere. I'm not a financial advisor, but based on all the indicators I covered, I personally think we might be near the current market bottom for growth stocks. I'm also watching the data much more closely and focusing on Arc Invests biggest buys and sells since we know they concentrate their funds down to their highest conviction peer play names when they can buy them at bargain basement prices.

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I'm excited to figure out which stay at home stocks may have been hit the hardest, and if other types of companies got caught in the crossfire, hopefully this gives you a sense of how I personally use or invest data to guide my tech research and my individual stock picks. By using data as my guide. Instead of my gut, I'm constantly being exposed to new ideas, technologies, and businesses on both the bullish side as AR can Vest buys and on the bearish side as they sell. When I feel those ideas have some merit, I share them with you and speaking of things, I share with you, I'm working on making these Arc Invest data dashboards more accessible to my patrons on Patreon and my channel panel members right here on YouTube.

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That way you can check the combined bar chart of Art and Vest Holdings. How those holdings are changing day by day, the Cathy indicator and around ten other dashboards for yourself. Instead of hoping I cover it in a video, I'm also happy to do special live streams, Q and A sessions and exclusive updates. If that's what's interesting to you. Comment below on what you'd like to see while these growth stocks are still selling at a steep discount. And of course, if that's not up your alley, I maintain a completely free Google spreadsheet that auto updates for the latest day because I really enjoy giving back to the community.

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That sheet has a lot of the basics, including bar charts of the funds, overlaps between the fund holdings and so on. I'll leave a link to that spreadsheet in the description below as well. And of course, if I find any interesting information while I'm researching these stocks, I'll be sure to share it right here on this channel. In my opinion, better information today means better investments tomorrow. And if you found the information here or the resources in in the description below, valuable, let me know by investing in the like button and subscribing to the channel with all notifications turned on.

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That's a great way to invest in the channel that invests in you until next time. This is Ticker symbol you. My name is Alex, reminding you that the best investment you can make is in you.