🚁 THESE STOCKS WILL FLY! | ARK Invest’s NEW Drone Stocks (Q3 Review)

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Welcome back to the State of the ARK, my quarterly series about adding context to Cathie Wood's
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biggest buys in each ARK Invest fund over the previous quarter. Since this channel focuses
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a lot on their research, the goal is to see how ARK Invest is putting their money where
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their mouth is. And since there's just too much to cover in a single episode, I've split
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the State of the ARK into a few episodes which I'm releasing around the end of Quarter 3.
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I'm calling the whole series of episodes ARK Week. So, welcome to, uh, the second week
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of ARK Week. Part one covered the biggest changes to ARK Invest's combined positions.
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Part two highlighted some of the biggest buys inside ARKW and ARKF, ARK Invest's funds themed
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around next-generation internet applications and Fintech innovations, as well as a pretty
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interesting inconsistency between them. This is part three, which covers ARKQ, Cathie Wood's
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fund themed around the autonomous revolution, and ARKX, the 6-month-old space exploration
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fund. You can watch these episodes in any order and timestamps are always enabled for
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your convenience. In the previous episode, I mentioned a trend that I'm finding very
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interesting. At the end of the quarter, ARKF had 38 stocks in it, a whopping 18 of which
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can also be found in ARKW. That's 47% of ARKF's positions that can be found in ARKW as well.
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If you compare by weight instead of just by stocks, that overlap is about 35%, which is
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still nothing to sneeze at. For example, if Square stock, ticker symbol S Q, is 10% of
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ARKF and 4% of ARKW, that's a 4% overlap between the funds because both funds are at least
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4% Square stock. We don't want the funds to overlap too much because, well, then there's
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less of a meaningful difference between them, what stocks and risks they expose you to,
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and how their prices move over time, right? Well, ARKQ and ARKX have an even bigger amount
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of overlap. ARKQ had 38 stocks in it at the end of the quarter and ARKX had just 35, 18
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of which are the same stocks. If you go by weight, these funds overlap by a whopping
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47% still, because of a few big positions that sit inside both funds, like Trimble,
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Kratos Defense and Security, UiPath, Unity Software, Iridium, Lockheed Martin, and several
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others. So, I'll show you the trades in each fund individually, highlight the ones they
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have in common, and then I'll wrap up with my commentary, which I always try to keep
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separate from my overviews of the data so you can make your own, unbiased, data-driven
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decisions. One final note before diving into the data; I was on vacation for the last 5
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days. It was actually the first vacation I've taken since becoming a full-time investor
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and YouTuber. So, some of the numbers I'm showing may be slightly different from the
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previous ARK Week episodes because I've updated them to include the last two trading days
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of the quarter. As always, you can find a link to download the full State of the ARK
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presentation for free at ticker symbol you dot com using the URL on your screen right
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now and I'll leave a copy in the description below as well. There's no catch here; I'm
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just building a website with the community so that no one has to hunt through youtube
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video descriptions to find what they're looking for.
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Great. Now that all of quarter 3's trading days are accounted for, here's how the assets
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under management of each fund have changed. On July 1st, 2021, ARK Invest's funds totaled
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just over 49 billion dollars combined. On October 1st before market open, Cathie Wood's
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combined funds had under 38 billion dollars in them, marking a whopping 23% decrease in
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total assets under management. This should give you a good sense of how rocky and volatile
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these funds are, as well as how fickle some people who claim to be long-term investors
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can be. That's not a dig on anyone; I'm saying that because for every person who sells low,
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there's someone buying low on the other side, right? When you pick and choose companies
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to invest in, you need to be ready for the volatility that comes with that choice, unless
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you want to be on the wrong side of those trades. We've all been there. The point is
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to do better next time. Anyway, here are the updated numbers for each fund at the end of
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the quarter. ARKK's assets under management dropped by almost 24% and are now back under
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$20 billion dollars in A U M. ARKG dropped a whopping 27%, from almost 10 billion dollars
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at the start of the quarter down to 7 billion dollars by the end. ARKW and ARKF each dropped
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by about 20%. And as for ARKQ and ARKX, which are the focus of this episode, their assets
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under management dropped by about 20 and 14%, respectively. The reason I always cover assets
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under management first is because that's the baseline for looking at the changes in ARK
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Invest's positions inside each fund. Here's the table of Cathie Wood's positions inside
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ARKQ. Each row is one stock, the rows are ordered by the size of that stock's position
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in ARKQ, and the rows are colored by the change in position over the quarter RELATIVE TO the
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change in ARKQ's assets under management. Since the total amount of money inside ARKQ
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shrank by about 20% since the start of the quarter, positions that are in white shrank
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by around 20%, right in line with the fund. Green rows show positions that shrank by less
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than 20%, meaning they grew relative to the fund, and red rows shrank by more than 20%,
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meaning they shrank relative to the fund. Since Cathie Wood can't control the prices
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of the stocks she buys, the first column shows the percent change in her share count and
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the second column shows the percent change in share price, which are the two things that
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affect the total position size of each stock. The numbers on the right show you each stock's
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rank in this ETF and how that's changed over the quarter, as well as its rank when you
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combine all six ARK Invest ETFs. Lower ranks are always better. For example, Tesla is always
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Rank 1 in ARKQ, since it's the biggest position. Tesla's rank in ARKQ hasn't changed at all.
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It's also ARK Invest's biggest overall position, so rank 1, and that hasn't changed at all
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over the quarter either. Using this framework for analyzing ARK Invest's data, all we have
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to do is look for is the darkest green rows. Simple, right?
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For example, Cathie Wood increased UiPath, ticker symbol P A T H, inside ARKQ by over
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75%. As a result, it's now the 4th biggest position in the fund, increasing 6 ranks from
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where it was at the start of the quarter. The amount of UiPath shares held in ARKQ actually
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more than doubled while its price dropped by almost 25%. Now that I've gone through
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how to read the data, let me highlight the other biggest changes. Unity Software, ticker
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symbol U, Komatsu, K M T U Y, Aerovironment, A V A V, and Blade Air Mobility, B L D E,
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all saw substantial increases in position size over the quarter. If we look toward the
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bottom half of the fund by weight, we can also add Markforged, M K F G, Archer Aviation,
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A C H R, and Palantir, ticker symbol P L T R to the list, because they got added after
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the start of the quarter, making them huge position increases. Just for clarity, Cathie
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Wood added 26 million dollars worth of Palantir to ARKQ this past quarter, while only adding
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about 10 million dollars worth of Proto Labs, ticker symbol P R L B, which is the position
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immediately above it. The reason Palantir's row isn't darker green is because there was
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no data to compare it to at the start of the quarter. Interestingly, every company I just
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mentioned except Unity Software is trading at a lower price today than they were 90 days
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ago. I'm not a financial advisor and this isn't an endorsement to buy or sell any security
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or fund. The fact that Cathie Wood is loading up on these companies AND they're cheaper
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now than 90 days ago tells me that I should throw them on my watch list and do some extra
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research, not that I should make any impulsive decisions. Here's the table of Cathie Wood's
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current positions inside ARKX. ARKX only dropped by about 14% for the quarter instead of 20%
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like ARKQ, but otherwise, I'm looking at the changes the exact same way. Remember that
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overlap thing I was talking about earlier? Let me uh, just highlight the biggest changes
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for you. We have Unity Software, ticker symbol U, Aerovironment, A V A V, UiPath, P A T H,
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Blade Air Mobility, B L D E, Markforged, M K F G, Archer Aviation, A C H R, and Palantir,
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ticker symbol P L T R. No, you didn't accidentally hit the rewind button; those were the biggest
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purchases in both funds over the quarter. Now, I'm being a little cheeky here, because
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Joby Aviation, ticker symbol J O B Y, got added to ARKX and not ARKQ, but hopefully,
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you're seeing my point about these funds overlapping by more and more. So, let's talk about these
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positions. Whether you've been following this channel for a while or you're just joining
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for ARK Week, you'll be familiar with Unity Software, UiPath, and Palantir. Unity software
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sits inside every ARK Invest fund except ARKG and ARKF. On the other hand, UiPath and Palantir
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are the only two stocks to be in literally all six of ARK Invest's funds. Because of
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that, I heavily featured them in the first episode of ARK Week and I've put out dedicated
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deep-dive videos on each of them. I put together one convenient playlist of all my stock market
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deep dives for you. I'll leave that in the right-hand corner of your screen right now
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and in the description below as well. So let me highlight the four other stocks that Cathie
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Wood has loaded up on in both ARKQ and ARKX over the last quarter.
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Aerovironment, ticker symbol A V A V, is a drone manufacturer that focuses on building
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small and medium unmanned aircraft systems as well as technical missile systems such
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as GPS-guided artillery shells. Their non-missile systems do things like relay communications,
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surveil a given area, track things on the ground, map out a region, and more. In my
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opinion, the biggest risk to Aerovironment is the fierce competition in the drone space,
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especially in the defense industry, where there are massive companies providing drone
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solutions of all kinds. Right now, Aerovironment is focused primarily on government contracts
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but they also put out media about entering the agriculture market, which certainly is
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a beneficiary of drone technologies. Because Aerovironment focuses on smaller form factors
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though, their drones could be suited to lots of other industries, even beyond agriculture.
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I'm excited to see what they come out with over the next few years as we see the adoption
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of drone technologies continue to, uh, take off. Get it? Take off? You know, like — [cut
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screen]
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Blade Air Mobility, ticker symbol B L D E, is currently a helicopter seat-booking company
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that carries passengers in crowded urban areas via helicopters, jets, and seaplanes. The
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big idea is skipping dense city traffic to get where you need to go in a fraction of
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the time for a competitive price. Their future is all about progressing into the urban air
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mobility space via electric vertical take-off and landing vehicles, or E VTOLs. The reason
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for that is because a major limiting factor for the growth of urban air mobility is the
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amount of noise helicopters generate along their flight paths and EVTOLs are much quieter.
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Just like Uber has on the ground, Blade is developing the infrastructure and routes and
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brand recognition with customers while keeping their own company asset-light. And just like
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Uber pays drivers for their time and vehicle costs, Blade has to pay aircraft operators
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the same way. Blade is a former SPAC that has shown consistent growth but is currently
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still trading at around its $10 dollar SPAC price after landing back on earth from a sky-high
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$18 dollars per share earlier this year, which was something like a 1 and a quarter billion
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dollar market cap.
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Markforged, ticker symbol M K F G, is a 3D printer manufacturer and the creator of the
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Digital Forge, an integrated metal and carbon fiber 3D printing platform. The Digital Forge
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uses machine learning algorithms to learn from each print from any of their printers
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to fine-tune the next one. Their platforms are used by Google, Tesla, Amazon, the US
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Airforce, and even NASA. Markforged greatly reduces the friction associated with learning
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to 3D print parts from scratch by using AI to streamline every step of the process. They
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recently announced a piece of software called the Eiger Fleet, which gives organizations
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a secure and centralized control point for all of their Markforged 3D printers, users,
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and libraries of parts. Eiger Fleet is designed to help manufacturers integrate additive manufacturing
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technologies into their existing workflows. That's a smart move because a lot of legacy
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companies still see 3D printing as a huge investment to replace something that isn't
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really broken, but Markforged can start by securely augmenting existing capabilities
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and scaling as customer adoption continues to increase over time.
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Archer Aviation, ticker symbol A C H R, is designing and developing electric vertical
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takeoff and landing aircraft, or EVTOLs, for use in urban air mobility. So, it's a flying
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taxi maker making a flying taxi called the Maker. The Maker is a two-person, 12-rotor
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aircraft with a range of 60 miles, a top speed of 150 miles per hour, and a cruising altitude
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of about 2,000 feet. Like I pointed out with Blade Air Mobility, noise is a very important
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factor. The Maker will only generate about 45 decibels of noise, which is about 100 times
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quieter than a helicopter. They're also working on a five-seater aircraft for groups. Importantly,
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Archer just completed a reverse merger with the SPAC Atlas Crest Investment Corp, ticker
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symbol A C I C in mid-September and is now trading for well below the $10 dollar SPAC
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price after Archer Aviation and Atlas Crest agreed to cut the deal value by about 37%,
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from $2.7 billion dollars to $1.7 billion. This isn't really a big deal in the long term,
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since Urban Air Mobility and vertical take-off and landing vehicle companies are probably
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at least 5 years away from generating real revenues anyway. They're currently still sitting
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under a 2 billion dollar market cap, so basically right at the value of their reverse merger,
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making it a good company to research further while the price is still at ground level.
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So, comment below or tweet me at ticker symbol you with your thoughts on these different
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aerospace and supporting technology stocks. Are you interested in autonomous mobility
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in general or urban air mobility specifically? Do you want exposure to drones in your portfolio
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or do companies like Markforged appeal to you more because they can support a wide variety
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of industries and market sectors? Should I try to buy a consumer-grade drone from a publicly-traded
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company and test it out for the channel? I'm excited to hear your thoughts.
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As for me, after the previous episode of ARK Week, I was a little worried that I'd be questioning
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why more and more stocks were included in ARK Invest's funds. I'm happy to say I think
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these stocks make a lot of sense for ARKQ because of the focus on robotics and autonomous
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mobility and they definitely make sense in ARKX because of the clear ties to Sub-orbital
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Aerospace. I believe that drone and 3D printing technologies are definitely core technology
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platforms to these funds and would love to see them lean even harder into that theme.
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The two reminders I'll throw out there are that urban air mobility companies are still
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several years away from being serious revenue generators AND that both ARKQ and ARKX are
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pretty niche funds, so make sure you're not overweighting your holdings in these types
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of companies just because they make super cool physical products. I've been guilty of
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that, myself. If we add Unity Software, UiPath, and Palantir back into the mix, we actually
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cover almost the entire value chain here, including making interactive visualizations,
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automating a lot of the day to day processes, and analyzing all of the data associated with
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the whole enterprise of moving people and stuff through the sky. AND! All of these stocks
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are trading for lower prices today than they were at the start of the quarter. Well, except
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for Unity Software, but we all know that Ticker Symbol U is only going to get more and more
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valuable as time goes on. Speaking of Ticker Symbol You becoming more and more valuable,
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don't forget that the full State of the ARK presentation is available for download for
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free at ticker symbol you dot com using the URL on your screen right now and I'll leave
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a copy in the description below as well.
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Thanks for watching. Until next time, this is Ticker Symbol YOU, my name is Alex, reminding
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you, that the best investment you can make… is in you.