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😰 #ARKInvest has seen their best tech stocks fall by 30% in 3 months. Is #CathieWood wrong about her strategy like #JimCramer says, or are ARKK, ARKG, ARKW, and ARK Invest's other thematic funds being loaded up and bargain-basement prices? Cathie Wood explains why she's bullish on Tesla stock (TSLA) and her other big bets, despite the downturn.
Let's touch if we may on this sort of current pull back, do you actually welcome that as a long term buying opportunity for a lot of the stocks you love. Are you feeling the heat a little bit?
Growth stocks have collapsed in price since the beginning of the year. Now that this has been going on for a three month streak, 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 with all notifications turned on. 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 take a look at ARK Invest's top five holdings, which make up over 20% of their six actively managed funds. What I'm showing you here is a bar chart of ARK Invest's fund allocations, where each color is how many dollars ARK has associated with this stock in this given fund. For example, on May 20, 2021, ARK Invest had $1.9 billion in Tesla, ticker symbol TSLA, in ARKK, their flagship innovation fund, another 500 million in Tesla in ARKW, ARK Invest's fund themed around the next generation of Internet technology and another 270,000,000 in ARKQ, their fund themed around the autonomous revolution. In total ARK has over two $7 billion in Tesla
today. However, Cathie Wood had over $3.5 billion of Tesla three months ago. Tesla is down over 30% from there. Cathie Wood had over two $5 billion in Teladoc, ticker symbol TDOC, whose stock price is down over 50% in the last three months. Five zero. Square, ticker symbol SQ, down over 25%. Roku, ticker symbol ROKU down over 30%. Shopify, ticker symbol SHOP, 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 what do you think, is Cathie Wood feeling the heat?
Should she hedge her bets or change course to capture some immediate returns? Comment below on what you would do if all eyes were on you and your investment strategy had been bleeding by 10, 20 or even 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 I say that.
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 powdered dry so that you have the psychological wherewithal when the world seems to be falling apart to pick up on bargain basement prices.
That was January 8th's episode of In The Know with Cathie Wood. The rotation out of growth stocks started around February 12, just one month after that clip. Let me know below if hearing this changes your answer to my earlier question. It's okay if it did, that's the whole point of this channel. To help you and me build up our convictions through research and analysis. Here's how Cathie Wood actually answered the earlier question.
Let's touch if we may on this sort of current pull back. Do you actually welcome that as a long term buying opportunity for a lot of the stocks you love. Are you feeling the heat a little bit?
Oh, I love this set up. The last time I was on, I think I said that this rotation was good news because it meant the bull market was broadening out. It was strengthening. And the worst thing that could have happened to us is to have the market narrowly focus on just our ilk of stock, the innovation space. Instead, it has broadened out. So that year to date, I think it's energies up 40% ,financials are up 27%, and from the peak in mid February, our strategies are down well, the ones that have been hit the hardest.
Not all of them are down 30% to 35%. I love that set up. We're, from our point of view…
Side note, you can tell she really wants to say we're at bargain basement prices, but she probably decided not to for compliance reasons. That's just my opinion. But watch her stop herself from saying it here.
From our point of view, five year time horizon, nothing has changed except the price and therefore the return, which at the peak of the market and of our strategy, in mid February, we expected a compound annual rate of return of 15% on average per year from our strategies. Now that the prices are down, that number is somewhere in the 25 to 30% range.
The math here is pretty simple. ARK Invest expects their stocks to double on average every five years. That means they're looking for a 15% compound annual growth rate. But now the prices of the stocks ARK picks are about one third cheaper. So hitting that same price target means that 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?
You may love the setup, Cathie, but it hasn't been great for your business. I mean, worse, start to the month on record you've seen outflows of a billion dollars. How are you managing these declines and their speculations, the speculation out there that if the outflows continue, it would be hard to meet redemptions.
No. Well, first of all, I don't have to worry about redemptions. The ETF ecosystem is a beautiful thing for portfolio managers. I highly recommend it. And so what that means is when I am making decisions, they are investment decisions. I have nothing to do with the flows.
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 months ago to protect herself from these kinds of 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 Wood's response to it.
Cathie Woods, ARK I saw on Twitter this morning. You asked, what stock is she going to save today?
Well, I like to take. I mean, it's a little bit of a pull. It's a little bit of a parlor game. She's the best for this, got to say that, she's buying every stock that should be crushed by the interest rate move. These are classic long dated assets that she's buying. And that's what you're supposed to be selling.
But she did have a lot of outflows yesterday, though, Jim.
Well, what can I say to you? I mean, by the way, I mean, a number that's so big, it's probably larger than her entire fund was only a handful of years ago.
Right? So instead you just see outflows and you say, okay, which one is she gonna stop? Is she gonna stop Square today? Square did not have a great conference call, and they're all Bitcoin, Bitcoin. So maybe she stops the decline in Square. This has become the ultimate parlor game, Carl. We look at these things instead of investing instead of trying to figure out what the right thing to do is do you buy J&J? We are looking and saying, you know what? Holy cow. She is making a statement right now with Arrow Environment, selling it again.
How did this happen? How did this person become what we do for a living. Memo to Cathie Wood, close your fund. Close it. Listen to what the late Jack Bogle would say. Close it. Concentrate on performance, not on trying to deploy capital. It's okay. It's no sin. It's what the great ones do. Peter Lynch did it. I mean, you just close it. You don't just sit here and just keep taking any money and taking a look at what stocks down a lot and saying, you know what I'm doing a cold shot.
That's it Tesla, 620. I'm done. Tesla goes hard. That's the kind of hyubris. No, David, help here.
Now, here's Cathie Wood on episode nine of Benzinga's Raz Report, responding to that Kramer 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.
Concentrate on performance, not on trying to deploy capital. It's okay. It's no sin.
Okay. Now I should just shut up and let you take over your response.
Well, he's talking about the ETFs. It is not possible to close an ETF. It's just not possible. So I think he was referring to the mutual fund industry, and that's not what we are. But I think the other mistake that commentators are making is that they don't understand that I have nothing to do with the flows. In other words, the ETF ecosystem outside of ARK, the market makers, the authorized participants, they are creating and redeeming baskets of stock, which are the stocks we're invested in. But I am not seeing, I'm not having to invest those flows or raise money to satisfy redemptions at all.
I am investing, pure and simple. I am making investment decisions. I'm not dealing with flows. This is such a luxury in a volatile market to be able to focus only on the investing side and not to be forced to do anything because of flows one way or the other. And from that point of view, I think ETFs are a superior wrapper for the portfolio manager. Now mutual funds have their place and define contribution funds and so forth. I'm not putting them down, but I think ETFs for an investor,
a portfolio manager, are a better wrapper. 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 bull* associated with managing flows, closing down funds, worrying about whatever it 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, keeping some powder dry to take advantage of falling stock prices. Stock picks based on research and performance based only on buying low and selling high. Let's take a look at this incredibly deep followup analysis on Cathie's comments by now another than Jim Cramer.
Take a listen to what Kathy said Friday.
Five year time horizon, nothing has changed except the price.
So, Jim, does that speak to you?
Nothing has changed except the price. But I listened to that interview, which was quite good. I thought about a head coach for a Southern NFL team who at halftime was down 21 to nothing and he started his speech to his team saying, we've got him just where we want them. And I remember say, Why did you say that? I don't know. It's like the most stupid thing. Well, when you're down 30% and others are up, I guess you got him just where you want him, David.
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?
Well, it does give you an opportunity to buy even more, if you believe.
Over time, she has had the best performance, five year.
That was then and this is now, okay.
They're killing these stocks. They're taking all the air out of these stocks and including her relatively unknown stocks. Now they can come back, call the five year. Is that terrific? And I hope that the people who are in there, Carl, have a five year perspective because I think they will do quite well. But right now there are people who expected a five day return, which is what she gave you. And that's struggling, including the man who was on Saturday Night Live, who's stuck as much as I love him.
And he did say that he's like an ad. What did he call himself? What do you expect? Some Kinder, gentler, chill guy. But I mean, Tesla has not been a great stock. These things all worked for a period of time. And now, Carl, they're not working. You got to be in Nucor. And these people don't know Nu from Core.
By the way, NuCore ticker symbol NUE, is an American steel production company whose stock started to rally right as ARK 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 the screen right 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.
Well, maybe they're the next Google and Facebook.
Nucore, no, I'm talking about Woodstock. That's what I call them by the way.
Who do you call Woodstock.
Cathie Wood's stocks. Woodstock.
All those stocks.
Well, Woodstock. Why not? That was like an unbelievable concert.
Yeah, well, that's Woodstock.
She lives in Bethel, New York, not Woodstock. But yeah.
But yeah, hopefully this episode provides you with some clarity on why I'm covering ARK Invest, even as their biggest position tumble anywhere from 20% to 50% over the last three months, and the mainstream media continues to pummel them. If I help 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 is 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 continue to fall. Let me know in the comments below if you see the same thing I do, or if you think I'm missing something big. 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.
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