Mentioned in Video:

Here is the context I feel is important when looking at how #ARKInvest navigated this past week's markets as active fund managers and analyzing their five ETFs together (#ARKK, #ARKG, ARKW, ARKQ, ARKF). This past week, Pfizer/BioNtech announced a #vaccine with a 90% efficacy rate (for comparison, the flu vaccine is 40-60% effective), causing a rotation of money out of the tech sector(s) and into value sectors like cruise lines and travel. Cases are on the rise around the world and the timeline for domestic #stimulus talks seems to be priced in. Europe is in the middle of another round of #lockdowns, but it was already priced into the market in previous weeks. In #ARK Invest specific news, one of their minority stakeholders named Resolute Investment Managers has announced that it will exercise its option to take a controlling stake in ARK, much to the dismay of #CathieWood. I believe this is a complete non-issue and is just Resolute flexing their muscles to prevent themselves from being replaced as ARK Invest's main ETF/financial product distributor and logistics handler. That does not stop YouTubers from making clickbait videos or retail investors from making panic-based financial decisions, so I cover that, as well as my vision for building a channel that “Invests in YOU”. If you're tired of clickbait, this channel can hopefully serve as your vaccine for that 😉

Video Transcript:

Hey there. Alex here with a special episode of Market Mondays covering ARK Invest news and trades for the week ending Friday, November 13th 2020. The reason this episode is special is because towards the middle of it, I also outlined my future vision for the channel. You should let me know in the comments below if I'm on track with how I see myself adding value to your strategies in the future. And as always, I put a lot of research and effort into each one of these videos so I'd appreciate the early thumbs up and let's dive right in.

mARKet Mondays typically have three parts. In part one, I discuss the overall markets and broader economic situation. In this week's episode, this part will be a little shorter than usual. In Part two, I talk about ARK Invest specific news. This week I want to add a little more value for you in this section, so this part will be a little longer. And in part three, I'll use all of that as context for analyzing ARK Invest's buys, sells and overall trades

over this past week ending Friday, November 13th 2020. Links to everything I discuss can be found in the description below. In past episodes, I've covered the European lockdowns and how that news has injected worries into the US stock market. Here's a map of the current state of affairs overseas. As you can see, many countries have nationwide lockdowns and curfews. When lockdowns occur, businesses, whether they're publicly traded or not, take a hit in terms of sales and profits and individuals are put out of work.

In my opinion. Both of these put downward pressure on ARK Invest's portfolios because some of the disruptive innovation companies they invest in are still quite young. Lockdowns and a lack of customers can really set them back in terms of long term growth and milestones. This is not a political channel, but one thing that continues to be politicized is how cases are counted. What I'm showing here is simply the case count that the market could be pricing in, since these are some of the most widely available numbers that track cases over time. To offset this, we've had a lot of positive headlines concerning a possible vaccine, which is showing to be over 98 percent effective, putting wind in the sails of airlines, cruise companies and the travel industry as a whole.

The word vacation has finally reentered our vocabulary for the first time in this decade of a year. Whew. In terms of the stock market, financial institutions like JP Morgan and social arbitrage traders like Dumb Money are pricing this news into their current trading strategies. Let's see just how positively the market sentiment is shifting around the news of this vaccine. So what you're seeing here is a sentiment survey of market participants for this most recent trading week. And as you can see, the average participant is very bullish.

In fact, bullishness went up almost eighteen points from the trading week before. Nineteen percent of the market participants are neutral, which is down eleven point three points from the week before. And almost twenty five percent are bearish, which is down six point six percent from the week before. This is a massive swing towards bullishness for the average market participant. And looking at historical averages, we can see that on average, thirty eight percent of market participants are bullish.

So we are currently seventeen point eight percent more bullish than average. We can see that on average, thirty one point five percent of market participants are neutral. So this past week we are down over twelve percent from that average and on average, historically, thirty point five percent of market participants are bullish. So we are currently down five and a half points from the historical average. So the average market participant this week is much more bullish than last week and also much more bullish than historically average.

The week before last, we experienced a very big, broad market rally on the back of the news that stimulus talks would be restarting right after the election instead of in early 2021, with headlines saying that both parties are interested in renegotiating upcoming stimulus packages literally as soon as possible. The entire market rallied, because stimulus introduces a lot more liquidity into the market. Compare that to news with the vaccine. Here is the performance of the S&P 500 for this most recent week.

As always, what you're looking at is the S&P 500 broken down sector by sector. In the top left, you have technology in the bottom left, you have financials. In the top right, you have consumer defensives, so on and so forth. And as you can see here money is rotating out of big tech companies. Facebook is down five and a half points. Amazon is down five and a half points, NVIDIA is down eight and a half points,

Netflix is down six point two points and PayPal is down almost seven points. And this is because the average market participant thinks that the rate of growth for digital companies is going to be slower in the future with the introduction of a vaccine. So let's take a look at the performance of the S&P 500 and the. NASDAQ For the previous week. The S&P 500 basically traded sideways, as you saw in the map of the S&P 500, some of the biggest companies went down because they're digitally native software companies and other companies went up.

So on average, the S&P 500 moved roughly sideways. The tech sector, which we measure by looking at the NASDAQ, slightly traded down. And that's again because the vaccine news is prompting a rotation of money out of the tech sector. Nothing I'm saying here should be taken as financial advice. I am not a financial adviser. Another thing I like keeping track of week by week is the market's volatility. So what you're seeing on the left is the VIX, the VIX, which measures the volatility of the S&P 500 and the VXN or VXN, which measures the volatility of the NASDAQ on the right.

A good rule of thumb is that a volatility of over twenty eight is considered highly volatile. So what you're seeing on the left is that the S&P 500 is definitely not in a volatile state as of Friday's market close. What this means is people know where they want their money to be, at least in the short term. They've rotated out of tech and into value plays like cruise lines and air travel. And that's reflected in the VXN which we're seeing on the right.

The money in the tech sector right now is highly volatile as some people rotate out and other people continue to rotate their money in because they feel they are buying the dip. So that's the context for the broader market. Let's take a look at ARK Invest specific news. This past week, ARK Invest released their November market update webinar and that webinar focused on the impact of the election as well as the vaccines on the economy. As you can see, part of the job of the Market Monday series is to track what's important to ARK Invest and cover that to add context to their trades.

The previous two episodes of Market Monday have covered the election extensively, and this episode we covered the news of the vaccine. And if you're interested in hearing my interpretation of how the election affected ARK Invest news and trades, I encourage you to watch those two episodes linked in the description below. This past week, ARK Invest released issue two hundred and forty seven of their weekly newsletter, which covered a wide variety of topics throughout many innovation spaces. One topic I'd like to focus on in that newsletter is that short read next generation sequencing has caused the cost to sequence the human genome to drop from three billion dollars a little under two decades ago to six hundred dollars today.

In addition, they released Episode eighty three of their FYI podcast, which talks about using gene editing to cure HIV. I've covered the evolution of gene editing techniques and their effects on the costs of gene editing extensively in my recent video on ARKG. And, in accordance with Wright's Law. For every cumulative doubling of data produced by Pacific Biosciences instruments, unit costs have declined consistently at a rate of twenty eight percent. I've also recently uploaded a video covering Wright's Law extensively, as I believe it's one of the fundamental laws that governs ARK Invest's

Trades. So what I've shown you here over the last two slides is this channel's value proposition. I try to time my releases very closely to the media and publications that ARK Invest releases. So if you need additional context to their trades, mARKet Monday series is for you and if you're interested in understanding their fundamental investment philosophy, videos like these two are key to understanding that. The reason I'm bringing up the value proposition of my channel is because recently there's been a dramatic increase in clickbait surrounding Arek invest.

This past week, a minority stakeholder in ARK Invest named Resolute Investment Managers has decided to exercise an option to take a controlling share in ARK Invest. Cathie Wood has been quoted as saying that this announcement is incredibly unwelcome and she doesn't like the idea of an external party seizing control of her fund. This prompted a lot of youtubers to release clickbait videos that have attracted a lot of attention. So in response, I released a partially satirical video that exposes this click bait and tries to get to the bottom of the facts.

Currently, what I believe is happening is fairly straightforward. Resolute Investment Managers is the distribution channel for ARK Invest's ETFs. Cathie Wood has been wanting to replace them to get a better deal for distribution. So Resolute is exercising its option to take a majority control of ARK Invest in order to stay as their distribution channel. It is in Resolute Investment Managers' best interest as a majority stakeholder in ARK Invest to not change a thing about it. Only time will tell what will actually happen as a result of this change.

But I urge you not to make any preemptive investment decisions based on emotion associated with a single headline. I created a small action plan that you can enact today if you're truly worried about this change in guard.One of the things I'm really excited about is building a channel that invests in you. One of the ways that you can invest in yourself right now is take a look at the channels you continue to watch, including this one. Make sure that the time you spend on YouTube doing research about investing is well spent for each channel that you care about,

go back in time and see how accurate their predictions are. Make sure that they're really adding value to your day, whether it's entertainment, information, or advice, and make sure that they're valuing your time appropriately. Your time is valuable .If you find the channels are constantly clickbaiting you without adding any real value to the conversation, maybe that channel isn't worth your investment. Remember, good investing is about more than just picking stocks, and another piece of it is properly managing your time.

Let's get back to it, OK? With all that said, let's get into ARK's buys, sells and trades for this most recent trading week. As you can see, their total assets under management basically traded sideways. They went up two percent because the value of their current picks went down. They increasingly bought shares. So this was a big net buy week for ARK Invest as money rotated out of the tech sector. Here is that same bar chart that we always look at of their top 30 holdings colored by the fund that it's in.

And as you can see, Tesla remains their number one position with about seven and a quarter percent of all of their money still in Tesla, followed by Invitae with about five point five percent, then Square with just over five percent, then Roku with just over four and a half percent and CRISPR with just under four and a half percent of their institutional holdings. And these top five companies make up about twenty six and a half percent of their total holdings.

They currently have forty eight holdings worth more than a hundred million dollars apiece. And that's exactly the same amount that they had last week. And they're currently holding one hundred and forty two individual tickers. The asterisk is there because this does not include things like Japanese yen, which they have sprinkled throughout their portfolios to diversify and manage their risks. I've replaced the pie chart from previous episodes with a new visualization. This one covers the overlaps in their five actively managed funds.

So what you're seeing here is their holdings ordered by the amount of money they have in total as an institution. And what you're seeing to the right of that is their five funds ordered by the size of the fund. So ARKK currently has eleven billion dollars in it. ARKW has three point four billion, ARKG with just under that, then ARKF with just over one billion and ARKQ with almost nine hundred million. And as you can see, there's a lot of overlap between ARKK and the other four funds.

That's because ARKK is a combination of all of their highest conviction, disruptive innovation companies. So we've covered ARKG extensively in a previous video and the next set of ETFs will cover our ARKW, ARKF, and ARKQ. A couple of interesting things to note about this table. If you're interested in holding two ARK funds with a very low correlation, the best two funds to hold are ARKG and ARKF. As you can see, there's almost no overlap between them. Another thing I like to do week after week is look at a cross section of all of their holdings and see what the biggest buys and sells for that week are.

So here we have the trading board opened in tableau in real time. And what you're seeing here is a cross section of all ARK Invest's holdings, regardless of what fund that they're in. Each square is colored by the change in the amount of shares they're holding from last week to this week. So as you can see, Palantir has their biggest increase. They've increased their position by over 4000 percent or 40 times in the previous week. They've increased their position in CloudFlare by over one hundred percent.

They've increased their position in Ansys by over 50 percent. And down and down the list. We can also look at their biggest cells the same way. For example, they sold Douyu almost 50 percent of their position. They've sold forty six percent of their position in Facebook. Anyway, I just figured I'd show you the data in Tableau this time in case that prompted any requests for interactive forms of data instead of just visualizations. So let's take a look at their biggest buys over the previous week.

The way I like to look at ARK Invest's trades for the previous week is in terms of percent change in the size of their position. That's because while ARK Invest can't control the share price of a given company, they can control how many shares they buy and at what price. So as you can see, by percent change, they've increased their position in Palentir by the most. But in reality, their position in Palantir is very small. In fact, if you were to look at Palantir on the bar chart of their total holdings, it's their

one hundred and fifteenth biggest position, they have a total of sixteen point six million dollars in Palantir, which is a very small position for ARK Invest. One of the things I like to think about when I look at this is which trades are the result of software telling them to execute a trade because they have more assets under management? And which ones are result of a human analyst saying that they should increase their relative position size in a given fund? As you can see in the bottom half of this table, many of their buys are for almost exactly 11 percent.

What this tells me is that the amount of money that they've taken from investors has risen and they're distributing that equally among all of their buys. What you're seeing in the top half of this table, however, I believe is the result of more active portfolio management. As you can see, the prices of some of these companies have dropped substantially. So ARK Invest has bought the dip and increased their position size accordingly.

When you see ARK Invest drastically increase one of their position sizes, even though the stock price went up, you can guess that that's because of either increased or at least renewed conviction in that company.

Their active research and knowledge may have revealed some indicator that makes them want to hold more of that position. So one of the biggest advantages of looking at their biggest buys each week this way is it really gives you a sense of the whole picture. Since ARK Invest has increased its positions in Palantir and CloudFlare by so much this past week, let's take a look at what their position sizes were in the weeks before. This chart is just showing you that both for CloudFlare, which is the line in yellow and for Palantir, which is the line in blue, they initiated their positions on the week ending October 16th, and they had very small positions in each: sixteen million dollars in CloudFlare and not even one million dollars in Palantir.

Those positions stayed steady until about November 6th. And then last week they doubled their position in CloudFlare and 40 x'ed their position in Palantir. It's worth noting that both of these positions are still very small. ARK Invest's total position size in CloudFlare is under 40 million dollars and their total position in Palantir is still under twenty million. So while this looks like a big apparent change, in the grand scheme of things, these are still very small positions. And then, of course, we can look at their sells the same way.

This week was a big net buy week for ARK Invest. So they have a very small amount of sells. In fact, their only noteworthy sells were in Zscaler, Facebook, Douyu International and they sold a lot of Japanese yen. And they sold all four of these positions, even though there was no dramatic increase in price. The next thing we can do is track their biggest buys and sells week over week. So here is a list of their biggest buys and sells from the previous market Monday, and here is the list for the episode before that.

And so what I've been doing is I've been keeping track of which of these holdings appear on these lists week over week. And that's what you're seeing here. Here are my short lists. The recurring buys are Teladoc, Palantir, CloudFlare, Shopify and Spotify, and their current trims are Zscaler and Douyu. None of this constitutes financial advice. I'm simply pointing out that week over week they're increasing their position size on the stocks on the left and they're continually trimming or trimming a lot of their positions on the stocks on the right.

And we're putting those buys and sells in context of both the broader market and ARK Invest news, which I think helps us understand the mentality behind some of their biggest trades. And just for your reference, here's that same list from last week. And something worth noting is that Teladoc has appeared on the buy list two Market Mondays in a row. If you've made it this far in the video, you're awesome. I appreciate you investing your time with me. And I hope this channel keeps providing you with value.

This is Ticker Symbol: You. My name is Alex, reminding you that the best investment you can make is in you.

If you want to comment on this, please do so on the YouTube Video Here

Alex Divinsky

💰 Investing in our future through disruptive innovation, ☕ lover of coffee, 📺 host of Ticker Symbol: YOU on YouTube

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