Mentioned in Video:

#ARKInvest is ending a very strong year with an incredible quarter. The State of the #ARK is my quarterly review of ARK Invest's actively managed funds: #ARKK, #ARKG, #ARKW, #ARKQ, and #ARKF. Also discussed is #CathieWood and Resolute Investment Managers, a possible sixth actively managed ETF (!!!) and the future of this very channel 🙂

Video Transcript:

You believe there are five technology platforms that are changing the world, artificial intelligence, robotics, energy storage, DNA sequencing and the block chain, but of course, technology isn't static. If there's a sixth, what would it be?

Hey there, Alex here. And this is Ticker Symbol: You, the channel that invests in you. With the quarter coming to a close and the holidays upon us, I thought it would be a great time to do a quarterly review for ARK Invest and a performance review for this channel. There's a lot to be excited about in the future. So I hope you enjoy this first State Of The Ark.

You're having one of the best years in the history of professional money management. What's it like?

Oh, it's been unbelievable, our portfolios are all about solving problems and our our investors have been rewarded for helping to solve some of the world's most profound problems.

Let's take a look at ARK Invest's historic performance in quarter 4, 2020. No, not that one. Yeah, this one. Nice. First, let's take a look at ARK Invest's top holdings overall and then I'll break their performance down fund by fund. ARK Invest assets under management more than doubled this quarter from just under 15 billion dollars at the start of October to just under 32 billion dollars as of last Friday, December 18th, 2020. ARK Invest actually manages over 50 billion dollars among all of their offerings and clients,

but we'll just focus on their five thematic, actively managed ETFs, as usual. Here's a look at their top 40 positions across all five of these funds combined. These top 40 positions account for about 75 percent of ARK's actively managed funds. The left bar chart shows the top 40 on Friday, October 2nd, and the one on the right shows the top 40 on Friday, December 18th, 2020. Note that the scales on the bottom show you the percentage of the overall holdings and on the top the units are dollars.

So, for example, Tesla accounts for just over eight percent of ARK Invest actively managed funds in both cases, and they had roughly one and a quarter billion dollars in it at the start of the quarter, while they have a little over two and a half billion dollars in it today. Let's break this down fund by fund. Mark grew by over eight billion dollars this quarter, which is a 93 percent increase in assets under management in the fund. ARKG grew by about four billion dollars this quarter, an insane 170 percent increase in assets under management.

Looks like genomics is definitely the new hotness. ARKW grew by a little less than three billion dollars, or about one hundred and ten percent and ARKF and ARKQ grew by well over one hundred percent each as well. These numbers are incredibly important to track and I'll show you why. This is the trading board for all of ARK Invest's actively managed ETFs for the quarter. Each square represents one stock they hold and you can see the ticker symbol as well as the increase or decrease in shares from the start of the quarter until now.

While your eyes adjust, let me explain the system for you. Any square without a percentage in it is one they didn't hold at the start of the quarter. It's a new position and has to be tracked separately. The darkest red squares are the ones they sold out of Illumina, ticker symbol ILMN; Slack, WORK; Twitter, TWTR; Zscaler, ZS; and so on. The darkest green squares are the ones they bought the most: Social Capital, IPOB; Baidu, BIDU; Berkeley Lights, BLI; PayPal, PYPL and so on.

The rest of the squares are colored by how much they grew relative to ARK Invest's total assets under management, the light green squares grew by more than the average asset. The light red squares grew by less than the average asset, and the yellow stocks roughly doubled, just like ARK's overall assets under management. This is active portfolio management coming into play. Instead of selling the stock, ARK Invest can just buy less of it as their funds continue to grow in order to shrink a position over time.

And that's what I'm showing you here. It turns out when people keep handing you billions of dollars, the stocks you choose not to put money into are just as important to the story. And the stocks you choose not to sell after a rally are just as important as the ones you choose to buy. Just a quick note. During the last two episodes of the market recap I mentioned I was working on a better way to identify ARK Invests' true buy and sell signals.

I think this is it. Of all the stocks ARK Invest held in these five funds at the start of the quarter, here are the ones that outgrew and out shrank their neighbors. This table is sorted by the rightmost column, which is the net increase or decrease in that holdings position relative to all the other holdings. The table is color coded the same way as the trading board I just showed you by percent change in the shares held, not this change in rank.

If the change in share count was all that mattered, then this table would be colored with the greenest one on the top and the reddest one on the bottom, with no breaks to the pattern. In fact, you can see the ARK's position in Pleuristem Therapeutics, PSTI grew by over 80 percent this quarter, but it's still dropped 35 ranks from October 2nd to now. Please leave a comment below, if you think I've got it wrong, I'm happy to have holes poked in this idea.

Otherwise I'll be using a stock's rise and fall in relative holding position or the ARK rank when I cover their trades and holdings from now on. Great. Let's get back to the funds, starting with ARKK, the current King Kong of actively managed ETFs.

All we did, which is what we should have done in terms of our research, is keep our eye on the prize. And the prize had to do with the autonomous taxi network that we believe Tesla will be in the pole position to dominate, mostly because of its advantages in artificial intelligence and the amount of data it has collected and the expertise that it has, and we couldn't believe that no one wanted to listen to this, that they really just made fun of it.

And it made me feel even more strongly about Tesla.

ARKK's theme is disruptive innovation and holds the highest conviction stocks from ARK Invest's four other thematic ETFs. It gives investors lots of exposure to genomics, artificial intelligence, energy storage, advanced robotics and disruptive financial technologies. Again, the bar chart on the left is from the start of the quarter, and the one on the right is from the most recent trading week with a different dollar scales on top. ARKK's assets under management increased by 92 percent over the quarter and its price increased by 35 percent, which is amazing for a basket of over 45 stocks.

Here's how its holdings have changed over the quarter. You can see that Tesla lands smack dab in the middle of the table this way since it has never left position one in ARKK and Pacific Biosciences, PACB, was in position thirty eight of ARKK at the start of the quarter and still in position thirty eight as of last Friday. Unity, Twist Bioscience, and DocuSign are the three biggest risers in ARKK and Compugen, Seres Therapeutics and Cerus Corp. are the three most shrunk positions, even though their share counts hardly moved.

Next up, ARKG, ARK Invest's Genomic Revolution Fund.

If I look backward, as you well know, Tesla accounts for almost a fifth of the return that you have generated in that five year time span. Which of your current holdings, Cathie, do you think will supply the biggest lift in the next five years?

Tesla's still in the running, but I would have to say the biggest upside surprises are going to come from the genomics space. And that's because the convergence of DNA sequencing, artificial intelligence and gene therapies, importantly CRISPR gene editing, are going to cure disease. That convergence is going to cure disease. We believed that our research would be focused better on the next set of FAANGs. And I don't mean FAANGs, meaning in the Internet age, we actually think the next FAANGs are in the genomic age.

The next coding language is DNA and the next app is us. People seem to dig that idea, myself included, because ARKG's assets under management grew by one hundred and seventy percent this quarter and its price grew by almost 50 percent. Fifty: five zero. Here's how ARKG's holdings have changed over the quarter. The biggest positive movers are in Berkeley Lights, BLI; Takeda Pharmaceutics, TAKUN; and Vertex Pharmaceuticals, VRTX. And the net negative movers are in Compugen, CGEN; Seres Therapeutics, MCRB; Syros Pharmaceuticals, SYRS; and Cerus Corp, CERS.

Protip don't name your company anything that sounds like Seres if you want your stock to stay in ARKG. Apparently it's not happening. Next up, ARKW, ARK Invest's next generation Internet fund.

Cathie, another surprise for me in your portfolio attribution is that almost none of your performance, just twenty points out of six hundred points, is from Apple, Microsoft, Amazon and Facebook, the four biggest contributors to the S&P 500 over the same period. What about them? Doesn't make the grade for Cathie Wood and for ARK?

Well, we're not saying they'll be bad stocks at all. In fact, they've been very good stocks and they were a part of our portfolios in the early days. But as they were scaling into the trillion dollar category, we believed that our that that our research would be focused better on the next set of FAANGs. I think if we step back and look at Amazon in the early 2000s, I remember buying that stock and many people derided that decision because the thought process back then is in the tech and telecom bust, which is, you know, the Internet is a figment of Wall Street's imagination.

What makes you think Amazon's ever going to make any money? But if we started seeing more and more of our stocks lose that return expectation and drop below fifteen percent, we would move back toward some of the FAANGs and Microsoft, because we would be treating them essentially as cash-like instruments for our strategy.

ARKW is actually where many of the FAANG stocks exist. Facebook, Amazon and Netflix all sit inside this fund, as well as some of their overseas counterparts and competitors, like Alibaba. ARKW's assets under management increased by 110 percent and its share price has increased by 37 percent over the quarter, beating out many of the individual FAANG companies themselves. Biggest positive movers in ARKW are PayPal, Open Door, Intercontinental Exchange, Unity Software and the grayscale Bitcoin trust. And the biggest net negative movers are Slack, which is currently being acquired by Salesforce, which sits in the middle of this table.

In addition, Alibaba, Splunk, DOUYU, and Huya are some of the bigger net negative movers. The most stable positions in the fund belong to Tesla, Roku, Square, PagerDuty and Salesforce, all of which have not left their positions in the fund since the start of the quarter. Speaking of stable: Bitcoin, let's talk about it.

Bitcoin historically was a huge contributor to your returns. And I know you're still bullish on it because ARK recently published two very favorable white papers on Bitcoin. But so far as I can tell, there has been no Bitcoin in the ARK innovation ETF for more than a year and a half. How come?

Yes, well, we put it in at a one percent position in 2015 when Bitcoin was two hundred and fifty dollars and we scaled with it. We didn't sell it at all. So it hit a 10 percent of the portfolio, at which point we were forced to sell and at the same time there was some forking taking place. So we were getting distributions. And what we learned is that that Bitcoin threw off what's called unqualified income, which is not illegal,

but from an IRS point of view, if our portfolios generate more than 10 percent of gross profits in unqualified income, which is usually a commodity like income, the IRS allows that 10 percent and then will confiscate the rest of it. So if we moved into a black swan event where the equity markets imploded and Bitcoin took off, our clients would be able to keep only 10 percent of that game. And we just thought this was too much of a risk from the fiduciary point of view to subject our investors to.

So if you're wondering why ARKF has no Bitcoin in it, that's why. Don't worry, ARKF holds both Square and PayPal in their top ten positions, both of which have been buying up Bitcoin like crazy. ARKF was created in 2019 and it's already making serious waves with its assets under management increasing by just under one hundred and forty percent this quarter and its price appreciating by a healthy twenty five percent. Just so we're clear on how awesome that is, Amazon stock has appreciated by two point six percent this quarter and Apple stock has appreciated by roughly thirteen point five in the same time frame.

So ARKF is still doing absolutely incredibly. Biggest upward movers: Lightspeed, Silvergate and Pinduoduo. Biggest downward movers, Slack and Zscaler. Like I said in my ARKF video, I think the companies in this fund are disrupting some of the biggest institutions on the planet, that is banks and governments, that control money and the rules of financial transactions, which will result in monumental historic changes to how we live our lives and interact with one another.

With outreach as one of ARK's missions and values, we have wanted to educate people, the average investor, about how their lives are going to change and how they might capitalize on these changes in their portfolios.

So here's ARKQ, ARK Invest's Autonomous Revolution Fund filled with disruptive and life changing technologies that promise a future of mobility as a service, space exploration and collaborative robots. Its assets under management have increased by one hundred and twenty two percent for the quarter, and ARKQ's share price has gone up by about twenty nine percent. Biggest upward movers include everyone's favorite ARK Invest penny stock, Nano Dimension, ticker symbol NNDM; Taiwan Semiconductor, ticker symbol, TSM and NXP Semiconductors, NXPI.

The biggest downward movers include Exone, XONE, and Xilinx, XLNX. This fund most closely aligns with my nerdy sci fi vision of a future filled with spaceships and robots. Speaking of the future, could there be a sixth fund in ARK Invest's future?

You believe there are five technology platforms that are changing the world: artificial intelligence, robotics, energy storage, DNA sequencing and the block chain. But of course, technology isn't static. If there's a sixth, what would it be?

Well, we're looking closely at quantum computing because we're, you know, I've been in the business a long time, more than 40 years. But for the last 20 years, since those it was always 10 years out, always 10 years out. And it probably still is from a commercialization point of view, 10 years out. But now we have the first little baby, rudimentary quantum computers. There's actually something physical out there working.

I'm super excited to hear more about this fund. And I have no doubt that ARK Invest will keep making history in 2021 and beyond. Just like Tesla is years ahead in battery and self-driving technology, I'm starting to believe that ARK Invest is years ahead of other financial institutions when it comes to how they organize their research and share it with the investment community. In fact, this channel can only exist because ARK Invest chooses to publish their research for free without any middlemen.

And one thing that's been of concern this quarter is that ARK Invest distribution partner Resolute Investment Managers announced its intent to purchase a majority stake in ARK Invest in early 2021. The concern is that with any new majority stake holders might come big changes to how ARK invests or whether they'll continue to share their research at all. My stance has always been that Resolute won't change things up too much because they like money and ARK Invest makes a lot of it. Here's what Cathie Wood has to say on the matter.

Cathie, in the midst of the incredible year ARK is having you're in a legal battle for control of your firm, how on earth did that happen?

Well, I will say that has quieted down and we are in negotiations, I think all we wanted were negotiations and we wanted to be fair and square with our partner. And I think that things will work out. I think we're well on our way.

From your perspective, does working things out leave control of the firm either in your hands or the hands of you and your partners? Your colleagues at ARK?

Yes, it does.

And if things were to go pear shaped and for your sake, I hope they don't, do you have a nuclear option? Could you just take the team, pack up, walk out, start a new firm and create new ETFs?

I could not. I could not.

You have a non compete.

And a contractual obligation.

OK, so both sides then have an interest in coming to the table.


And speaking of great news for this channel, I figured I'd share a little quarterly review of Ticker Symbol: You with you. I treat your time spent watching as an investment. So here's how your investment is growing and what you can expect going forward. I started this channel right before Halloween. I planned to make 12 videos before I made any firm decisions about continuing with YouTube. My exactly 12th video was Episode four of the Market Recap, which is still my third most watched video of all time.

I guess a few of you like my Tesla content because that video instantly got me monetized, which I thought would take many more months and videos. I ended November with 62 bucks from YouTube and a smile from ear to ear. It's my proudest sixty two dollars. December is turning out to be a great month. I created a charity video, the one about ARK effing the banks and that money is going to a good cause. I've been approached by two sponsors so far, a VPN solution and a finance app, neither of which I use,

so I rejected them. My hope is to keep the content packed with value and never waste your time. And denying irrelevant sponsors is one way I can do that. I've also been taking out one ad that Google places in each video. Sorry, almighty YouTube algorithm. If each ad is a quarter minute long, then in December I saved my audience almost two months of cumulative ad watching. I'm really proud of that ARK eff those ads. When I started the channel, I had no related projects planned.

As I kept digging into ARK's data to come up with video ideas, I realized I was basing my own investments on the wrong buy and sell signals. So I started calculating the ranks first as an auto updating spreadsheet and then in Tableau, which led to the dashboards that you all see in my videos. When those videos got enough views, the YouTube showed me some statistics that blew my mind. It turns out that most of you watch on mobile devices, not a desktop like I do.

Well, I started reading about the best practices for mobile design, change the banner and literally every thumbnail I made to date. Hopefully the experience on the channel page is better for it. A lot of people have been asking for ARK Invest's positions and trades in written form, spreadsheets, downloadable documents, newsletters and so on. So I've just published Issue negative 3 of the newsletter link in the description below. The first formal issue will be in three weeks and the newsletter is hosted on Patreon.

There's never any pressure to join the Patreon. I will continue sharing ARK's positions and trades in video form like I already do now. Another thing I've launched on the Patreon is the first shared dashboard published in Tableau Public. It lets users explore what's in ARK's funds. The dashboard in the top right is in the hands of my disruptor level patrons. One day I hope to have it working to the point where it can go public for free. It's a process.

The dashboard on the bottom left is the one I'm working on next. There's a ton of work to do and I'm doing it alone, but I'm willing to invest the time. To do that, I'm cutting the market recap episodes for the short holiday trading weeks coming up. I want to get back to the content focused on disruptive innovation. I will still cover ARK Invest news and weekly trades for those weeks in the newsletter, and those issues will be completely public and free,

since I'm not providing a video alternative. I'll post them in the community tab of this channel when they go live. Speaking of the community tab, the first issue of the newsletter is already linked on it. Check it out. I think you'll dig it. Because I don't have to make a whole video, the newsletter comes out a few days before the video giving you the weekend time to research anything you read that piques your interest. Also on the community tab are a few surveys that help me add value by knowing where to focus my content and what else I can be offering the community.

So keep checking the community tab from time to time. Thank you for a wonderful first quarter on YouTube and for investing your precious time with me. 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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