Mentioned in Video:

🔥 #CathieWood made massive trades in all #ARKInvest funds over the last quarter, especially in #ARKK. This episode focuses on the #GrowthStocks inside their largest and most misunderstood funds: ARKK, #ARKG, and #ARKF. The @ARK Invest ETFs are filled with some of the best stocks to buy now – hello TSLA (Tesla stock) – but can Cathie Wood's funds reach new all-time highs? Find out why I'm more bullish on ARK's picks than ever in the final part of 2021's Q2 State of the ARK!

Video Transcript:

Now, I warn you that ARK's fund suffered from a glaring flaw: a ridiculous lack of diversification.

Maybe we should stop allowing more inflows and close the ETFs. Close the funds.

A lot of your favorite stocks are the classic stay at home plays. Investors have soured on them lately and you've seen some really sharp sell offs and questions about whether they're overvalued. Why are you sticking with them?

I'm back with the final part of the State of the ARK. If you're just tuning in, welcome. This channel focuses a lot on ARK Invest's research and biggest investments. The State of the ARK is about looking back at the previous quarter and understanding how they put their money where their mouth is. So much has happened this quarter that I had to split this project into three episodes. You can watch them in any order. Part one focused on looking at the changes in ARK Invest's combined positions. Part two focused on adding context to the biggest trades that Cathie Wood made inside ARKX, ARKW and ARKQ, three funds that have a lot of overlap in terms of advanced Internet technology companies. Because I treat your time like an investment,

that episode also gave a performance review of this channel and how your investment is paying off big time. Both of those episodes, as well as all of my resources for this episode, can be found in the description below. This is part three, and it focuses on what I think are the three most misunderstood funds managed by Cathie Wood: ARKF, ARK Invest's fintech fund, ARKG, their genomics fund, and ARKK, their massive $25 billion flagship innovation fund. All three of these funds contain advanced technology companies that are changing our lives in big ways, that traditional Wall Street analysts can't seem to wrap their heads around.

And I don't blame them. Innovation platforms like Blockchain Technology and CRISPR gene editing are tough to understand and even tougher to value. That shouldn't stop us from trying. If you enjoy this type of commentary and analysis, consider liking this video and subscribing to the channel 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 start with fintech, which is all about the often misunderstood concept of frictionless value transfer.

Here's Cathie Wood sharing her opinion about digital wallets on episode nine of Benzinga's Raz report earlier this year. Then we'll put that clip in context by diving into ARKF.

Are you doing more in fintech? Do you look at, like, enabling technologies in the public markets, or is it more… Yeah, I just want to get your take.

We think that fintech is probably one of the most misunderstood of all of the technology platforms. Digital wallets, digital wallets are going to, we believe, gut banks. So remember, I told you the indexes have value traps. We think banks are among them.

ARKF is all about digitizing and disintermediating financial transactions and the hardware and infrastructure that support that: think peer to peer lending, digital wallets, contactless mobile payments, and using artificial intelligence to calculate risk, interest rates, insurance premiums, and so on. It's also filled with companies like Zillow, Intercontinental Exchange, Opendoor and Intuit. These companies focus on providing professional services, real estate loans, managing a business. But without all the friction that comes with the physical processes of doing so. If I could describe ARKF in just three words, it would be frictionless value transfer; where a value could be a professional service, not just money.

Frictionless value transfer was its own big idea in 2018, and I think it's a really elegant way of describing many of the technology driven changes that we're seeing in society right now. Here's an interesting note. Square and PayPal are the two big digital wallet companies in the US owning CashApp and Venmo, respectively. Instead of betting on one, ARKF has them both among its top positions. Here's a look at how ARKF's positions have changed over the quarter. Since the fund only grew by one and a half percent in assets under management,

the rows are basically colored so that growing positions are in green and shrinking ones are in red., ticker symbol JD, moved up 16 ranks in ARKF from ranked 22 at the start of the quarter to rank six since Cathie Wood almost doubled its position size. Coinbase, ticker symbol COIN, IPO'ed on April 14 and is now the 8th biggest position in ARKF. Pinduoduo, PDD, moved up twelve ranks after Cathie Wood increased the number of shares held in the fund by over 50%. Ping An Healthcare, ticker symbol 1833 on the Hong Kong Stock Exchange grew by over 40%.

A lot of companies also got rebalanced when their stock prices made big moves to keep their overall weights the same in the fund. Square, PayPal, Zillow, ADEN, Opendoor and DocuSign all got rebalanced after either massive rallies or crashes. These funds are all conviction weighted, so we might be seeing exactly where Cathie Wood thinks these companies should be inside ARKF until something fundamentally changes with one of them. In my opinion, the fintech fund is filled with the companies that will change our lives the most and their effects will be felt everywhere.

Banking and money management, home buying, shopping, health benefits and insurance and much more. I also think many of these transformations in value transfer will happen sooner than later. If you agree with that, check out my episode discussing the way fintech is disrupting traditional banking. I'll leave a link to that in the top right hand corner of your screen right now and in the description below as well. Likewise, if you think the fintech space is up your alley, the companies in the greenest rows of this table might be worth your further research.

That's how all the pieces, the research, the themes, the individual companies and the relative holdings' changes fit together. If you're interested in the full tables of changes for each fund, I'll leave a PDF copy of this presentation in the description below and put it up on as well. I'm building that website to have everything in one place instead of you having to hunt down the resources across all the videos on my channel. Boom. Reducing friction via the Internet is awesome. Okay, we're onto the heavyweights.

That joke worked better in my head. All of the companies in ARKG are innovating in things like specialized cell or gene therapies, DNA sequencing, healthcare specific big data, medical devices or agricultural biology. They're working towards extending or enhancing quality of life, human or otherwise. About a week ago there was a new milestone in how CRISPR gene editing medicine was being delivered to patients. For the first time, it was delivered as an IV infusion. This is one of those moments where I think research, technology, innovative companies and the stock market really come together to reflect the state of the art and how we're progressing towards a better future.

And, in all seriousness, this CNBC clip captures it all beautifully.

You hit the nail on the head, Joe, this is a very rare disease that we're talking about for this application that Intellia Therapeutics had this tremendous success over the weekend, but it really is a proof point for CRISPR gene editing. This is the gene editing technology that won the Nobel Prize last year and you can see and tell you up there more than 52% along with Regeneron is part partner up almost 3% on this news this morning. This is the first time that CRISPR has been used, delivered systemically as a medicine to the human body.

And what that means is it was given as an IV infusion for this rare disease known as ATTR: Transthyretin Amyloidosis. It affects about 50,000 people and what they needed to do was make this genetic cut to try to reduce a gene that was creating a protein that would build up and cause these issues for patients. And what they found is that after one administration of this CRISPR technology, they reduced that protein in the high dose by 87%. And guys, this is a phase one trial. Only six patients.

That high dose was only in three patients. But you can see the implications of proving that this can be done. Previously, CRISPR was used either in cells that were taken out of patients, bodies edited in the lab and then given back or injected directly into the site where you needed to make these genetic edits. This is the first time it's really been delivered as other medicines are delivered systemically. So you can see Alnylam, which is a competitor in this very rare disease, is down 11% on this.

Even though this is only phase one data, they've still got a ways to go to get this potentially to market, but it's also boosting CRISPR stocks across the board, another company called CRISPR, and another one called Editas, both seen boosts from this just because it's proving that CRISPR can really be turned into a medicine in a broader way. Guys.

There are a lot of hereditary diseases, but many are not hereditary, and you think of cancer or Alzheimer's and all this stuff, but they do have gene products. And if we can identify where the aberration is, whether it comes later in life, it's not in your stem cells. It's not in your germ cells, but it's in. It just happens to you as you're living whatever you could block gene products that cost just about anything using this technology. So the application would be way beyond just hereditary diseases.

Yeah, absolutely. If you can figure out a protein that you want to block or you want to make more of, that's where this technology is potentially differentiated, there are other technologies that block the production of proteins. That Alnylam drug that's already out there for this rare disease does that. So CRISPR could potentially go in either direction. But there are still a lot of things that need to get proven out here. This is six patients in a phase one clinical trial, but it's the first time we've seen it done delivered as medicine.

I'm not going to sit here and pretend I understand everything about CRISPR gene editing. But what's clear to me is that the companies on this list are tackling a challenging problem and changing the world for the better. That's what their stock prices are reflecting here. Not some short report or change in fiscal policy, but real progress that's affecting people's lives. Intellia Therapeutics, CRISPR Therapeutics, Editas Medicine, Beam Therapeutics and Regeneron Pharmaceuticals are all in ARKG. Yeah, all of them. I'm not a financial advisor, but I couldn't be more proud to to be holding ARKG right now,

regardless of this awesome price action. I'm invested in companies that are helping cure tough, rare, bad diseases in human beings. This is why I'm so passionate about investing in innovation. ARKG's assets under management increased by 3.7% over the quarter. The biggest upward movers were: CareDx, ticker symbol, cDNA; Ionus Pharmaceuticals, IONS; Intellia Therapeutics, NTLA; Beam Therapeutics, BEAM; and Adaptive Technologies, ADPT. I'm definitely going to read up on the companies in ARKG so that I can do a better job of covering it on this channel. But hopefully that clip provided you with at least some value. Phew, we're almost home.

There are three big things you need to know about ARKK, ARK Invest's flagship innovation fund. First, it's the biggest actively managed ETF on the planet, weighing in at over $25 billion in assets under management. It's currently bigger than all of ARK Invest's other actively managed funds put together. Second, it contains no unique stocks. Every stock in this fund is in at least one other ARK Invest fund, usually ARKW or ARKG. Said another way, if we show all of our contest holdings on the same bar chart and combine the funds,

there are no red only bars. Many of the bars with red also contain ARKG, which is in yellow or ARKW, which is in green, and bars with any red in them are high conviction stocks by definition, since these funds are all conviction weighted and managed by the same Cathie Wood. Third, I covered ARK Invest's biggest trades in ARKK back in May in the same episode where I said the market bottom was in for growth stocks. To be clear, I'm not saying I called the bottom of the market or that I'm able to time the market in general.

What I saw was a huge shift in ARKK away from many genomic stocks and into many Internet technology stocks. Cathie Wood often says that genomic stocks are the next FAANG stocks. FAANG stands for Facebook, Apple, Amazon, Netflix and Google, some of the best performing stocks over a long period of time. I believe this massive change in conviction between entire innovation themes can only happen when prices for one theme become insanely low compared to ARK Invest's five year outlook for that theme. When that happened,Cathie Wood traded gains in the far future for the same gains in the near future because web technology as a whole is much more mature than genomics technology is today.

In my opinion, what Cathie Wood actually did is lower ARKK's technical risk, meaning it's now much more likely to meet and exceed their long term price performance targets as a result. Here's Cathie Wood saying as much in a Bloomberg Business Week interview, right as the stay at home stocks that she rotated into were bottoming out.

My confidence has only increased in our strategies. I can tell you that the valuations in our portfolios would suggest that over the next five years again, if our research is correct, no promises. We believe that our portfolios will more than triple over the next five years, so that's more than a 25% compound annual rate of return over the next five years. Actually, it's approaching 30 after today. So I'm looking at that with great confidence because these innovation platforms have hit escape velocity and there is no turning back.

There is no turning back.

If you're interested in my analysis on her huge trades inside ARKK, I'll leave a link to that episode in the top right hand corner of your screen right now and in the description below as well. Hopefully you're starting to see that all of my videos are really interconnecting puzzle pieces, and these end of quarter episodes really focus on how they all fit together. Let me just highlight the stocks that Cathie Wood bought at the bottom in the middle of May because they're still the biggest changes in the fund. As I do,

just note that the prices on almost all of them are already up by double digits. The rows with the blanks are Coinbase, ticker symbol COIN and UIPath, ticker symbol PATH, both of which IPO'ed after the start of the quarter; as well as Skillz, ticker symbol SKLZ, which got added to ARKK at the end of April. Then we have Zoom Video, ticker symbol ZM; Shopify, SHOP; Twilio, TWLO; Palantir, PLTR; 10X Genomics, TXG; Beam Therapeutics, BEAM; Draft Kings DKNG and Twitter, TWTR; and of course, Unity Software, ticker symbol U.

When we look back on our case performance in several quarters, I believe these trades will be a big part of what got them there. I hope this episode helped you understand some of the most misunderstood themes inside ARK Invest's funds, including fintech, Frictionless Value Transfer; Genomics, CRISPR gene editing; and also how the weights between them changed inside ARKK. If it did, let me know by investing in the like button and subscribing to the channel with all notifications turned on. That's a great way to invest in the channel that invests in you.

And speaking of investing in you, how's that for a smooth segue? Let me know in the comments below on what other things you'd like to see: T shirts and mugs, a public portfolio that we can track together weekly, some other topics or different types of content, your voice matters. After all, 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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Alex Divinsky

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

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