Avoid ARKK
With a reported net worth of a few hundred million dollars, Ark Invests CEO Cathie Wood laid an egg in her interview yesterday defending the company’s lousy recent performance.
It wasn’t so much that tech has sold off and especially growth stocks have bore the brunt of the carnage, but it was her logic behind her answers that raises more questions than answers.
Doing a deep drive into her array of ETFs, there are some headscratchers.
For example, in her ARKX Space Exploration and Innovation ETF (ARKX), why is her 5th biggest holding a Japanese construction company that specializes in making excavators Komatsu?
Her ETFs are full of these stocks that shouldn’t be there and she continues to bang on the drum about her portfolio possessing superior innovation.
Her second largest holding in this same ETF is a 3D printing ETF (PRNT) which also is illogical and has nothing to do with space exploration.
In her ARK Genomic Fund ETF (ARKG) her second largest position is Teladoc (TDOC) which provides remote doctor services through an app.
TDOC has nothing to do with genomics whatsoever.
Her flagship fund ARK Innovation ETF (ARKK) fund is down 60% in the past 365 years and it appears as if the pain is just starting, with huge drawdowns in many of her core holdings.
In the interview, she also gave some bizarre answers.
She reasoned to the viewer that the reason her team avoided Moderna (MRNA) is because the valuation is too high.
This is at the same time she completely ignores valuation for “innovation” stocks that aren’t interested in turning a profit because they are too “innovative.”
A company like TDOC has an EPS of -$5.5 and many of her key holdings are big loss makers which in the era of Central Bank hawkishness is a death knell.
Some of her other key holdings like Roku (ROKU) are down 25% just today and down 77% in the last 365 days.
TDOC is also down 77% in the last 365 days and 7% just today.
I mean for a net worth of a few hundred million dollars, surely, performance could be a little better, right?
What Cathy Wood misses completely is that being in the stock market is about the right and wrong timing which she behaves like it doesn’t exist because her time horizon is forever.
She likes to say “innovation is on sale,” but I would argue, quality is on sale and readers should migrate to higher ground to the likes of Amazon, Google, Apple, and Microsoft.
Wood's response was that other people “aren’t doing the research” which I find to be a ridiculous claim in itself.
In another absolute shocker, she played down inflation as something that has been more or less contained and will work itself through.
Then she highlighted all the “deflationary forces” as the reasons why inflation will be tamed which seems highly unlikely.
She plain out avoided many of the hard questions because she simply had no good response.
She stuck with the marketing pamphlet as if that was all she knew.
Wood also completely ignored anything related to tactical and active portfolio management and her plan is pretty much to stick with what she has even if there are 99% selloffs or drastic shifts in market conditions.
ROKU and TDOC are down 77% and she repeats the same general phrases as if we are in a bull market.
Readers wants to know what the next step is and how to strategically navigate through this bout of high volatility.
To shame the market and blame others on not “doing the research” is quite tone deaf and I could never recommend Cathy Wood and her ARKK fund to anyone.
To give her credit, she got the Tesla (TSLA) call spot on and crushed that one, but the real stock market people know that this industry is a what have you done for me lately industry and only when the tide goes out, we see who’s swimming naked.
