Entering text into the input field will update the search result below

ARKK: Disrupters Will Get Disrupted

Apr. 04, 2021 3:39 PM ETARK Innovation ETF (ARKK)227 Comments

Summary

  • ARK Innovation ETF has pulled back after delivering a spectacular 2020.
  • We look at the underlying components of this famous ETF.
  • We tell you about the two biggest forces that weigh on these components.
  • I do much more than just articles at Conservative Income Portfolio: Members get access to model portfolios, regular updates, a chat room, and more. Learn More Β»

Businessman Popping The Stock Market Bubble
Photo by DNY59/E+ via Getty Images

Perhaps no ETF has captured the average investor's attention in the last year as much as ARK Innovation ETF (NYSEARCA:ARKK). The fund is actively managed and aims to generate long-term growth of

Are you looking for Real Yields which reduce portfolio volatility?Β  Β 

Conservative Income Portfolio Β targets the best value stocks with the highest margins of safety. The volatility of these investments is further lowered using the best priced options. Our Cash Secured Put and Covered Call Portfolios are designed to reduce volatility while generating 7-9% yields.Β  We focus on being the house and take the opposite side of the gambler.Β 

Learn more about our methodΒ & why it might be right for your portfolio.

This article was written by

Trapping Value profile picture
40.67K Followers

Trapping Value is a team of analysts with over 40 years of combined experience generating options income while also focusing on capital preservation. They run the investing group Conservative Income Portfolio in partnership with Preferred Stock Trader. The investing group features two income-generating portfolios and a bond ladder.

Trapping Value provides Covered Calls, and Preferred Stock Trader covers Fixed Income. The Covered Calls Portfolio is designed to provide lower volatility income investing with a focus on capital preservation. The fixed income portfolio focuses on buying securities with high income potential and heavy undervaluation relative to comparatives. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (227)

k
Followers of ARKK are crying and bleeding badly. We have been telling these followers that simply following ARKK as an investment strategy is simply silly. There you are now. This is just the beginning. It is going to get worse. My 2 cents
k
@kalu0003 , ARKK is as outdated as an Aardvark!
Trapping Value profile picture
ARKK has now underperformed BRK.B by 43% since IBD put up that silly picture.
e
Forget the growth stocks, it looks to me that the DJIA and cyclicals valuations are trading in La La Land. Many of them are 50% higher than their all time highs! That's an all in bet on the come out roll, lol.
k
@edgehillcm , The entire market is a bubble!
AnonB profile picture
@kimbillro yes it is, just need another decent reset like the covid one
k
@AnonB , Bring it on!
B
Please use a logarithmic chart when showing the SP500. When people show it as linear, as you do, it easily makes the market seem as if an irrational bubble. Once stretched out using log instead of linear and the market looks much more realistic in its behavior over the long term.
Trapping Value profile picture
@Breadth and Sentiment
1) It is not my chart.
2) Point was not the price but headlines...20 years apart.
B
@Trapping Value understood. Still, if you’re going to post a chart, find a log one. No idea why linear in the investing word even exists. 50 points from 50 to 100 is very different than 1000 to 1050.
Trapping Value profile picture
@Breadth and Sentiment Agree on that. Everything looks like a bubble on linear. Hard to find a lot of log scaled charts.
Lake OZ boater profile picture
On the heels of Jamie Dimon's prognostication that happy days are here again, the "growth scare" has hit a speed bump.

www.bloomberg.com/...

- As of 4/8/21, the number of Americans filing for first time jobless claims has spiked back to 744K.

-Over 18 million Americans remain on some form of government jobless benefit.

ARK Innovation ETF (ARKK) is up nicely this morning (4/8/21) on a decline in the yield of the 10 year treasury note.

finance.yahoo.com/...

Since the recent peak of the yield on the 30-year treasury bond at 2.45%, it is down (-13) bps to 2.32%.

www.bloomberg.com/...

Interest rates are much more interested in the outlook for future inflation than what it has measured in the last 12 months.

The Cleveland Fed's 10-year average expected inflation rate is currently: 1.48%
(Estimates going back to 1982).

www.clevelandfed.org/...
k
@LakeOZ boater , A huge inflation is directly ahead.
Lake OZ boater profile picture
@kimbillro It will be temporary. Among the reasons...

Supply chains were disrupted by the pandemic. Low-cost producers in Asia and other parts of the globe were unable to deliver much of their products into the US. This allowed higher cost U.S. producers to gain market share. Supply chains will be gradually restored as the low-cost producers who lost market share will lower prices to regain it.

Two main headwinds to US and global economic growth are massive debt accumulation and aging demographics--- both of which have worsened since the pandemic hit in 2020.
k
@LakeOZ boater , I will eventually go the way of a house of cards!
Tall Seller profile picture
πŸ”₯ $ARKK was one of the very best investments of the last 5 years. Anyone who put $10K in it 5 years ago, turned in to something like $74K.πŸ”₯

Check out ARK’s amazing results, HERE:
πŸ‘‡πŸ»πŸ‘‡πŸ»πŸ‘‡πŸ»πŸ‘‡πŸ»πŸ‘‡πŸ»
etfs.ark-funds.com/...
πŸ‘†πŸ»πŸ‘†πŸ»πŸ‘†πŸ»πŸ‘†πŸ»πŸ‘†πŸ»

LONG $ARKK for me for the next +10 years. Volatility is a big yawn for me. Cathie rotates company picks that will likely result in decades of massive growth from $ARKK.

πŸ“ˆπŸ“ˆπŸ“ˆπŸš€πŸš€πŸ”œπŸ’°πŸ’°πŸ’°
Eric_Riggs profile picture
ARKK was one of the best short of 2021! Shorts will definitely have more opportunities going forward. For now, this is going to trade sideways for a few months, but once those stay-at-home stocks start to disappoint with poor guidance. we'll gain some momentum.
k
@Eric_Riggs , It will be a short at some point but I don't know when.
A
I think with a decent team of analysts, anyone could pick the 40 or so stocks she's investing in. Doesn't mean that means anything if you get my drift...
k
@Atlas44 , You could throw darts and beat her 50% of the time.
Tall Seller profile picture
I enjoy tracking ARK Invests [https://ark-funds.com ] daily allocation changes. I just follow this account on Twitter [twitter.com/... ] and set an alert there to get notified every day when the account posts ARK’s daily trades, like this post:
πŸ‘‡πŸ»πŸ‘‡πŸ»πŸ‘‡πŸ»
twitter.com/...
πŸ‘†πŸ»πŸ‘†πŸ»πŸ‘†πŸ»
Ellenindc profile picture
@Trapping Value ...unless I’m dreaming, you will get at least ten posters who argue that arbitrage will always provide liquidity so it doesn’t matter what sort of stocks the ETF holds. My answer to that false assessment is: go back to May 10, 2010 when a flash crash exposed ETFs to pitiless selling to values far below the basket of stocks value with many trades being cancelled after a thousand point drop. The dutiful arbitrage traders simply left the auditorium.
Trapping Value profile picture
@Ellenindc She is losing liquidity by doubling down on the high multiple tint cap, plays and reducing Novartis like plays.
Zelid profile picture
@Ellenindc well said
N
ARK state very clearly that their funds are based on buying firms in markets where the existing technology is being over thrown. IF this is true, then past experience shows that holding the disruptor is lower risk than holding the disrupted. ARK also state clearly that investors need to use a 4 to 6 year time horizon, which means that for most years, returns will be low, and then jump in exceptional years.
Your analysis ignores both of these - eg; you focus on short-term price changes. Yes ARK is high beta in the short term, but over a 3 to 5 year period, the beta is very different.
Any real analysis of ARK has to be based on questions around whether or not the claimed technological disruption will happen, the extent of that disruption, and whether or not ARK have chosen the right firms. Please contribute to that debate.
B
@NZ Prof why is nowhere in your comment anything about the price of a stock already reflecting that disruption. There is difference between a great company and a great stock. I think the ARKK chart looks good here but commenting about disruptors as a great investment without regard to the price one is paying is sophomoric. By that standard there is no price at which it ain’t a good idea to buy these disruptors.
Tall Seller profile picture
Gotta love that $ARKK holding $SHOP just had alternative data sources conclude its highly probable Shopify has had around 120% on average YoY trailing 14 day average GPV growth between January and March in the USA with it even getting as high as 141%.

That’s MASSIVE! I bet $ARKK, $ARKF, &/or $ARKW could buy more $SHOP with that kind of outsized growth happening.

No wonder Cathie has been BUYING $SHOP and increasing her proportionate allocations of $SHOP in $ARKK, $ARKF, & $ARKW for the last 6 months straight.
πŸ“ˆπŸ“ˆπŸ“ˆπŸ“ˆ
AnonB profile picture
@Tall Seller there is something artificial and tampering going on with these ARK funds
Tall Seller profile picture
The only thing artificial is they invest in Artificial Intelligence, in addition to other such disruptive niches with massive and long term growth ahead, like energy storage, gene sequencing & editing, robotics, cryptocurrency & blockchain.
M
Wish I bought ARKK 3 years ago :( . Hopefully we can get back in at a decent price!
M
Agree. Mkt needs a dose of sanity right now. Too much Ark and Softbank madness, not enough good sensible investing.
Cathie Wood = Garret Van Wagoner
Tall Seller profile picture
πŸ’₯Pretty cool that ARK Invest’s Director of Research, Brett Winton thinks the 5 core platform segments that ARK focusses on (AI, energy storage, gene sequencing & editing, robotics, cryptocurrency & blockchain) will grow from $14TRILLION in attributable market cap to $28TRILLION over the next 5 years. Check out his Bloomberg interview here:

We Don't Lack Opportunities to Deploy Our Capital: ARK's Brett Winton
πŸ‘‰πŸ» www.bloomberg.com/...

Sounds like the right place to park some of my money with ARK Invest for the next 5 years.

LONG $ARKK for me...
πŸ“ˆπŸ“ˆπŸ“ˆπŸ“ˆπŸ“ˆπŸ“ˆ
Tall Seller profile picture
$ARKK is very likely going HIGHER this year, and next year, and they year after that, and the year after that, and the year after that...etc.

Unless the cart and buggy is the next growth driver over the future, what Cathie Wood invests in (ark-funds.com/... ), could go up 20X in coming years/decades.
Q
@Tall Seller Well, I don't know about 20X, but it is likely that ARKK goes higher long term.

This is the thing about market inefficiencies: they are almost always short-term. We have to remember that price is supported by what people are willing to pay for something. So there is price discovery. Price will always return to what people think is fair value, and with a stock that is influenced by earnings.

Will every single company in ARKK disrupt the future marketplace? Unlikely. But Cathie doesn't need them to. If only a fraction of her portfolio goes 10X, then the fund will rise in value. Why is that? It's because it's weighted by definition, just like how only a few tech tickers have dragged the S&P 500 kicking and screaming higher despite a massive wall of worry that has spanned decades.

To pretend that the technologies represented in the basket that is ARKK are not transformative is just a form of denial. And it is equally a stretch to believe that the runner in the lead is always going to stumble and fall. Look at Intel. I thought it was going to decline for sure and here it is, knocking on all time highs again. The incumbent leader has a number of advantages, not least of which is a head start on competitors. And anyone who has actually built anything of lasting value in the tech industry knows that it's not so easy to reverse engineer success. You're always playing catch up unless you just happen to get RIDICULOUSLY lucky and stumble upon a talent like Steve Jobs.

Don't rely upon this coordinated hedge fund attack on Cathie Woods. They don't have any loyalty to one another, they are just in it to make a quick buck. As soon as they reach their target price (assuming their efforts can even get them there), they are going to flip to the long side and leave any short who is slow to cover holding the bag. There is no way to stop the tech revolution that is coming. Is every pick in ARKK a winner? Probably not. But I wouldn't bet against them collectively, no, not if you actually research what each one of these companies actually does. Oh, you did do that before opening a short position, right?
Rational_investor_09 profile picture
@Tall Seller possible. As JMK puts it : "the markets can remain irrational longer than you can remain solvent"

We are truly in a period of extreme irrationality and the bubble can inflate for quite a bit of time. I've seen that story before in 2001 and 2008. Too much risks for me thanks.
Rational_investor_09 profile picture
@Qichar "We have to remember that price is supported by what people are willing to pay for something. So there is price discovery." not really. Most of the money flowing in these funds and growth comes from investment banks, international JUG and IFE. Without the biggest FED pump in history, ARRK would be a flat ETF. The FED has created the bubble, most people don't understand this basic concept.
d
For now & in the short term, the author is right about ARK & Cathie being out of favor as innovative growth stocks continue relative weakness. But in time, disruptive growth & high valuation growth stocks will join the overall bull market in going up. Still like SQ, PLTR, FVRR, CRWD, APPS, and others, on dips for longer term investments.
o
Where is the disruptor to Amazon?
Where is the disruptor to Google?
Where is the dusruptor to Apple?
The future is winner takes most, such as Tesla.
Good luck with your legacy W Buffet investing thesis
k
allen_jones
wrote "A.D. (after disruption), everyone is now driving EV's and $TSLA is the largest car company -"

allen_jones - the above statement is A BLUE LIE in BROAD DAY LIGHT. It is simply FALSE. Thanks
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About ARKK

SymbolLast Price% Chg
Expense Ratio
Div Frequency
Div Rate (TTM)
Yield (TTM)
Assets (AUM)
Compare to Peers

More on ARKK

Related Stocks

SymbolLast Price% Chg
ARKK
--
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.