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Home » Popular Markets » Equities » ARKK ETF: behind the numbers on Catherine Wood’s flagship ETF strategy

This is the first of my regular looks at the ARK Innovation Fund ETF (NYSE:ARKK) launched by ARK Invest/Cathie Wood and her team. The purpose for this article is to bring external analysis to her unique style of investing.

Top ten holdings in ARK Innovation Fund

WeightCompanyTickerShares Held
5.5%Teladoc HealthTDOC8,435,384
5.0%Unity SoftwareU8,012,819
4.7%Coinbase GlobalCOIN4,078,022
4.0%Zoom Video CommunicationsZM2,927,344
3.8%Spotify TechnologySPOT3,334,164

ARKK Invest September 14th, 2021

Tesla (NASDAQ:TSLA) is still a large part of ARKK’s holdings – Wood has been a long time Tesla bull, and her conviction on the electric vehicle marker hasn’t eased, even after the stock’s massive rally in 2020. She said her base case for the stock is $3,000 in five years with the best case set around $4,000. Tesla closed Friday September 17th at $759.49.

At the annual SALT conference last week in New York City, the hot-handed innovation investor said it’s OK to trim your largest winning holdings to raise cash to buy what you feel will be your next big winner, especially when the market is giving you an opportunity to do so.

“I am always looking for cash, especially in the flagship fund, which is very concentrated and involves all of our technologies,” Wood said. She was also very bullish on cryptos especially Bitcoin which she expects to rise ten fold over next five years to $500,000.

The ARK Innovation Fund does not hold direct crypto holdings yet, but Coinbase Global (NASDAQ:COIN) is a large holding currently 5) 4.66% among top ten holdings of ARKK ETF.

No cash position

In her ETF mandate Cathy Wood has said in multiple interviews that she does not hold cash – the fund is always fully invested. She uses large stocks as cash holdings were she can exit daily to fulfill any drawdowns from the fund.

Excellent open disclosure with eight funds and crypto ETF in 2022/23

The ARK Invest daily emails are excellent for investors. They explain all daily moves, buys/sells of all the funds. Depending on the fund they all hold 30-55 holdings – so they are diversified, but not too much. ARK Invest currently has eight funds with symbols:

  1. ARKK “Disruptive” Innovation
  2. ARKQ Autonomous Technology & Robotics
  3. ARKG Genomic Revolution
  4. ARKW Next Generation Internet
  5. ARKF Fintech Innovation
  6. ARKX Space Exploration and Innovation
  7. PRNT 3D Printing
  8. IZRL Israel Innovative Technology

China threat

My belief in Wood’s investment strategy increased when she realized recently (in early July) that Chinese politics and U.S. regulatory demands are a severe threat to Chinese ADRs (American Depositary Receipts), instead of brushing them aside and claiming that Chinese stocks are a dip-buying opportunity like most asset managers have done in the recent months.

The trading range & net assets

The ARK Innovation Fund closed Friday September 19th, 2021 at $121.07. The 52-week trading range of ARKK is $159.70-85.27. The All Time High (ATH) was achieved February 16th, 2021 and the 52-week low September 24th, 2020. ARKK “The Flagship Fund” had net assets of $25.5 billion June 30th, 2021. The expense ratio of the ETF is 0.75% p.a.

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Retail frenzy 2020 / Institutions entering 2021

It’s safe to say that the ARKK hype has cooled down in 2021, and its six-month inflow of 27% doesn’t precisely stack up against its near 2000% three-year inflow. ARKK’s ETFs were a hot topic under retail traders during 2020, but 2021 has really been a story of crypto currencies and meme stocks for those very traders.

Long-term investment or trading vehicle?

The purpose of this column is to look past the speculative noise; it is trying to determine whether the ARK Innovation Fund is actually a solid long-term investment or trading vehicle with a “risk on” and “risk off” approach. In other words is it possible to trade in and out off it?

ARKK’s portfolio allocation is predominantly focused on Cloud-Computing (14%), E-Commerce (12%), and Digital Media (11%).

Institutional investors have noted the ETF’s prospects, resulting in a 300% increase in institutional ownership to 35% total since June 2020. Notable holders include Morgan Stanley (MS) 6% and Bank of America (BAC) 3%.

Finally, there is still close to 65% of the ETF not owned by institutions. ETFs are often over 90% institutionally owned; if this ETF experiences a similar trend, some serious liquidity could be on its way, meaning plenty of upside in the asset’s price, but some very famous short sellers like Michael Burry, the pathology-resident-turned-hedge-fund manager whose success in calling the housing market’s collapse was made famous by Christian Bale in the 2015 film “The Big Short.

As of the end of June, Burry’s Scion Asset Management held bearish put options worth nearly $31 million against 235,500 shares of the ARKK, but last Tuesday Wood did not seem fazed by this. She laid out her investment thesis in a series of Twitter posts Tuesday — then capped off her messages by throwing a jab at Burry’s latest call:

“To his credit, Michael Burry made a great call based on fundamentals and recognized the calamity brewing in the housing/mortgage market,” Wood said. “I do not believe that he understands the fundamentals that are creating explosive growth and investment opportunities in the innovation space.”

Time will tell who is right.

Competition coming

Other companies have entered the active ETF space : Wisdom Tree, First Trust, and BlackRock, to name a few. Even Goldman Sachs announced last week that it would be introducing it’s own active ETFs. We will be revisiting this topic on a regular basis, so make sure you sign up for updates.


This article is not investment advice. Investors should do their own research or consult a professional advisor.

Raine Lahtinen

Raine Lahtinen

Raine Lahtinen has spent over 25 years in wealth management and trading. His active investment days started when he attended University of Miami 1987-1991 majoring in International Finance and Marketing. He has experienced the highs and lows of the stock markets since the 1987 crash, bubble 2001-2002, the 2008 financial crisis and the current record breaking rally.

Since 1995, Raine has been based in Brussels, Belgium in Continental Europe as an international financial advisor and director of investments in various UK IFA firms. He has written many popular columns about markets and investments during his professional life. His passion is finding undervalued listed stocks. As a Finnish native he specializes on Nordic and US stocks.

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