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This is my second take on the ARK Innovation Fund ETF (ARKK) launched by ARK Invest/Cathie Wood and her team. The purpose for this column is to bring an outside view to her unique style of investing.

ARKK defines ‘‘disruptive innovation’’ as the introduction of a technologically enabled new product or service that potentially changes the way the world works. I, myself strongly believe that is the key to successfully stock picking.

ARKK is tradable active ETF, with 78.85% of fund’s assets in its top twenty holdings. I will concentrate my analysis going forward on the moves inside these top 20 positions. The top three are the same from my last analysis, but there has been some serious selling again in Tesla.

Cathy Wood and the Tesla trade

Tesla is still a clear number one holding among ARKK’s assets – 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.

Top 20 Holdings in ARKK Disruptive Innovation ETF
CompanyTickerSharesPriceMarket ValueWeightYTD
1TeslaTSLA2,469,443$785,49$1,959,774,6599.65%11.31%
2Teladoc HealthTDOC9,124,177$135,55$1,193,442,3515.88%-34.21%
3ROKUROKU3,561,738$323,36$1,155,677,1285.69%-2.61%
4Coinbase GlobalCOIN4,452,360$248,14$1,120,169,2525.52%-42.23%
5Unity SoftwareU7,871,005$136,22$1,071,007,6505.28%-11.24%
6Zoom VideoZM3,465,434$255,05$888,086,7714.38%-24.39%
7SquareSQ3,345,605$238,49$833,590,9414.11%9.58%
8SpotifySPOT3,346,241$232,88$786,032,0103.87%-25.99%
9ShopifySHOP554,609$1.378,03$775,620,6863.82%21.73%
10TwilioTWLO2,058,263$320,60$667,227,1163.29%-5.29%
11UIPATHPATH12,670,173$51,38$662,903,4513.27%-42.91%
12Exact SciencesEXAS6,793,407$93,69$648,770,3683.20%-29.29%
13Zillow GroupZ6,942,125$91,04$650,199,4273.20%-29.86%
14Palantir TechPLTR24,268,294$23,50$575,886,6162.84%-0.21%
15Intelia TherapeuticsNTLA4,110,536$120,71$554,018,0422.73%121.89%
16DraftkingsDKNG11,096,933$47,91$547,855,5822.70%2.90%
17TwitterTWTR8,099,991$63,68$518,156,4242.55%17.60%
18CRISPR TherapeuticsCRSP4,992,440$98,63$514,171,3952.53%-35.58%
19BEAM TherapeuticsBEAM5,387,568$83,57$457,727,7772.25%2.36%
20InvitaeNVTA15,969,506$26,15$424,309,7742.09%-37.46%
Source: ARKK Invest, 8th October 2021

Wood said her base case for the stock is $3,000 in five years with the best case set around $4,000. Tesla closed Friday October 8th at $785.49. Wood and the team have sold 592,829 shares in Tesla since September 14th, taking the position down to 9.65% from 10.7%. That would tell me that the fund is bleeding cash and/or she thinks Tesla is overvalued right now.

A date for your diary

On the 21st of October, Stuart Fieldhouse will be joining Sarah Lowther and Mark Watson-Mitchell to discuss which small cap investments they like the look of and, perhaps, which ones they do not. It promises to be a lively and insightful discussion. If you are interested in investing in small cap stocks then this could be a profitable use of your time. We hope you can make it! Sign up now

Tesla is moving its headquarters to Texas and ARK Invest is moving to Florida. Both are very favorable places to work and live, because the tax burden is much less than New York. Both companies have opportunities for employees to work remotely part of the time or even full-time, which seems to be the new normal after the Covid-19 pandemic.

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

The ARKK ETF does not hold direct crypto holdings yet, but Coinbase Global (COIN) is a large holding and ARKK has been adding to it in the last few weeks moving it to #4 5.52% from #5 4.66% among the top ten holdings of ARKK ETF.

Another sizeable increase has been Square (SQ) rising from 3.7% to 4.1%, with its position rising from #9 to #7. The problem with the top 20 stocks in ARKK is that only 7/20 stocks have positive YTDs. This would mean Tesla has been used as the cash asset.

The trading range and net assets

The ARKK ETF closed Friday October 8th, 2021 at $110.60. The 52-week trading range of ARKK is $159.70-89.39. The All Time High (ATH) was achieved February 16th, 2021 and the 52-week low November 2nd, 2020.

ARKK “The Flagship Fund” had net assets of $25.5 billion June 30th, 2021, calculating from the daily holdings data dated October 8th, 2021 provided daily on their excellent website. ARK have
roughly $21 billion in assets in the fund.

The ARKK June 30th, 2021 price was $130.78. They have lost nearly $3.9 billion since then or -15.43% of the assets under management and are currently holding 46 (55 max) different stocks.

I would start an ARKK position near $100, with a 10% stop. If the ETF ARKK breaks its 52 week low I would close the position. The tech sell-off should be almost over. The expense ratio of the ETF is 0.75% p.a., which is quite reasonable compared to the other actively managed funds.

No cash position

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

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand 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, Dot.com 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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A date for your diary

On the 21st of October, Stuart Fieldhouse will be joining Sarah Lowther and Mark Watson-Mitchell to discuss which small cap investments they like the look of and, perhaps, which ones they do not. It promises to be a lively and insightful discussion. If you are interested in investing in small cap stocks then this could be a profitable use of your time. We hope you can make it! Sign up now

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