Investment Integrated ARKK, the Innovation ETF, was a successful ETF from the start. It is an actively managed ETF that strives to invest in innovative and disruptive companies. This is probably the best way for investors to gain exposure to speculative technology. However, with insecure tech valuations reaching bubble proportions, this may only be one of the shareholders to avoid for today. Intro ARKK – ARK Invest’s Innovation ETF, has been one of the most active ETFs over the past 5 years or so. Take a look for yourself. YCharts Stats This represents a 26.7% CAGR from the start, a total of beats over Warren Buffett. Nevertheless I offered it. And I believe you should too. Therefore, to clarify why I went from my hard-earned money at ARKK to withdrawing it directly, we need to start from the beginning. Rationale for investment ARKK is geared towards investing in tumultuous and innovative companies. In the blurb: “ARK defines ‘disruptive innovation’ since the launch of a new, technologically enabled product or service that can potentially change the way the world works. Companies within ARKK include those that depend on the growth of new services or products, technological advancements and improvements in scientific studies on regions of DNA technology (“Genomic Revolution”), innovation industry in energy, automation and manufacturing (”“ Industrial innovation ”), the increased use of technologies, infrastructure and shared solutions (“ Next Generation Internet ”) and technologies that produce financial services more efficient (“Fintech Innovation”). “
More than anything else, I enjoyed ARKK because of my exposure to risky and high level technologies. I’m convinced that the best way to buy higher growth, high potential, often unprofitable tech stocks (in case you’re not careful, those words I wrote actually do involve insecurity) would be to buy a basket and then allow the winners to run. and cut the winners. If that’s what you want, there is absolutely no question: ARKK does it better than any other ETF on the market. I will throw this challenge against anyone. As an investor who invests primarily in high growth blue chips, then undercover and heavily researched micro or small caps, the volatile, insecure and sometimes insane high-tech globe is a hard world to find. I think I would be an idiot to let possible profits sit on the sidelines. ARKK includes a fairly diverse portfolio whose winners won’t sink the boat, but winners will help it grow. Before the new speculative bubble – more on that after – highly capable ARKK revealed that the formula worked: YChartsARKK’s stats far exceeded the market by a factor of almost 2: 1. Although this fund incorporates a ratio of cost greater than 0.75%, for this type of investment vulnerability and this type of outperformance, I found the concession acceptable. Therefore, ARKK. Then things changed. Post COVID Speculative Tech Bubble We see a lot of comparisons between the current market and that of 1999. While these arguments have some merit, I think they are overblown. Though slightly overvalued, today’s biggest tech companies weigh outside money, have more cash in their coffers, and have dominant brands as well. While we’re very likely to see at least one of these titans fall out of favor over the next decade, I think it’s not easy to say that they’re blatantly overrated or – like some Chicken Little. insist – that they are doomed. .
But there is a bubble, and it is present in the insecure stocks of the market. Stocks of speculative technology must be visible. The very stocks in which ARKK is spent. It starts with the speculative technology leadership, Tesla (TSLA). If you’ve read my articles, you know that I’m probably not going to buy Tesla in stock. Tesla’s stake – still a massive position and one that was somewhat difficult for me personally – has shrunk to over 10% of the ARKK portfolio. I would like to be clear, I am fully prepared to admit that my “no spending” situation on Tesla of years past has not turned out. I agree with that. You don’t need to hit every winner. Musk succeeded. He created an automaker from scratch, and they are likely to play a big role in the business for a very long time. I really don’t care about the magic of the bookkeeping in the last quarter. I really don’t care about the occasional stumble on Twitter. They create phenomenal automobiles. They can make them. They are not likely to stray as a leading US automaker. But… nor are they likely to fulfill their absurd $ 277 billion valuation anytime soon. Yes . The stock is more expensive to perfection, and it’s been skipping its 2050 cash flow (you read that right) at a superbly high rate. Anyone who buys here is buying dead money. In between it may rise – and almost certainly at some point it will return – but the asymmetry between future value and current value will not change and is heavily biased downward. Unsurprisingly, as Tesla enters its mad bubble phase, ARKK has followed closely behind. Info by YCharts When you look at the rest of ARKK’s top 10 titles, you discover the same. This chart requires an overview of the change in PE ratios over the period of Square (SQ), CRISP (CRSP) and Proto Labs (PRLB).
Statistics by YCharts The PE ratio for lots of ARKK’s top 10 holdings has increased because COVID has passed away … and the people in the graph above are the ones with favorable incomes. Generally speaking, I visit the absurd Tesla Bubble for a symptom of this overvaluation disorder, not the disease itself. The Fed flushed the market with cash, and cash found a home chasing itself. The evaluations are very disjointed. Because speculative technology is attractive, and because it is easy to build a “social distancing” or biotech scenario around it, it has entered the transfer. Really, I believe the graph I showed at the beginning indicates best, which of ARKK itself: YChartsLook statistics in comparative performance over the previous 6 months. As much as I enjoyed the benefits of driving, which is not healthy in the long run. Wait until you come back to Earth. Decision Let me be clear. I really don’t have a crystal ball. This bubble could explode bigger and harder than I could imagine. There may be – or even probably – more money to be produced in ARKK from here. Nonetheless, most or the majority of the components of ARKK have a high amount of possible future expansion, and at such levels this ETF should not be bought. If potential constituent business valuations come to life again, you can expect me to come back. While the current value proposition is unacceptable, ARKK represents the best at category diversification in the unsecured tech sector.
Disclosure: I / we have no place in any listed stock, with no plans to start in certain locations within 72 hours. I wrote this post, and it expresses my own comments. I am not getting a refund for this (besides Seeking Alpha). I have no business relationship with any company whose stock is cited in this report.