ARKK: one number and one target

David_Snowball

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The last profitable day for initiating a buy-and-hold position in ARK Innovation was one year, one month and one day ago. Somewhere in the mid-day. Good news, I guess, is that any purchase made after that day is a candidate for tax-loss harvesting.

64.9%

The amount by which ARK will have to rise for get positions established in early February 2021 out of the red. The fund saw huge inflows in the fourth quarter of 2020 and most of the first quarter of 2021 as investors rushed to buy the previous five years' returns. Which is to say, almost all of ARKK's investors are likely underwater.

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There's an interesting (somewhat semi-pro) piece on Wood's long term record at the anonymous InvestmentWatch blog. The author's takeaway is

almost all of Cathie’s major outperforming years come during special periods in the market cycle, particularly in the periods following a market crash ... Outside of those special events, Cathie’s funds generally underperform equivalent style peers on a year-by-year basis. She has a history of leaving a fund during or following a period of underperformance, then “rebooting” in another fund. This includes a short stint in a hedge fund that lost over 80% of it’s AUM.

That last caveat shouldn't apply now, but the others are useful reminders.

For what that's worth, David

Derf

Thanks for posting @David_Snowball

davidrmoran

(making square-L sign)

For all funds and ETFs, MFO needs a dynamic new column (input = purchase date) called TTBE, Time to Breakeven

JonGaltIII

Really interesting post. Thank you DS. My funds that are underwater this year… are what I believe to be very ill timed purchases along with a couple of bad choices. I won’t mention them here so as not to derail the topic. The concept of breakeven is a worthwhile topic as I evaluate taking my losses and investing somewhere else with better short term prospects vs. the long term recovery and outperformance of a fund I originally believed in and may still.

On ARKK and Cathie, I’m mixed but my take-away is the Investment watch blog is not undecided. It basically called ARKK or Cathie a pump and dump scheme (maybe a little hyperbole by me) but then again no that was the conclusion.

The only positive caveat, according to the author… is to catch the very early cycles of her outperformance and this was attributed to Tesla and a Bitcoin Trust.

Sven

MFO Premium has a “recovery” column on funds/ETFs for different time periods at which the funds would fully recover.

BaluBalu

Are she and Musk related? They are such an outside the box talkers, except he made money for people who got on his train(s). Both moved to a no income tax state as they became rich. They certainly fill a need / role in the market place / society.

rforno

IIRC Cathie is soon launching a fund to buy stuff that she sells from the flagship funds, presumably for a big drop in momentum/price ... eg, for her fallen angels.

I can't help wondering how that can't be considered a market manipulation if word comes out she sells ABC from ARKK (price goes down even more b/c OMG CATHIE SOLD) but then is buying ABC for her ARK Fallen Angels Fund (price goes up b/c OMG CATHIE BOUGHT).

IMO she's a momentum-only trader. For that particular investing style, and because she's got a cult/herd following (which I never like) I don't want anything to do with her investments.

Sven

What trouble me is the ever changing strategies she has and they change frequently. I came to the conclusion that Ark ETFs are really for momentum traders, not so much as the buy and hold investors.

hank

I think most fund investors (self included) are very “fickle” today. If a fund disappoints over a few months or a year they’re ready to pull money out. So, the more volatility that’s associated with a fund the more likely it is to experience these swings in investor commitment. And, being forced to unload assets during poor markets is never a good thing for the manager or the stalwarts who stick with the fund. Wood’s approach might work better in a hedge fund where minimum holding periods are sometimes stipulated. BTW - one reason for the success of PRWCX over many years is that it’s not the kind of high octane fund that invites a lot of hot money flows in and out.

As investors today it might be a good idea to consider the growing impact short sellers are exerting on some targeted equities.

Sven

Cathie Wood worked in the hedge fund business in the past.

In 1998, along with Lulu C. Wang, Wood co-founded Tupelo Capital Management, a hedge fund based in New York City

Many fund managers have disciplined buy and sell processes with a holding period of 5 years or longer. Also the positions are built on multiple buys without rising the stock prices.

davidrmoran

icym

https://www.reddit.com/r/wallstreetbets/comments/rciqbx/this_is_what_its_really_like_to_be_a_trader_on/

just chased a tip thanks to someone here, went through this exactly (almost)

play loud

The Phantom Tendy

rforno

davidrmoran said:

icym

https://www.reddit.com/r/wallstreetbets/comments/rciqbx/this_is_what_its_really_like_to_be_a_trader_on/

just chased a tip thanks to someone here, went through this exactly (almost)

play loud

The Phantom Tendy

LOL Excellent!!!

(Not that I'm a r/WSB'er but I'd likely be the one who secretly bought some puts, fwiw saying...)

Charles

Despite the current drawdown, which has seemed inevitable for some time, her 7-year risk and return numbers remain remarkable, as shown in table below:

BaluBalu

Thanks Charles. I do not follow ARKW but am surprised to see ARKW with lower St. Dev and higher returns than ARKK. Except ARKW, the other ones’ sharpe ratio is not impressive. With the recent draw down, may be future ratio will be higher.