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I'm Not Sure Wood at ARK ETF Knows What "Soul Searching" Really Is
I just checked at M* the valuation of top 10 components of ARKK portfolio. Two companies are rated four stars (Twilio & Zoom), one company is rated five star (Teladoc), and one company is rated two stars (Tesla). All other companies are rated 3 stars. The higher the star rating the more undervalued a company is. Assuming M* valuation work can be relied upon and assuming the market pays attention to M* work, it appears ARKK may currently be in the range of fair value. But given market's mood always swings too far from the median, another 15% drop in ARKK from today's close price would put it at $64.50, which I think is a good entry point.
This piling on is so unfair. The market is just in liquidation mode for high flyers, was inevitable but that doesn't mean this is dot.com 2.0 (it isn't IMO). Those who held ARKK since inception have still averaged 25% CAGR versus 14% for VTI. What, did folks who gained 157% in 2020 think there would be no extreme volatility? Buy more, I am (but not with what I'm looking to retire on, one never knows........)
I’m tip-toeing into DKNG (one of Wood’s gems) at below $20. Here’s one that was $75 10 months ago. Small amount. Long term hold at this price. Daily price swings of 5-8% in either direction are common. (I’ve traded in and out in the past.) Have used their app for a year. Like it. Cannot find any material change in the health or prospects of the company. Highly speculative of course.
It’s sad that many have lost their shirts on ARKK. Am not familiar with Wood’s other holdings except for the one I own. Tesla builds a fine car. Musk’s a genius. I get it. But companies exist on cash flow and have intrinsic value. That appears to have been lost in the minds of many. Something I don’t hear a lot about in the press is that most of these companies have piles of debt. With rates going up, that’s an added strain.
I agree with @wxman123 to the extent than the early investors in ARKK did very well. Wonder how many piled in a year ago, however?
PS - I wouldn’t rule out buying in myself at some future point. But, got too many irons in the fire right now as is …
I agree with @wxman123 to the extent than the early investors in ARKK did very well. Wonder how many piled in a year ago, however?
I believe WSJ’s Zweig did a story on this and as is often the case most people get into speculative funds after the initial surge and then lose money. Surely, this is not the first speculative investment fund to lose a lot so it doesn’t deserve that criticism. However, one difference here is the manager publicly boasting the portfolio is set to deliver 40% annualized over the next five years even as investors were already hurting this December 9. Since that date, I believe the fund is down another 25%. So anyone who listened just lost a quarter of their investment in a few weeks. It is those shareholders I feel for and the reason for the initial link. Performance chasing should be discouraged and encouraging unrealistic future performance expectations—40% a year for five years is unrealistic—deserves some response.
I guess we'll know in 5 years. Right now her largest position in ARKW (what I own along with ARKG) is coin base just moving past Tesla. Coin is down 23% just like ARKW. I can easily see big gains for Coin if Crypto is a real thing, and I think it is. Josh Brown (who I think is terrific) is all in. I am buying BITQ every dip, so far, no good, but 5 years is a long time.
Excerpt from above: “Morningstar doesn’t help. Even now, with a lifetime negative P&L, ARKK has four stars and is the #1 ranked fund over five years. Morningstar’s rankings are all based on quantitative data, presumably to eliminate any analyst judgment. But you might think that the trajectory of ARKK’s cumulative profits would be worth considering. It’s hard to identify much useful for investors here, although Morningstar rankings do drive fund flows which generally benefits managers.”
What I’m wondering about is litigation? This is beginning to approach or exceed the disaster of Oppenheimer’s Champion Income Fund in 2008. There was successful litigation against Oppenheimer Funds following that fiasco. An internet search turned up nothing. If Wood has made positive public pronouncements unwittingly, however, it could strengthen a case.
Just skimming, it sounds like Oppenheimer made material, misleading statements (aka "lies") about what it was doing. That's not the impression I get about ARKK. Woods is saying she expects annualized yields averaging 40% over the next five years and has explained why. That would seem to be considered "puffing", rather than, um, "misleading".
We have at least one poster here who appears to feel this is reasonably possible even it it doesn't pan out: "I guess we'll know in 5 years." There may be a fine line between good salesmanship and illegal deception, but so long as Woods invests according to her statements and the ETFs' prospectuses, I don't think she's crossed that line.
From the SEC release:
"Mutual fund providers have an obligation to clearly and accurately convey the strategies and risks of the products they sell,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Candor, not wishful thinking, should drive communications with investors, particularly during times of market stress.”
I had experience with OppenheimerFunds in 2008. It was IL 529 manager at that time. It stuffed lot of HY in the core bonds and allocation/balanced funds. This was stupidity if not fraud. That all turned ugly during the financial crisis. There was eventually a settlement with IL 529 but only some funds were restored. OppenheimerFunds was not fired immediately but was reigned in by being forced to include several non-OppenheimerFunds funds. Eventually, its contract wasn't renewed. IL 529 has bounced well under the new manager UBT and is now rated Gold by M*, only 1 of 3 such 529s.
I would tend to agree with MFS here. It’s not so much a legal issue I imagine as merely a depressing sign of what has happened again and again throughout market history near the tail end of a bull market. The investment products continue to get increasingly speculative as markets peak and investors chase those returns. The least knowledgeable and sometimes even sophisticated investors get burned.
You all know that the inflows and outflows in the Ark funds are impacted by institutional or smart money and not by retail investors. About a year ago, Ark complex had about $10B a month of inflows. Not sure what is a smart money.
I just checked at M* the valuation of top 10 components of ARKK portfolio. Two companies are rated four stars (Twilio & Zoom), one company is rated five star (Teladoc), and one company is rated two stars (Tesla). All other companies are rated 3 stars. The higher the star rating the more undervalued a company is. Assuming M* valuation work can be relied upon and assuming the market pays attention to M* work, it appears ARKK may currently be in the range of fair value. But given market's mood always swings too far from the median, another 15% drop in ARKK from today's close price would put it at $64.50, which I think is a good entry point.
We might reach $65 this week as many of the three star and 2 star stocks get re-rated to higher stars. Tesla has to move from 2 star to 3-4 star sometime during the current swoon.
Closing the loop. Bought some today. It may go further down in the next several weeks. I am not likely to post new buys in this thread as I would like to leave this thread behind.
ARK's portfolio manager Cathie Wood has taken to the airwaves and penned a blog to say the strategy's merely out of favor. ... It's hard to find data that support [her] points. [To the contrary ...]
ARK Innovation's Relatively Few Unique Holdings Have Been Resilient Signs of an Anti-Innovation Bias Are Hard to Find in the Market The Strategy's Aggressive Posture Has Hit Headwinds, Not the Typhoon That ARK Claims
Among her most consistent messages in recent months has been that the prices of innovation stocks have not been irrationally high as technology and telecom stocks became in the late 1990s.
By historical standards, Wood's return forecast is possible but improbable. Less than 2% of U.S. funds (alive or dead) have achieved such a feat over any rolling five-year period since 1980. Many did so during the late-1990s bubble.
Each of the bolded sections contradicts or weakens a claim made by Wood. The body of each section presents a fair amount of data and graphs.
It all seems to me simply like a tech gogo way up / way down event, such as some of us have seen in the past. Extremely hot 'n' hopeful followed by plunging losses. Like a 1995 Robertson Stephens fund (in some of which I and many others made and lost serious moneys; they underwrote the IPO of the startup where I worked, and held extremely exciting staff meetings).
The foolish and cruelly impugning subject hed here, plus Wood's own dumberer pronouncements, and this idiocy --- seriously??
\\ Terrible destruction of wealth. \\ Willingly acts to cause harm. She must've known this was all bullspit no? \\\ At what point does this cross over into malfeasance? Did Wood not enrich herself thru promotion of her fund? kerrist kerrist
quite apart from the opaque silliness of 'If Wood has made positive public pronouncements unwittingly' and 'guess we'll know in 5 years' (hell, we'll know about everything then!), ...
@davidrmoran Agreed the thread has run its course, but “foolish impugning hed” is foolishly impugning. To say in the same interview, in the first thread link, that one is doing a lot of “soul searching” about recent losses while boasting in the same interview of future annualized returns of 40% over the next five years does not seem to fit with what the meaning of “soul searching” is. Since that boast, the fund has lost over 25% of its value. To me, what’s cruel is what shareholders who believed such statements have just experienced. Given the religiosity of the subject, the hed was apt. As you would say, kerrist.
'It’s very hard to escape the sense that there’s mania now, that this is a FOMO market. When you look at the way that people have piled into the stocks of bankrupt companies like Hertz ....'
Hope not too OT. Interesting article in recent WSJ (probably Friday’s) about how the Robinhood / Reddit crowd devastated hedge fund Melvin Capital. (I realize it’s hard to feel sorry for Melvin.) Melvin had shorted a bunch of meme stocks (like Gamestop, AMC) ) because all their sophisticated analysis indicated these stocks were ripe for picking (overpriced). I got the impression literally millions of small investors banded together via internet forums to drive these stocks sky high. Melvin nearly folded. Didn’t understand at first what had hit them as the numbers seemed so out-of-whack. Clawing their way back now. Still in the red. But the power of irrationality compounded by internet forums is truly amazing - albeit a bit frightening.
Old news? Yes. But the degree of organization / coordination was really highlighted in the referenced article.
* Came across the membership of “Wall Street Bets” (website) where a lot of the coordinated effort originated: 11 million members Jan.1, 2021 according to the WSJ. That was up from 2 million the prior year.
Comments
Terrible destruction of wealth. Hoping most in that fund didn't invest a substantial portion of their hard earned monies into this crap.
Willingly acts to cause harm. She must've known this was all bullspit no?
At what point does this cross over into malfeasance? Did Wood not enrich herself thru promotion of her fund?
Answering balubalu. Low to mid 50s is where maybe worth trying to catch a falling knife
Posting for entertainment purposes only
I don't know anything about anything
Best
Baseball Fan
I’m tip-toeing into DKNG (one of Wood’s gems) at below $20. Here’s one that was $75 10 months ago. Small amount. Long term hold at this price. Daily price swings of 5-8% in either direction are common. (I’ve traded in and out in the past.) Have used their app for a year. Like it. Cannot find any material change in the health or prospects of the company. Highly speculative of course.
It’s sad that many have lost their shirts on ARKK. Am not familiar with Wood’s other holdings except for the one I own. Tesla builds a fine car. Musk’s a genius. I get it. But companies exist on cash flow and have intrinsic value. That appears to have been lost in the minds of many. Something I don’t hear a lot about in the press is that most of these companies have piles of debt. With rates going up, that’s an added strain.
I agree with @wxman123 to the extent than the early investors in ARKK did very well. Wonder how many piled in a year ago, however?
PS - I wouldn’t rule out buying in myself at some future point. But, got too many irons in the fire right now as is …
However, I believe I have been consistent in my views re this specific investment, ARKK etc.
We'll see how it works out, you might be right, who knows?
Best Regards,
Baseball Fan
I bailed from DKNG in November at above $40. So that one has fallen over 50% in 2 months.
(Currently $19.46 (the year of my birth - spooky)!
Even if such big gains are possible, many investors may not be able to stomach this kind of volatility and could time their purchases and sales as poorly in the future as they already did in the past.
Excerpt from above: “Morningstar doesn’t help. Even now, with a lifetime negative P&L, ARKK has four stars and is the #1 ranked fund over five years. Morningstar’s rankings are all based on quantitative data, presumably to eliminate any analyst judgment. But you might think that the trajectory of ARKK’s cumulative profits would be worth considering. It’s hard to identify much useful for investors here, although Morningstar rankings do drive fund flows which generally benefits managers.”
What I’m wondering about is litigation? This is beginning to approach or exceed the disaster of Oppenheimer’s Champion Income Fund in 2008. There was successful litigation against Oppenheimer Funds following that fiasco. An internet search turned up nothing. If Wood has made positive public pronouncements unwittingly, however, it could strengthen a case.
M* Forward-looking Analyst Rating is Neutral.
Moreover, M* has had many negative comments & pieces on ARK.
Hard to blame M* on this.
https://www.sec.gov/news/press-release/2012-2012-110htm
Just skimming, it sounds like Oppenheimer made material, misleading statements (aka "lies") about what it was doing. That's not the impression I get about ARKK. Woods is saying she expects annualized yields averaging 40% over the next five years and has explained why. That would seem to be considered "puffing", rather than, um, "misleading".
We have at least one poster here who appears to feel this is reasonably possible even it it doesn't pan out: "I guess we'll know in 5 years." There may be a fine line between good salesmanship and illegal deception, but so long as Woods invests according to her statements and the ETFs' prospectuses, I don't think she's crossed that line.
From the SEC release:
ARKK's Claims of an Anti-Innovation Market Ring Hollow Each of the bolded sections contradicts or weakens a claim made by Wood. The body of each section presents a fair amount of data and graphs.
https://www.morningstar.com/articles/1071658/arkk-an-object-lesson-in-how-not-to-invest
It all seems to me simply like a tech gogo way up / way down event, such as some of us have seen in the past. Extremely hot 'n' hopeful followed by plunging losses. Like a 1995 Robertson Stephens fund (in some of which I and many others made and lost serious moneys; they underwrote the IPO of the startup where I worked, and held extremely exciting staff meetings).
The foolish and cruelly impugning subject hed here, plus Wood's own dumberer pronouncements, and this idiocy --- seriously??
\\ Terrible destruction of wealth.
\\ Willingly acts to cause harm. She must've known this was all bullspit no?
\\\ At what point does this cross over into malfeasance? Did Wood not enrich herself thru promotion of her fund?
kerrist kerrist
quite apart from the opaque silliness of 'If Wood has made positive public pronouncements unwittingly' and 'guess we'll know in 5 years' (hell, we'll know about everything then!), ...
yeah, way past time to leave the subject.
What a thread.
Thanks for this thread. Educational & timely.
'It’s very hard to escape the sense that there’s mania now, that this is a FOMO market. When you look at the way that people have piled into the stocks of bankrupt companies like Hertz ....'
Melvin had shorted a bunch of meme stocks (like Gamestop, AMC) ) because all their sophisticated analysis indicated these stocks were ripe for picking (overpriced). I got the impression literally millions of small investors banded together via internet forums to drive these stocks sky high. Melvin nearly folded. Didn’t understand at first what had hit them as the numbers seemed so out-of-whack. Clawing their way back now. Still in the red. But the power of irrationality compounded by internet forums is truly amazing - albeit a bit frightening.
Old news? Yes. But the degree of organization / coordination was really highlighted in the referenced article.
* Came across the membership of “Wall Street Bets” (website) where a lot of the coordinated effort originated: 11 million members Jan.1, 2021 according to the WSJ. That was up from 2 million the prior year.