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Cathie Wood’s Flagship Fund is Down … Money is Still Flowing. WSJ
ARKK under $37 and, according to M*, a P/E under 4. Whoa, value fund! Until you look and see that that P/E incorporates lots of individual negative P/Es. Companies that are losing money -- not where I want to be right now (or ever).
I believe she just loaded up on HOOD, a company I never really understood and felt slimy from the beginning.
Cathie Wood @CathieDWood .@ARKInvest must share more of our research about #artificialgeneralintelligence (AGI) and how it is likely to transform the way the world works. Within 6-12 years, breakthroughs in AGI could a accelerate growth in GDP from 3-5% per year to 30-50% per year. New DNA will win!
Aside from Cathie Wood in particular, you'll have to pardon my skepticism about AI potential in general. Not that work in the field doesn't lead to significant developments, but that it has a history of repeatedly overpromising and underdelivering. Perhaps she could learn from history, or is this time different?
From the initial boom cycle ("good old fashioned artificial intelligence") to the second boom cycle (expert systems, specialized applications), to the current boom cycle, the field has left a trail of Broken Promises and Empty Threats https://www.technologystories.org/ai-evolution/
From a piece yesterday in MIT Technology Review:
Earlier this month, DeepMind [s subsidiary of Alphabet (GOOGL)] presented a new “generalist” AI model called Gato. ...
One of DeepMind’s top researchers and a coauthor of the Gato paper, Nando de Freitas, couldn’t contain his excitement. “The game is over!” he tweeted, suggesting that there is now a clear path from Gato to artificial general intelligence, or AGI, a vague concept of human- or superhuman-level AI. ...
Unsurprisingly, de Freitas’s announcement triggered breathless press coverage that DeepMind is “on the verge” of human-level artificial intelligence. This is not the first time hype has outstripped reality. ...
Some technologists, including some at DeepMind, think that one day humans will develop “broader” AI systems that will be able to function as well as or even better than humans. Though some call this artificial general intelligence, others say it is like "belief in magic.“ Many top researchers, such as Meta’s chief AI scientist Yann LeCun, question whether it is even possible at all.
It's the "breakthroughs in AGI could a accelerate growth in GDP from 3-5% per year to 30-50% per year." that gets me. What sort of planet would we have to be living on for that to happen? What sort of carbon emissions would that level of GDP growth produce in the world's largest economy? How many workers would have to be replaced by machines for it to happen? What would happen to those workers? And when would the terminators come to seize control of the world government? It's a bizarre claim.
Dropped another 7% today. I like to bottom feed, but passed this one up. Too much garbage thrown in. Thanks all for the informative posts on the subject.
PS - Actually feel guilty as I mentioned it on the OT board as a potential turn-around candidate for a Roth conversion. Still might be. But after looking over the holdings yesterday I have to wonder when it might turn and to what degree.
Morgan Stanley has some ARKK type innovation funds. For example, based on M* charts, MSEGX trails ARKK in every period 5 yr through 1 mo, except 1 yr, total returns. If one were to be interested in the ARKK type theme of investing, is a Morgan Stanley fund preferred over ARKK? If this topic was previously discussed, please feel free to direct me to the appropriate thread. Thanks.
That performance comparison is heavily dependent on period selected. Your selection of end date makes it seem like you're cherry picking (or cherry pit picking in this case).
Standardized Total Returns are reflected as of month- and quarter-end time periods. ... Morningstar calculates Standardized Returns in-house in accordance with the rules outlined in SEC Rule 482, Forms N-3 and N-4, and reflect the investment experience from the inception date of the fund. The SEC Rule 482 in the Securities Act of 1933 dictates that this return figure be as of Most Recent Quarter.
M* analysts rate MSEGX silver (MSEQX gold), forward looking, while they put a sell (negative) rating on ARKK>. That might be a good place to start looking for a comparison.
What attributes of MSEGX lead you to characterize it as an innovation type fund? Its approach is "to invest in established and emerging large cap companies in the US that [it] believe[s] have sustainable competitive advantages with above average business visibility, the ability to deploy capital at high rates of return, strong balance sheets and an attractive risk/reward profile." [ibid.]
In contrast, "Companies within ARKK include those that rely on or benefit from the development of new products or services, technological improvements and advancement in scientific research relating to the areas of: DNA Technologies and the 'Genomic Revolution'; Automation, Robotics, and Energy Storage; AI and the 'Next Generation Internet; Fintech Innovation." https://ark-funds.com/funds/arkk/
While there's certainly some portfolio overlap (e.g. Zoom ZM and Block SQ), the two fund objectives don't seem all that similar. ARKK doesn't even suggest a focus on large cap companies, and in fact over half its holdings are in midcaps. How many large caps are truly disruptive?
Sector and style focus explain the bulk of returns, generally speaking. The ARK complex were top performers in the past few years before the downturn, and they were on top of all the "greats," like the Baron funds. When the "growthier" sector/style cratered they all did, though to a lesser extent compared to the ARK funds. I hold MGGPX (10yr 5 star MS, now 4 star MS). It correlates pretty closely with ARKW at least on a daily basis. My conclusion is that Ms. Wood was a better stock picker, by far, and not her fault that some bid those pics to the moon when her sector and style focus was in favor. But that which goes up 157% in a year can also drop 55%, predictable actually. You can decide which is the better fund. https://www.portfoliovisualizer.com/fund-performance?s=y&symbol=MGGPX&benchmark=ARKW
But explaining points could be constructive. You wrote MS funds are innovation funds and offered performance data as evidence. As @wxman123 described, sector and style (along with magnitude of volatility) explains the bulk of returns, regardless of investment "theme". Similarity of performance doesn't really show that two funds are picking the same type of stocks, except in this broad "style and sector" sense.
Hence my question about why you considered MSEGX to be an innovation fund. You might simply be focused on high volatility, rocket-fueled off-the-chart growth funds with no reentry parachutes. Theme not important.
As far as performance data are concerned, short term anomalies at the end of a period skews figures. (There's an 8% performance difference between ARKK and MSEGX month-to-date.) This type of distortion is something I've posted about before. Similarly, in late 2018 many columns were written warning to expect a radical change in fund ratings the instant the 2008 GFC performance dropped off the radar (10 year performance figures).
One shudders to imagine how ARKK would have fared in 2008.
MGGPX ... correlates pretty closely with ARKW at least on a daily basis.
Daily performance may tend to resemble a random walk. FWIW, the correlation of daily changes in value (accounting for divs, using Yahoo figures) from 10/31/2014 through 5/25/22 is 81.83% (R² 66.97%). Fair, but not all that close. MGGPX correlates significantly more closely on a daily basis with VUG (LCG index). Over the same period, the correlation is 90.53% (R² 81.96%).
PV shows similar daily correlation figures between MGGPX and ARKW using rolling 60 day windows. In comparison, PV shows much higher correlation between ARKK and ARKW.
CNBC closing bell segment mentions some of ARKK top holdings “stay at home” ones. I tend to agree with Najerian vs Lebenthal. Teladoc looks most attractive to me
Not included in this link is Lebenthals comment… I wouldn’t own any of these, I’d rather own CITI or Qualcomm which are higher quality and could go up 50%.
Interesting comments comparing MS TO ARKK… I would never have thought of either as a comparable and I used to own MSEGX and still own MGGPX as an International holding. Will study closer.
Today NYMag takes a look at the market performance and philosophy Saint Cathie of ARKK....which I must confess I agree with in its entirety. I think she's been reckless but lucky, but the bill always comes due.
@rforno a good share from NY Mag. Interesting story. It’s a shame stories like this weren’t written when her fund was up 187%. The implication is that her investors are all Robinhood or Reddit investors along with Archegos. But, it strikes me that they don’t account for her $16B or even close to it.
Comments
https://twitter.com/CathieDWood/status/1528179451070230530?ref_src=twsrc%5Etfw
https://seekingalpha.com/article/4513814-one-tweet-ark-innovation-etf-has-become-uninvestable
From the initial boom cycle ("good old fashioned artificial intelligence") to the second boom cycle (expert systems, specialized applications), to the current boom cycle, the field has left a trail of Broken Promises and Empty Threats
https://www.technologystories.org/ai-evolution/
From a piece yesterday in MIT Technology Review: https://www.technologyreview.com/2022/05/23/1052627/deepmind-gato-ai-model-hype/
A quote that helps put this hype in historical (and hysterical) perspective: https://sitn.hms.harvard.edu/flash/2017/history-artificial-intelligence/
That's a pretty low bar.
See also Digital monkeys with typewriters recreate Shakespeare
https://www.cnn.com/2011/09/26/tech/web/monkeys-typewriters-shakespeare/index.html
PS - Actually feel guilty as I mentioned it on the OT board as a potential turn-around candidate for a Roth conversion. Still might be. But after looking over the holdings yesterday I have to wonder when it might turn and to what degree.
Whoopee!
9% Zoom
8% Tesla
8% Roku
6% Exact Sciences
6% Block
5% Teladoc
5% Crispr
4% Coinbase
4% UiPath
4% Twilio
As of the last month's end, MSEGX beat ARKK by 6.71% (1 month), 10.76% (3 month), 9.93% (6 month), 7.16% (YTD), 15.83% (1 year), 5.16% (annualized, 3 year).
http://performance.morningstar.com/fund/performance-return.action?t=MSEGX
M* analysts rate MSEGX silver (MSEQX gold), forward looking, while they put a sell (negative) rating on ARKK>. That might be a good place to start looking for a comparison.
What attributes of MSEGX lead you to characterize it as an innovation type fund? Its approach is "to invest in established and emerging large cap companies in the US that [it] believe[s] have sustainable competitive advantages with above average business visibility, the ability to deploy capital at high rates of return, strong balance sheets and an attractive risk/reward profile." [ibid.]
In contrast, "Companies within ARKK include those that rely on or benefit from the development of new products or services, technological improvements and advancement in scientific research relating to the areas of: DNA Technologies and the 'Genomic Revolution'; Automation, Robotics, and Energy Storage; AI and the 'Next Generation Internet; Fintech Innovation."
https://ark-funds.com/funds/arkk/
While there's certainly some portfolio overlap (e.g. Zoom ZM and Block SQ), the two fund objectives don't seem all that similar. ARKK doesn't even suggest a focus on large cap companies, and in fact over half its holdings are in midcaps. How many large caps are truly disruptive?
Hence my question about why you considered MSEGX to be an innovation fund. You might simply be focused on high volatility, rocket-fueled off-the-chart growth funds with no reentry parachutes. Theme not important.
As far as performance data are concerned, short term anomalies at the end of a period skews figures. (There's an 8% performance difference between ARKK and MSEGX month-to-date.) This type of distortion is something I've posted about before. Similarly, in late 2018 many columns were written warning to expect a radical change in fund ratings the instant the 2008 GFC performance dropped off the radar (10 year performance figures).
One shudders to imagine how ARKK would have fared in 2008. Daily performance may tend to resemble a random walk. FWIW, the correlation of daily changes in value (accounting for divs, using Yahoo figures) from 10/31/2014 through 5/25/22 is 81.83% (R² 66.97%). Fair, but not all that close. MGGPX correlates significantly more closely on a daily basis with VUG (LCG index). Over the same period, the correlation is 90.53% (R² 81.96%).
PV shows similar daily correlation figures between MGGPX and ARKW using rolling 60 day windows. In comparison, PV shows much higher correlation between ARKK and ARKW.
Correlation: MGGPX and ARKW (45% to 96%)
Correlation: ARKK and ARKW (57% to 99%)
Correlation: MGGPX and VUG (63% to 98%)
https://www.cnbc.com/video/2022/05/26/i-dont-like-any-of-these-stay-at-home-stocks-says-ceritys-jim-lebenthal.html
Not included in this link is Lebenthals comment… I wouldn’t own any of these, I’d rather own CITI or Qualcomm which are higher quality and could go up 50%.
Interesting comments comparing MS TO ARKK… I would never have thought of either as a comparable and I used to own MSEGX and still own MGGPX as an International holding. Will study closer.
Today NYMag takes a look at the market performance and philosophy Saint Cathie of ARKK....which I must confess I agree with in its entirety. I think she's been reckless but lucky, but the bill always comes due.
The Rise and Fall of Wall Street’s Most Controversial Investor
https://nymag.com/intelligencer/2022/05/the-rise-and-fall-of-cathie-wood.html