YEREVAN (CoinChapter.com) – Cathy Wood’s ARK Innovation exchange-traded fund (ETF) has had a rough year, shaving 50% off its stock (ARKK) price year-to-date. As a result, ARKK traded at $47 a share on the New York Stock Exchange on May 2.
Moreover, one of ARK Innovation ETF’s flagship positions, Teladoc Health Inc. (TDOC), has plummeted after the company reported its first-quarter results and lowered its sales forecast.
ARK Innovation Fund; the details
In detail, the ARK Innovation Fund invests heavily in companies that feature “disruptive” qualities in their respective industries. In addition, the Fund says that it “seeks long-term growth of capital by investing under normal circumstances primarily (at least 65% of its assets) in domestic and foreign equity securities”.
Thus, ARK takes highly concentrated positions in various tech companies to achieve these investment objectives. These range from electric-vehicle manufacturers to videoconferencing platforms and financial technology start-ups.
However, according to Ark’s daily transaction reports, Ark Innovation ETF and the firm’s three other funds sold nearly $160 million worth of Tesla shares in late April. ARK also offloaded a massive stake in Spotify, dumping about $74 million in shares in the same period.
Additionally, according to research, most overweight positions in the ARK Innovation ETF remain overpriced. The high multiples, in turn, expose investors to “significant” valuation risks, “especially if the capital exits the growth sector.”
However, some experts claim that all is not lost for ARKK.
Resurrection for ARKK ahead?
Despite the aggressive sell-off, the Fund’s cumulative money flows are positive this year. Moreover, the flow stood at nearly $800 million, as shown below. Cameron Dawson, the chief market strategist at Fieldpoint Private Securities LLC, pointed out the contradiction and stated that the same phenomenon isn’t happening for other ETFs that have performed similarly poorly.
It stands to reason that while traders soured on growth stocks, Cathie Wood’s ARK Innovation Fund ETF possibly remains compelling for investors.
A Canadian businessman and entrepreneur, Kevin O’Leary, also picked ARKK during CNBC’s Stock Draft.
“I bet these stock names come back, and I beat everybody, even from the back of the car race,” said O’Leary.
