Opinions
The Monthly Gems by Allan Tong
ARK Innovation ETF
ARKK-N
TOP PICK
Mar 02, 2022
$67.560
Stock price when the opinion was issued
E.T.F.'s
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Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research.
The ARK funds have likely bottomed, on the basis that interest rates and inflation have peaked. Although, even if the fund has truly bottomed, it may trade sideways for longer than an investor can wait, and we would not expect the parabolic action that it saw in 2020 to occur anytime soon. The underlying companies in the fund are growing fast, but valuations are still on the high end, and we feel it will take a substantial shift in market sentiment to a 'risk-on' environment to see material gains in the name. With that said, we think the name can do well over a long timeframe, and we think investors will need to be patient here.
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E.T.F.'s
Tesla is ARK's largest holding at 8.69% which has bounced from its 52-week low of $700 on February 24 to the current $864 (March 1). Its PE has always been astronomical (176x), but buyers of this stock suspend ordinary stock metrics in favour of faith in CEO Elon Musk and his vision of the automobile future. That faith remains. Expect Tesla to keep climbing. You can't say that about ARK's second-biggest holding, Teladoc, which is tanking as the pandemic fades and consumers rely on telephone medical services less. Streamer Roku was also considered a pandemic play and has oversold, but that too is recovering since bottoming on February 24. Other big holdings in ARK include Block (Square) whose recent numbers have launched a renaissance in a stock once left for dead.