ARK Innovation ETF (ARKK-N)

Had its day in the sun a few years back. A disruptive ETF, not like your typical large-cap ETF. A lot of the names are expensive; average price to sales is 5.3x, pricey. Compare that to the S&P trading at just under 3x price to sales.

ARKK went all-in into high-growth, high-risk tech stocks, but these trade as a group. So, in 2020 ARKK was the number-one fund, but struggled in 2021 and was far from the best in 2022. A fund or collection of stocks that is not diversified will eventually stumble.

She was the world's greatest stockpicker in 2020 when tech ruled. Not so these days. Why? Her portfolio lacks diversification, concentrated in only a few names.

 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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ARKK vs. FNND Such growth stocks are vulnerable to inflation and the discount rate. They will struggle and have already declined a lot, and shares are still not cheap. There's not much difference between these ETFs. ARKK has performed better this year, so he skews towards that.

Down 77% since highs. Disruptive names that were the flavour of the day, but now affected by rising rates. Names with high multiples, high growth. Can only perform well in a falling interest rate environment. Possible tax-loss sale.

Sell ARKK to add to ZQQ? Good idea. ZQQ is a broader universe. ARKK is more of an innovator-type fund, lots more risk. Whole semi side is very difficult. Oversupply and under-demand, and so the price of memory chips is coming down. He'd recommend trading the ZQQ.

Run by Cathie Wood, the mnost successful money manager on 2020 who invests in high-growth tech stocks. Their glaring flaw was a lack of diversification, which is why her ETF hot hammered this year when tech fell out of fashion. In May, Ark saw negative fund flows for the first time in over a year. ARKK is one Wood's largest ETFs. ARKK is down 5% YTD while the indexes are up. Her holdings like Zoom Video are considered Covid stocks. Wood, though, remains a wizard. Her small funds have performed better than the benchmarks and remains a fantastic long-term performer. But the era of Wood propping up these hyper-growth stocks with her massive inflows is over.