https://www.afr.com/companies/finan...e-ark-s-rough-year-gets-worse-20211207-p59fci Cathie Wood readies new fund while Ark’s rough year gets worse Sam Potter and Emily Graffeo Dec 7, 2021 Cathie Wood is preparing to launch only her second new US exchange-traded fund in almost three years this week, just as her existing lineup is lashed by tech-led market turmoil. The ARK Transparency ETF (ticker CTRU) will be ARK Investment Management’s ninth ETF and the third to track an index. The fund is expected to begin trading on Wednesday (Thursday AEDT), according to the firm’s website. Some of the largest constituents in the 100-company gauge are tech and consumer firms such as Nvidia, Tesla and Nike. AP It looks set to arrive amid a big test for Wood and her disruptive vision. ARK products have been slammed by market volatility, with investors ditching the kind of unprofitable tech bets beloved by the firm. The flagship ARK Innovation ETF (ARKK) just posted its worst week since February, sliding 12.7 per cent to the lowest in more than a year. Six of the firm’s eight strategies are down in 2021, with the worst performer -- the ARK Genomic Revolution ETF (ARKG) -- losing 37 per cent. ARKK dropped as much as 4.8 per cent at the open in New York, before paring more than half of the loss as of 10am. It is down about 25 per cent this year. Wood and her team were always destined to struggle to repeat 2020’s stellar year, when ARKK returned about 150 per cent to beat most of the market and lure billions in new flows. But performance has gone from bad to worse in the past month, as policymakers signalled a more hawkish monetary stance. Many of ARK’s big bets are on companies with profits expected in the future, which now have to be discounted against potential increases in interest rates. “Sentiment toward ARK has started to shift as thematic funds like ARKK and siblings have struggled to repeat its performance success in 2021,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA. “We expect the ETF to still garner some interest as ARK still has a strong ETF brand and it provides exposure to a new approach that could complement ARKK.” With CTRU, Wood will be looking to tap booming demand for investments with higher environmental, social and governance standards. The planned new fund will follow an index that excludes industries including alcohol, banking, gambling and oil and gas. Some of the largest constituents in the 100-company gauge are tech and consumer firms such as Nvidia, Tesla and Nike. A spokesperson for ARK didn’t immediately respond to a request for comment on the new launch. With about $US31 billion ($44 billion) in its existing US ETF lineup, ARK is the 11th-biggest issuer in the US Its last new fund was the ARK Space Exploration & Innovation ETF (ARKX), which launched near the height of Wood’s popularity in March and was one of the biggest debuts on record. “The launch of ARK Space ETF at the end of the first quarter of 2021 was well-timed,” said Rosenbluth. “The fund benefited from the halo ARK had established in 2020 when it was the darling of the ETF world.” Despite the recent rough patch, investor loyalty has been strong. A $US12 billion drop in assets in the flagship ARKK fund is mostly linked to market declines, with only about $US400 million leaving the fund on a net basis since assets peaked at $US28 billion in February. Meanwhile, the ETF has shown a historic ability to rebound fast -- it rallied more than 30 per cent in six weeks in the middle of the year. That was the last time its 14-day relative-strength index dropped below 30, which is usually a sign to technical analysts a security has fallen too fast and could be poised to rebound. The reading is currently at 20. The slump has been good news for a young fund offering an inverse bet on ARKK, the Tuttle Capital Short Innovation ETF (SARK). SARK has been surging in recent weeks and is up more than 25 per cent since launching almost a month ago. Bloomberg
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Chanticleer https://www.afr.com/chanticleer/cat...e-than-ever-as-bear-hug-bites-20211205-p59evf Cathie Wood needs Elon Musk more than ever as bear hug bites As tech stocks plummet, Tesla is one of just two companies in Cathie Wood’s flagship Ark Innovation Fund not in a bear market. Is the growth stock boom over? Dec 6, 2021 Perhaps it’s fitting that a year which started with meme stocks, bitcoin and SPACs soaring irrationally should end with the world’s biggest tech stocks suffering an extraordinary pasting. Friday night brought a case in point. US e-signature giant DocuSign was worth $US40 billion ($57 billion) on Thursday, but a quarterly earnings report – in which it delivered in line for the September quarter but warned its revenue growth rate in the December quarter would slow from 40 per cent to 30 per cent – saw the stock plummet a staggering 42 per cent in a session. The company ended the week worth $US26 billion. The plunge was more bad news for Cathie Wood, whose tech-heavy fund Ark Invest has soared to prominence in recent years thanks to huge bets on the likes of Tesla, Zoom, Square and Spotify. Cathie Wood’s ARK Innovation ETF is taking on water. David Rowe Wood has been a lightning rod for criticism – she rightly called herself the most trolled fundie on earth in 2019 – but critics have struggled to argue with her performance. In the past five years, Wood’s flagship Ark Innovation ETF has risen 358 per cent as Wood has surfed five key disruptive technologies: DNA sequencing; collaborative robots; energy storage (such as electric and autonomous vehicles); artificial intelligence; and blockchain technology. bond yields higher in the second half of 2021, pressure has grown on highly valued tech stocks; investors use these yields to calculate the present-day value of future profits, so the higher the yield, the bigger the discount. Since November 1, the Ark Innovation ETF has taken a pasting, falling 25 per cent as its holdings have been punished. Teladoc, the ETF’s second-biggest holding, is down 39 per cent since November 1 and 53 per cent year-to-date. Roku is down 35 per cent over both periods. Zoom is down 34 per cent since November 1 and 48 per cent year to date. Unity Software has shed 27 per cent since November 18 and 2 per cent year to date. Square, which will soon merge with Afterpay, is off 29 per cent since the start of November. DocuSign’s dive on Friday night means just two of ARK Innovation’s holdings are not in a bear market (defined as being down 20 per cent off recent highs): Trimble (down just 4 per cent since the start of November) and Tesla (down 16 per cent). Tesla trouble coming Tesla is easily Ark’s biggest holding, with a weighting in the EFT of almost 10 per cent. And while there has been recent selling pressure on the EV giant’s stock, it has actually protected Ark from an even worse year, given Tesla has posted a year-to-date gain of 39 per cent. Wood will be hoping Tesla can hold on to that gain, but founder Elon Musk isn’t exactly helping her cause by continuing with a stock sell-down that on Friday passed $US10 billion. The sales are designed to help Musk reduce his tax bill, but the same trolls who have cheered Ark’s recent retreat see the share sales as a warning sign of much bigger trouble coming at Tesla. Wood is remaining as bullish as ever. In the past week, she has expressed concern that investors are buying the dip, forecast the “most spectacular period for innovation that we have ever seen, and declared her strategies are set to quadruple over the next five years after this year’s underperformance. You clearly don’t become the world’s most trolled fundie without developing thick skin. If nothing else, Ark’s travails highlight the conundrum facing investors when it comes to highly valued tech stocks. There are plenty of signs high-growth tech might be losing its leadership in markets, from the share price falls caused by the threat of rising interest rates, to signs that roaring growth rates might be starting to peak, to Facebook and Square changing their names. Yet after an 18-month period during which medical science has changed the course of the pandemic, the energy transition has accelerated, artificial intelligence has become embedded in corporate strategy and major banks are betting on blockchain technology, it’s hard to disagree with Wood’s view of the big trends driving the world. Perhaps this is the dose of reality the tech sector needed, a reminder that stock selection matters and speculative booms don’t last. Wood has seen periods of 20 per cent-plus losses in 2016, 2019 and of course early 2020, but this could be the first time in Ark’s seven-year history that high-growth tech isn’t the dominant theme in global markets.
Keep an eye on the Naz high beta stocks and depending on how they open tomorrow ARKK may have bottomed ... for the time being anyway. It hit long term daily support and got a decent bounce so keep those stops tight :-