is arkk a buy?

The stock market’s characteristics have changed dramatically in 2023. We’ve had more than a year of flat-to-down action, depending upon the index you’re looking at, but starting in January of this year, the behavior of US equity markets has been unbelievably bullish.

I see tailwinds for US equities all over the place – many of which I covered recently in my bullish TQQQ article, and can be read here – including sentiment, interest rate movement, and rotation of money from value-oriented corners of the market to growth-oriented ones.

Those looking for exposure to growth can select individual stocks, or find funds with exposure to growth. I’m not aware of any fund that has more exposure to outright growth potential than the now-infamous ARK Innovation ETF (NYSEARCA:ARKK).

We all know the story; ARKK exploded to the upside during the pandemic, but has now given back all of its gains. There were good reasons for that, as economic and interest rate headwinds caused investors to sell growth and buy value. However, those tailwinds have abated and it’s quite clear to me that Wall Street wants exposure to growth, and therefore, so do I.

The last time I covered ARKK was back in September of 2021, and the article was titled “Look Out Below”. The fund is down 67% since then, as many of the risks outlined in the article came to fruition. However, those risks are now priced in, according to what I’m seeing, and the risk has shifted firmly to the upside.

ARKK is an actively managed fund that seeks to give investors exposure to companies that are highly focused on innovation. The companies in the portfolio tend to have little in the way of profits, but a lot in the way of future growth potential.

ARKK factsheet

There are very obvious risks to this kind of fund, and those risks have been on full display in the past year or two as the price of ARKK fell off a cliff. Stocks like the ones in the ARKK fund are heavily dependent upon investors paying a premium for future growth. When that premium goes away – as it did in the past couple of years – the prices of these stocks seemingly cannot find a bottom. That’s a risk you must be willing to take with ARKK. However, as we’ll see below, I believe this risk was fully priced in as of December of 2022, and that the risk is firmly to the upside now.

ARKK factsheet

The decline of ARKK has been the stuff of legends. It outperformed everything by hundreds of percentage points into early-2021, and has now given all of that back. In fact, since inception, the fund is now worse off than a simple S&P 500 or Nasdaq fund. It’s been a wild ride.

The holdings of ARKK change everyday just as soon as we get a print of what the fund owns, it’s generally slightly out of date. Still, we can get an idea of the kinds of companies ARKK holds with the below. The overall composition doesn’t change much as ARKK finds a few companies it really likes, and trades its positions around those companies.

Seeking Alpha

Obviously, Tesla (TSLA) remains number one as ARKK rode Tesla’s meteoric rise to massive gains, and has now ridden it down to losses. But these companies all have a few things in common. They are generally operating at a loss, or with narrow profit margins. They are generally early on in their projected growth cycle. They either offer some sort of competitive advantage, or are working on some sort of sustainable advantage. None of these are “sure bets” or safe places to park money. These are aggressive growth stocks with massive risks and massive rewards. That’s not for everyone, and ARKK is certainly not for everyone. However, if I’m right about where US equities are going this year and beyond, aggressive growth is exactly where you want to be.

That’s the fundamental case for ARKK, but anyone that reads my work knows that I follow the money more than anything, and for that, I use charts. Let’s take a look at the bull case for ARKK, beginning with the growth to value ratio. This ratio shows us whether money is rotating into growth names, or rotating into value names. Bull markets see the former, while flat or bearish markets see the latter.

StockCharts

Growth underperformed value by 28% from late-2021 to late-2022, but has outperformed by almost 17% in the first quarter of this year. Wall Street has voted with their money and said growth is the place to be, not value. That argues for Nasdaq outperformance over the S&P 500, growth over dividend stocks, etc. I expect technology and growth stocks to blow past anything else this year, and ARKK is a great way to get exposure to both.

One factor I mentioned above was interest rates, and the reason is simple; Wall Street discounts future growth by risk-free rates, which are measured by US Treasury rates. The benchmark 10-year Treasury is the oft-quoted one, and I have a chart of it below. Essentially, when looking at growth names, lower rates are better, and higher rates create a headwind for growth stock valuations.

StockCharts

The 10-year yield is at critical price support right now, and I believe the path is lower. This chart has all the characteristics of an asset that has already topped, and as such, it is my view that whether it breaks down next week or next month, it’s very likely to break down. When it does, ARKK and other growth-oriented areas of the market will get additional leeway on their valuations, and that means higher prices.

Now that we have the backdrop, let’s look at ARKK itself. This is a two-year chart, which shows the almost unbelievable decline the fund’s price.

StockCharts

From spring of 2021 to the end of last year, ARKK underperformed the S&P 500 by more than 72%. That’s difficult to imagine, but that’s reality. However, as I mentioned above, the look and feel of this market is wholly different to what it was back in December, and ARKK should continue to be a massive beneficiary of that going forward.

The accumulation/distribution line is flying higher, indicating intraday buying. The A/D line measures whether the closing price is higher than the opening price, and in up trending assets, you tend to see the A/D line lead the way. It’s a way to measure whether Wall Street is buying dips or selling rips, and it’s firmly the former with ARKK.

The PPO is turning higher again at the centerline, which is very bullish. And the 14-day RSI is nowhere near oversold levels, which is bull market behavior. All of this lines up with ARKK going higher this year, and that’s why I’m long.

I’ve annotated a symmetrical triangle on the price chart, and that’s the obstacle the bulls need to break through. The triangle is almost closed so we’ll get resolution in the near future, but it’s something to watch in the coming days.

Finally, the bottom panel has the fund’s 250-day correlation to the 10-year yield, and at -0.76, they are quite inversely related. Should the 10-year break down, as I mentioned above, that’s yet another tailwind for ARKK.

The stars have aligned for ARKK to have an epic year, and that’s a train I want to be on. I believe 2023 is going to produce a massive bull run in the US equities markets, and that it will be led by growth names. ARKK is a great way to get exposure to growth names, and I’m very bullish.

I mentioned some risks above and I want to reiterate this is not for everyone. If the bull case goes off the rails, ARKK could very easily make new lows, which would be a long way down from here. I don’t think that’s going to happen, as I believe the worst was priced in back in December, but this is a high risk, high reward setup.

ARKK has a conensus rating of Hold which is based on 197 buy ratings, 162 hold ratings and 40 sell ratings.

One effective strategy for trading the ARKK ETF is to purchase the momentum. It is possible that the rally has commenced earlier than anticipated, as of the year 2023.

The renowned investment manager experienced a significant decline in the value of her flagship ARK Innovation ETF (ARKK) between early 2021 and the end of last year, with a drop of up to 80%.

However, the fund has shown signs of recovery in early 2023 and has since increased by almost 50% year-to-date.

It appears that ARKK is experiencing positive effects from what may be the conclusion of a prolonged period of rampant inflation and continuous interest rate increases.

It is recommended to adopt a systematic approach while trading the ETF instead of relying on the assumption that the fund will maintain its upward trajectory.

If you want to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or use WhatsApp (+44-7393-450-837).

The previous year witnessed a substantial change in investor mood toward new technologies, which was a positive indication for the industry.

The Cathie Wood’s ARK Innovation Fund (ARKK), which experienced a drop of roughly 68 percent in 2022, is the best indication of innovation equities that there is.

It was a terrible year for growth investors, and there was no Santa Claus rally to end the year, so a few companies that specialize in disruptive innovation found a way to fall even farther in the last weeks of what had been a terrible year.

It is not known when unprofitable inventors would reach their ultimate lowest point; but, a reversal might be on the horizon sometime around the year 2023.

ARKK is now selling at a price that is over eighty percent lower than what it was priced at when it reached its all-time high. It’s probable that ARKK is still a ways off from making a turn for the better despite the Federal Reserve’s ongoing efforts to combat inflation by raising interest rates.

There is no question that the fate of ARKK and other creative technology stocks seems to still be primarily connected to the actions of the Federal Reserve.

Putting a price on the shares of a firm that does not see itself turning a profit in the very near future is, to tell you the truth, one of the most challenging things to accomplish.

Stocks that have had a price decline of 80–90% but are still trading over their fair value threshold due to oversold conditions are not always considered to be inexpensive.

When the Federal Reserve raises interest rates, it makes it that much more difficult to get money because of the increased competition for available funds.

When it comes to the businesses that they are looking to store away in their portfolios, investors who are focused on growth will need to exercise a higher level of discrimination in the years to come.

If a forward-thinking firm is going to have to keep investing a significant amount of money into its future, then it is in the best interest of investors for the company to continue robust growth while also making progress toward reducing its losses.

Recently, growth rates have been under pressure as a consequence of headwinds that already have begun to push their way into financial results.

This is due to the fact that headwinds have already begun to force their way into financial results.

The primary question that has to be answered is how much of the recent slowdown in growth can be attributable to circumstances brought on by the temporary economic downturn, and how much can be related to the natural process of organizations becoming older.

The growth rates of hyper-growth enterprises often undergo a considerable decrease once the company reaches its maturity stage.

The most important factors that have led to a slowdown in growth are the intensification of competition and the lack of a durable competitive edge. Both of these factors have the potential to “reset” values in a direction that is unfavorable.

After the economic downturn has run its course, it is quite unlikely that many of the assets included within the ARK ETFs would be able to reacclimate their growth rates to pre-recession levels by the year 2021.

Investor favorites like Zoom Video Communications (NASDAQ:ZM) have lost 88 percent of their value. It is quite doubtful that it will return in light of the economic openness that occurred as a result of COVID-19 and the development in popularity of other forms of video-conferencing.

ZM stock will continue to be a top holding (representing just under 10% of the flagship ARKK ETF) far into 2023, in spite of the catastrophic decline it has experienced.

It is quite clear that Cathie Wood has not abandoned her faith in the company. However, due to the fact that so many competitors are concentrating their efforts on capitalizing on the work-from-home (WFH) trend, the issue of whether or not businesses such as Zoom are able to innovate their way back to growth remains unanswered.

In the same vein as a large number of other investors who are selective, there are reasons to continue to be suspicious.

ARKK is the primary fund of the investment firm ARK Invest. The ARKK ETF is centered around companies that demonstrate “disruptive innovation,” which refers to the introduction of a new technologically-driven product or service that has the potential to revolutionize the way the world operates.

In 2020, the ARK Innovation ETF outperformed the Nasdaq with an impressive surge of over 152%, while the Nasdaq returned 43.6%.

The ARKK ETF exhibited a significant underperformance in 2021 as compared to the Nasdaq, with a decline of 24% in contrast to the Nasdaq’s 21.4% growth.

The ARKK ETF’s underperformance persisted in 2022, as it experienced a significant decline of 67%, in contrast to the Nasdaq’s 33.1% annual loss. As of May 10th, 2023, the ARKK exchange-traded fund has experienced a notable recovery, with a 24.2% increase in value.

Given that the ARKK ETF is currently trading at a 30% discount from its 52-week high, it may not be advisable to purchase the ETF at this time.

It is advisable to exercise patience and wait for the ETF to cease its current downward trend. Once it forms a new base and breaks out past a suitable buy point, it would be an opportune time to make a purchase. On May 26, the ARKK ETF experienced a 2.7% increase.

ARK Investment Management offers a range of ETFs that cater to various investment themes. These include the Fintech Innovation (ARKF), Autonomous Technology & Robotics (ARKQ), Genomic Revolution (ARKG), Next Generation Internet (ARKW), and the newly launched Space Exploration and Innovation (ARKX) ETFs.

Adopting a buy-and-hold approach without conducting thorough research and analysis may not yield optimal results in the stock market.

It is possible that the ETF with a high concentration of technology stocks may continue to experience losses for several months. One possible approach to buying the dip is to wait for market signals that indicate a favorable time to make a purchase.

One effective strategy for trading stocks is to time your purchases when the price is above the 50-day moving average. Conversely, it can be wise to sell your shares when the price falls below the trend line.

This approach can help you make informed decisions about when to buy and sell, potentially maximizing your returns and minimizing your losses.

It is important to note that the implementation of a moving average strategy alone does not guarantee universal success for all investors in every scenario.

The most effective approach for trading assets that tend to follow momentum is to engage in buying and selling activities based on momentum.

It is a well-established phenomenon that speculative bubbles tend to follow a pattern of (1) inflating due to irrational exuberance, (2) experiencing an overcorrection, and (3) eventually rebounding and reaching even higher levels.

The phenomenon observed with ARK Innovation is reminiscent of what occurred with technology stocks from the 1990s to the mid-2000s.

The upcoming year of 2023 is expected to witness a robust lineup of technology Initial Public Offerings (IPOs), raising the prospect of a much-needed boost for innovative technology.

These new IPOs are anticipated to generate enthusiasm for emerging technological trends that have the potential to revolutionize the world.

Investors who have the ability to select long-term winners can still achieve remarkable returns through investing in growth stocks. When the rates are higher, the risks or potential losses also increase.

It is evident that in 2022, tech investors experienced a significant setback and chose to withdraw their investments. Despite the challenges faced, significant progress was made in the field of technology, with several noteworthy advancements being achieved.

Innovation in the tech industry is showing no signs of slowing down, as evidenced by the groundbreaking projects of OpenAI such as Dall-E and ChatGPT, as well as Meta Platforms’ ongoing investments in the hardware and software that will drive the metaverse.

Despite the challenges posed by a weakening macro environment and stricter monetary policies, these companies remain committed to pushing the boundaries of what is possible in the tech world.

Despite the challenging year for ARKK and other innovative growth stocks, Cathie Wood’s popularity has not been impacted as severely as one might anticipate. It appears that Wood is not yet prepared to cease operations.

She has been actively investing in the stock market by purchasing stocks such as Tesla (NASDAQ:TSLA) and Coinbase (NASDAQ:COIN) during periods of market decline.

Wood’s bold investments have the potential to magnify a potential resurgence in the technology sector, should one occur in 2023. It is possible that ARKK’s decline could worsen if innovation continues to face challenges. Investing in ARKK at present seems to be a challenging task as the feeling of decline is persisting even in the new year.

Wood is of the opinion that in the long run, stocks related to innovative companies will emerge as the winners.

Although ARKK and other innovation stocks are likely to recover eventually, the primary concern is the possibility of another significant drop in value before the anticipated rebound occurs.

Investors are advised to exercise caution and thoroughly evaluate the potential risks before making a decision that goes against the prevailing market trend. Utilizing a dollar-cost averaging (DCA) strategy appears to be the most sensible and cautious approach.

Investing is inherently unpredictable and there are no guarantees of success. If one were to follow the aforementioned strategy, they would have purchased ARKK in March 2022 and subsequently sold the same shares at a minor loss within a few days.

If ARKK manages to rebound and reach its previous peak levels, purchasing during the upward trend could prove to be a profitable move for the investor. Achieving success in any endeavor primarily depends on one’s ability to remain patient and diligent.

It appears that Cathie Wood and ARKK are poised for a year of recovery in 2023. Investors who implemented the moving-average strategy in 2022 would have been able to avoid significant losses while still being able to participate in roughly two-thirds of the market’s rally in 2023.

It is worth noting that if an individual had invested $1,000 13 months ago and traded according to the moving average rules, the investment would have yielded a return that is slightly less than the original investment.

In contrast, those who were determined to hold onto their investments regardless of market conditions would have experienced a significant loss of 53%.

The future trajectory of ARKK is uncertain and difficult to predict. In my opinion, utilizing the aforementioned strategy to trade the ETF has the potential to be a highly effective method for capitalizing on the potential for market growth while simultaneously minimizing the potential for losses.

The performance of Cathie Wood’s stocks and her ARK funds has been suboptimal over the last year. ARKK, which is Wood’s primary investment vehicle, is currently experiencing a decline of approximately 78% from its peak in early 2021.

The components have decreased by comparable amounts. Despite the potential lack of respite in the upcoming year of 2023, I believe that it may be worthwhile to explore distinctive opportunities by examining the aftermath of ARK.

Wood maintains a positive outlook on the innovation trade in the long run, despite the current discomfort.

Additionally, she has demonstrated a willingness to act on her convictions by consistently purchasing stocks during market downturns. Cathie Wood expressed her belief that innovation stocks will ultimately emerge victorious.

This section will focus on two holdings of ARKK, namely EXAS and U. The market is expected to remain unstable and may not be suitable for investors who prefer low-risk investments due to its unpredictable nature. Some investors may consider it beneficial to keep an eye on these promising opportunities.

The ARKK ETF’s largest holding currently is Exact Sciences, with a weighting of 9.45%. The company specializing in molecular diagnostics is considered to be one of the most fascinating and pioneering firms included in the ARKK portfolio.

The company responsible for developing the widely-used Cologuard screening test utilizes advanced biotechnology to accurately identify the presence of cancer.

According to a report by the market research firm MarketsandMarkets Research, the cancer diagnostics market is projected to reach $26.6 billion by 2026.

The market in question is quite substantial, and it appears that Exact has the potential to capture a significant portion of it in the coming years.

The improvement in Exact’s performance could potentially lead to a significant increase in its stock value, which has been negatively impacted by rising interest rates and unfavorable economic conditions.

Wood has identified Exact as a promising contender that has the potential to make a significant impact and potentially reach new heights.

During its lowest point, the stock experienced a decline of over 80% from its highest value. In recent times, the stock has gained significant momentum, registering a remarkable surge of over 125% since reaching its lowest point in October 2022.

The company has achieved EBITDA profitability in the recent past. Given the vast size of the market and the advanced technological capabilities at its disposal, Exact Sciences has the potential to emerge as a key holding in ARK’s portfolio, potentially contributing to a significant rebound in the years ahead.

As of the time of writing, the EXAS stock is trading at a price-to-sales ratio of 5.9, which is significantly lower than its five-year average of 13.8.

The cost for one of the most fascinating innovators out there is not exorbitant. It is possible that the recent positive surprise in quarterly earnings may be indicative of future positive performance.

The financial industry has expressed a favorable view of the company, with eight analysts recommending a Buy rating, five suggesting a Hold rating, and none recommending a Sell rating. This results in a Moderate Buy consensus rating.

The projected average stock price target for EXAS is $60.31, indicating a potential decrease of 8.85%. It is evident that analysts should consider upgrading their price targets following the recent surge.

Unity Software is a relatively smaller holding in the ARK basket, but it is still considered innovative. It currently holds a 3.6% weighting. Gamers are likely to be acquainted with Unity, the platform responsible for powering numerous popular games.

Unity, the firm in question, has a unique vantage point in the gaming industry. However, with the emergence of virtual and augmented reality technologies, the potential market for Unity’s products may be significantly greater than previously anticipated.

The primary concern is whether Unity has the ability to dominate the majority of this particular market. Although uncertain, even a small increase in value could potentially yield significant profits for Unity while it remains undervalued.

The stock has experienced a significant decline of nearly 87% from its peak, positioning it as one of the most substantial underperformers in the field of innovation.

The recent announcement of 284 layoffs by the company has raised concerns about how it can maintain its competitive advantage in an environment of rising interest rates.

During an interview with The Wall Street Journal, management acknowledged the presence of project “overlap”. It is clear that there is an opportunity for Unity and other technology companies that hired excessively during the pandemic to enhance their efficiency and productivity.

There are reasons to believe that the extent of the damage to U stock has been exaggerated and is not reflective of its true value. Based on the impressive innovation and growth exhibited by the company (with a revenue growth of approximately 24% in the past year), the current sales multiple of 9.3 appears to be unreasonably low and unsustainable.

Unity Software has garnered a Moderate Buy consensus rating from Wall Street, which is based on a total of thirteen ratings consisting of eight Buys, four Holds, and one Sell.

This indicates that while there is some level of caution, there is also a sense of optimism surrounding the company. Based on the average U stock price target of $37.54, it appears that there is a potential upside of 29.9% from the current trading levels.

Among the various stocks in the ARKK portfolio, the Exact Sciences and Unity Software are particularly promising at their current price levels. This is due to their strong potential for growth when compared to their current valuations.

The two names are highly unpredictable and prone to sudden fluctuations in either direction. Investors need to exercise additional caution and thoroughness in their research and analysis.

Some of the stocks that Cathie Wood recommends buying and keeping an eye on are Roku, Block, Tesla, and Zoom Video.

Zoom Video is a prominent provider of contemporary video communication solutions for businesses. Their cloud-based platform offers a range of features including video and audio conferencing, chat functionality, and webinars.

These services can be accessed across various devices such as mobile phones, desktop computers, and conference rooms.

Zoom announced on May 22 that its earnings for the April quarter exceeded expectations. However, investors in ZM stock were concerned about the declining performance of its enterprise business.

The company’s first-quarter earnings for Zoom increased by 13% to $1.16 per adjusted share due to cost-cutting measures. The revenue has experienced a 3% increase, reaching a total of $1.105 billion. In the previous year, Zoom’s earnings per share were $1.03, with sales amounting to $1.074 billion.

The stock price of Zoom experienced a 4% increase on May 26. The current value of shares is approximately half of their highest value recorded in the past 52 weeks.

On May 25, Tesla’s stock experienced a 0.9% increase, which put an end to its two-day decline. Currently, the shares are experiencing a level of support near their 50-day line while they construct a cup base.

The buy point for this base is at 207.89 at the moment. Be vigilant for a leveraged opportunity to provide a more affordable entrance. On May 25, the shares concluded trading at a 41% decrease from their highest value over the past 52 weeks.

On May 26, the TSLA stock showed a positive trend by increasing 6.9% from the previous day’s gains. On the evening of May 25, Tesla and Ford made a joint announcement that they have reached an agreement to provide access to Tesla’s network of superchargers to Ford’s electric vehicle customers.

Block is a prominent player in the realm of digital payments and cryptocurrency. The current stock price is trading at a significant discount of approximately 50% from its highest price point in the past 52 weeks.

Additionally, it is currently trading below the 200-day moving average, which is a long-term trend indicator.

As per the IBD Stock Checkup analysis, the Block stock exhibits a Composite Rating of 58 out of a possible 99, indicating its performance in terms of fundamental and technical factors.

The IBD Composite Rating is a useful tool for investors to assess the overall quality of a stock’s fundamental and technical metrics in a straightforward manner.

Square’s parent company, Block, announced their first-quarter earnings and revenue on May 4, which exceeded the expectations of Wall Street analysts.

Despite exceeding expectations in terms of gross profit, SQ stock did not experience any positive impact due to the ongoing controversy surrounding its consumer Cash App business.

On May 26, there was a 1.2% increase in the value of Block stock.

The current trading price of Roku stock is approximately 50% lower than its highest value in the past 52 weeks. This decline has been significant and has persisted for the past 22 months.

The company based in San Jose, California announced on April 26th that it had acquired 1.6 million new active accounts during the March quarter, resulting in a total of 71.6 million accounts. During the period, it was anticipated by analysts that there would be an addition of 1.14 million new users.

In Q1, Roku reported a loss of $1.38 per share on revenue of $741 million. According to a survey conducted by FactSet, it was anticipated that Roku would incur a loss of $1.47 per share while generating $708 million in revenue.

During the corresponding period of the previous year, Roku incurred a loss of 19 cents per share while generating $734 million in revenue.

On May 26, there was a 2.7% increase in the value of ROKU shares.

Pained by financial indecision? Want to invest with Adam?

After two straight years of losses throughout 2021 and 2022, Cathie Wood’s Ark Invest’s flagship ARK Innovation ETF (ARKK) is finally back on the radar, up more than 30% year-to-date. The ETF focuses on companies that exhibit “disruptive innovation,” technologically enabled new products or services, and technological advancements that change how the world works.

With the significant potential of disruptive innovation firms that make up the ARKK fund, investing in this ETF could be wise this month for solid returns.

ARKK is an actively managed Exchange Traded Fund (ETF) that seeks to generate long-term growth of capital by investing in domestic and foreign equity securities of companies that exhibit disruptive innovation. The fund is managed by the team at Ark Invest, an advisory firm led by well-known investor Catherine Wood.

Companies within ARKK rely on or benefit from the development of new products or services, technological improvements, and advancements in scientific research relating to the areas, including Artificial Intelligence (AI), DNA sequencing, automation, robotics, energy storage, and fintech innovation.

Ark Invest CEO Cathie Wood is considered a star stock-picker who advocates investing in disruptive technologies and reportedly shot to fame in 2020 when all her six ETFs saw astronomical returns of over 100%. Despite poor performance last year, her flagship fund, ARKK, is up 34.6% year-to-date, primarily driven by bets on Elon Musk-led company Tesla Inc. (TSLA).

TSLA is Ark Innovation’s top holding. According to Cathie Wood, the company is on the cutting edge of AI. “Tesla... probably is one of the biggest beneficiaries of artificial intelligence and it is the only auto manufacturer to design its own AI chip. And we do believe that it is in the pole position to be the leader in a winner-take-most market called autonomous taxi platforms,” she said.

Cathie Wood added that between now and 2030, autonomous taxi platforms’ revenue opportunities might be between $8 trillion and $10 trillion from $0 in revenue now. While Tesla is bound to see competition as the EV/AI market matures, Wood sees it as a cut above other auto companies and tech companies, thanks to the data collection it has already engaged in.

Given AI as one of the major areas of innovation, along with TSLA, Wood’s investment firm purchased stock in Zoom Video Communications, Inc. (ZM), UiPath, Inc. (PATH), and others. Moreover, earlier this year, Ark Invest estimated that AI software would increase at a 42% CAGR to reach $14 trillion by 2030.

Here are the factors that could influence ARKK’s performance in the near term:

Robust Fund Stats

ARKK has assets under management of $7.81 billion. The fund’s top holding is Tesla Inc. (TSLA), with an 11.41% weighting, followed by Zoom Video Communications, Inc. Class A (ZM) at 7.30%, and Roku, Inc. (ROKU) and UiPath, Inc. (PATH) at 7.13% and 6.76%, respectively. It has a total of 29 holdings.

In addition, the ETF has net inflows of $117.23 million over the past month.

Impressive Price Performance

ARKK has gained 12.5% over the past month and 16.6% over the past six months to close the last trading session at $42.06. The ETF is currently trading 21.9% below its 52-week high of $53.86, which it hit on August 8, 2022. The fund’s NAV of $42.03 as of May 5, 2023.

POWR Ratings Reflect Promising Prospects

ARKK’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

ARKK has a grade B for Trade, consistent with its recent price performance. In the A-rated 119-ETF Technology Equities ETFs group, it is ranked #66.

Click here to see the POWR Ratings for ARKK (Peer and Buy & Hold).

View all the top ETFs in the Technology Equities ETFs group here.

Bottom Line

Cathie Wood’s Ark Invest investment company’s flagship ETF, ARKK, was one of the hottest funds following 2020’s huge stock market gains. However, the ETF was hit hard in 2021 and again in 2022. Despite various macroeconomic headwinds, such as high inflation, rising interest rates, and recessionary fears, ARKK has been witnessing gains lately.

The ARKK fund’s recent gain results from stock success stories in cutting-edge tech areas, including AI, robotics, and automation. Disruptive innovation companies that ARKK holds have huge growth potential.

Given ARKK’s impressive fund statistics, solid price performance, and high growth potential, investing in this ETF this month could be wise for substantial gains.

How Does ARK Innovation ETF (ARKK) Stack Up Against Its Peers?

While GLDM has an overall POWR Rating of A, one might consider looking at its Technology Equities ETFs category peers, Technology Select Sector SPDR ETF (XLK), iShares U.S. Technology ETF (IYW), and VanEck Vectors Semiconductor ETF (SMH), with an A (Strong Buy) rating.

What To Do Next?

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ARKK shares rose $0.04 (+0.10%) in premarket trading Tuesday. Year-to-date, ARKK has gained 34.64%, versus a 12.11% rise in the benchmark S&P 500 index during the same period.