“Stonks” only go higher, right? That’s the main takeaway from the craze around red-hot names popularized by the Reddit day-trading crowd, observes Tony Sagami, editor of Weiss Ratings' Daily Briefing.
Almost as frenzied is the action around the ARK Investment Management family of exchanged-traded funds (ETFs). Investors are plowing money into them at a pace never seen before.
In fact, investors have never poured so much money at such as furious pace. Over the last 12 months, investors have thrown $28.8 billion into ARK ETFs. That’s the 15th-largest raw-dollar inflow of all time. But it’s No. 1 in terms of percentage growth: 886%.
Total ETF assets for the company are now at $53 billion:
The ARK Innovation ETF (ARKK) is ARK’s most popular ETF with net assets of $23 billion. Its other four ETFs are no slouches:
- ARK Genomic Revolution ETF (ARKG), with $10 billion in assets, is up 173% in the last 12 months;
- ARK Next Generation Internet ETF (ARKW), with $6.5 billion in assets, is up 152% in the last 12 months;
- ARK Autonomous Technology & Robotics ETF (ARKQ), with $2.8 billion in assets, is up 122% in the last 12 months; and
- ARK Fintech Innovation ETF (ARKF), with $2.7 billion in assets, is up 120% in the last 12 months.
People are even beginning to ask whether Cathie Wood is “the world’s best stock picker” because of her early (and loud) recommendations of other headline-generating names like Tesla (TSLA), Square (SQ), Shopify (SHOP) and Bitcoin.
ARK Innovation ETF has smashed the performance of the S&P 500 Index and trounced icons like Warren Buffett. And, I have to admit, I envy her 2020 performance.
The key to ARK’s stellar performance is its focus on five key “disruptive” technologies: artificial intelligence (AI), energy storage, robotics, DNA sequencing and blockchain technology.
I absolutely agree about AI, robotics, energy storage and blockchain technology. I don’t share the enthusiasm for DNA sequencing simply because I lack the medical background to make intelligent decisions.
Should you add a little ARK spice to your portfolio? There’s no denying its stellar performance. But its ETFs are volatile.
ARK Innovation ETF has a standard deviation of 35.8% compared to 12.1% for the S&P 500, which means it’s almost 300% more volatile than the world’s most widely followed equity index.
And the Weiss Ratings gives ARKK a “D+” for risk. My experience is that investors who absolutely love volatility to the upside also absolutely hate volatility to the downside.
If you have a cast-iron stomach and a long-term horizon, I think the ARK funds are worth your consideration. But buckle your seatbelt; it will be a wild ride.
