✍️ ARK Invest Short & Squeeze - Edition #2

ARKW +37%, ARKF +30%, ARKK +29% & ARKQ +19% in 2023 - Performance, Valuation, Short Interest, Key Metrics, AI framework, ARKK deep dive, latest trades, direct stock commentary & bonus

Mar 21, 2023

Dear all,

welcome to the 2nd edition of the ARK Invest Short & Squeeze report that covers state of the art analytics & visuals on Ark’s 6 main ETFs. A unique report after I studied what is out there & not even Ark Invest itself post many of these key analytics

Target audience: investors into the disruptive innovation thematic, traders from long, short & short squeezers of Ark. Useful also for investors in general, journalists and markets observers given how Ark is quite a distinct liquidity proxy, risk-on/risk-off, and sentiment gauge in the financial markets.

Report is NOT behind a paywall, there are no pesky ads here but pure data-driven research as always. It would be highly appreciated if you just spread the word around to people that might also be interested.

Report structure is the following:

📊 Ark Invest ETFs: Performance Overview 📊

📊 Ark Invest ETFs: Valuation 📊

📊 Ark Invest ETFs: Short Interest - ETF level & single stocks 📊

📊 Ark Invest ETFs: Key Metrics 📊

📊 Ark Invest ETFs: Artificial Intelligence framework 📊

📊 ARKK flagship ETF: deep dive 📊

📊 Ark latest trades in action 📊

💬 Ark Invest Direct Stock Commentary 💬

🏦 Bonus Takes & Charts 🏦

📊 Ark Invest ETFs: Performance Overview 📊

All 6 ETFs with a massive rally in 2023, ARKW, ARKF, ARKK & ARKQ with +37%, +30%, +29% & 19% respectively (despite the recent banking doom & gloom headlines):

Enhanced Price Action view: Ark 6 ETFs 2023 YTD Winners & Rebounders from their 52-week low + I added S&P 500 (SPY) and the Nasdaq 100 (QQQ):

Further performance breakdown inside the ETFs via price scatterplots: 2023 Total Return % and Above 52-week Low % with the following likely use cases: check for market leaders & laggards, outliers, positive/negative momentum, short/squeeze candidates, relative strength, likely unwarranted cheap/expensive stocks, further deep dives on single stocks & connecting the dots for a general market assessment.

ARKK 2023 Total Return % and Above 52-week Low %: most names are up materially, check the outliers

ARKQ 2023 Total Return % and Above 52-week Low %: most names are up materially, check the outliers

ARKF 2023 Total Return % and Above 52-week Low %: most names are up materially, check the outliers

ARKG 2023 Total Return % and Above 52-week Low %: more names negative, check the outliers (ETF overall still positive in 2023 as per above)

ARKW 2023 Total Return % and Above 52-week Low %: best performer ETF in 2023 with almost all up materially, check the outliers

ARKX 2023 Total Return % and Above 52-week Low %: most names are up materially, check the outliers

Weekly price % change of the 6 ETFs for the past 12 months for zooming out a bit:

Zooming out further for the returns & CAGR since the inception of each ETF: massive parabolic run up & then back to earth with a notable driver being cheap money driven by ultra low interest rates & central banks balance sheet expansion.

Since inception, Bloomberg estimates that ARKK investors lost almost $11bn, though let’s note that was also with the positive sign back in Q4 2020. I personally always say: when anything works too well & too fast, time to ask questions, hedge, trim or mark a profit: nobody got hurt ever booking a profit, stepping a bit on the side for a new plan less influenced by recency bias. On hedging, a general message: it’s very likely to be cheap when the asset is going fast upwards (i.e. when nobody wants to hedge).

Is what happened lately a very unique Ark / Cathie Wood story? No: 5-year performance of ARKK vs a Goldman Sachs Basket of Unprofitable Tech Stocks. Spot the difference! Close to none!

Going forward now, is the disruptive innovation back or just a bear market rally? Note the recent biggest ARKK inflows since 2021. FED balance sheet (re)expanded with $300bn & interest rate hiking expectations dropping materially a likely key driver.

📊 Ark Invest ETFs: Valuation 📊

Valuation view will done via the Sales/Revenue aka ‘Top-line’. Specifically, we will take the P/S multiple & Revenue growth (next year estimates). Interpretation: Forward P/S multiple the stock is trading at for the given level of estimated Sales growth.

ARKK components:

ARKQ components:

ARKF components:

ARKG components:

ARKW components:

ARKX components:

📊 Ark Invest ETFs: Short Interest - ETF level & single stocks 📊

ETF level Short Interest: ARKK flagship ETF with a big 24.17% short interest, though note it cooled of a bit lately given the recent inflows spike covered above. Note also how ARKF used to be very high, though it did temper lately.

Top 10 Ark holdings Short Interest across all ETFs:

Short interest of ETF components with 2023 Total Return: check names with high short interest that performed well/bad in 2023 and conversely, for the names that have low short interest that did well/bad in 2023 … outliers, special cases can get interesting

ARKK components:

ARKQ components:

ARKF components:

ARKG components:

ARKW components:

ARKX components:

Last but not least on the Short Interest section, execution wise for short sellers one way to short ARKK is via SARK ETF (‘the shark going for the Ark’) which is an ETF launched in 2021 and mechanics wise goes inverse via swaps on ARKK. A great 71% return since inception (was up 135% just recently in December), though note lately the outflows (monthly) from the ETF and fading volume.

Looking into 2023 now, via SARK we see short sellers did not do well with a -22.75%. Note again the outflows (weekly series this time) from the ETF and fading volume.

📊 Ark Invest ETFs: Key Metrics 📊

Now let's plot 5 Key Metrics covering the last 3 years for all 6 ETFs: Total Return, Drawdown from peak, Flows (weekly), NAV trading at Premium/Discount & Volatility.

Complementary, Ark ETFs Assets Under Management (AUM) since inception:

AUM again, but linear scale - a good idea to watch for differences in linear/log scales:

📊 Ark Invest ETFs: Artificial Intelligence framework 📊

ARKK ARKQ ARKF ARKG ARKW valuation via an Artificial Intelligence (AI) framework provided by Hedgy Analytics via the Cheapness, Profitability, Sentiment & Momentum dimensions. Main takeaway: rock bottom Cheapness & Profitability while Momentum & Sentiment scores with a recent jump

Profitability and Cheapness dimensions via a great scatterplot visual:

Momentum and Sentiment dimensions via a great scatterplot visual:

If you go on Hedgy's website, you can filter the Opportunity Triangle by Cheap, Value, Profitable, Growth, Loved, Trending and right in the middle, Ideal:

12 months forecast for ARKK ARKQ ARKF ARKG & ARKW components:

N.B. background on the Artificial Intelligence (AI) framework: model breaks down company historical and forecasted financial fundamentals to gain perspective on its Cheapness, Profitability, Sentiment, and Momentum. Then it further applies machine learning techniques to data to determine which measurements are most predictive in each distinct industry. It is improved and fine tuned week by week and more to come.

📊 ARKK flagship ETF: deep dive 📊

Digging inside the flagship ETF ARKK constituents via the angle of Performance & Weight in 2023: leaders and laggards

2023: COIN TSLA ROKU PATH EXAS DKNG & RBLX doing the heavy work

2023: DNA BEAM TWST NVTA CERS VCYT VERV the laggards

A common statement I see online is that ARKK has been all about retail investors buying the innovation investing theme. Data clears the ski on that one also: Fidelity data shows us that current Institutional ownership is 43%, they bought more comparing the last 2 quarters & in the Top 10 holdings by shares held, we find big household names as owners.

Via Fintel.io we see visually how institutional ownership increased in the last years, and that despite the price falling back to 2018-2019 levels. Last green bar shows a drop in institutional ownership, something to watch if a material trend or some beginning of the year asset allocation effect.

From a technical analysis view, ARKK formed a major Head & Shoulders pattern in the last 3 years. Going into 2022 year-end, it broke briefly below the right neckline, only to come back up in 2023 strongly. That is a key resistance level to be watched further. In case a confirmed break below the 33-ish level happens, that would be very bearish with the next support around the 23-ish level.

All in all, ARKK is very sensitive to inflation, hence the interest rates trajectory & liquidity profile that the FED embarks on. Chart below shows FED total assets yearly % change and ARKK price. As FED liquidity shoots up, ARKK goes parabolic and the other way around. ARKK in general is a bet on innovation and a liquidity proxy as well.

When rates & inflation will fall fast enough, likely a sharp rebound for Ark ETFs, growth, hyper-growth & tech space in general. A wordplay & rhyme in the same time: at the end of the day it’s a big 'rates play' … for this space.

📊 Ark latest trades in action 📊

🐂 Bullish action🐂

Ark with material buys lately in Tesla (TSLA), Coinbase (COIN), Square (SQ), Cerus (CERS) & Ginkgo Bioworks (DNA)

🐻 Bearish action 🐻

Ark with material sells lately in MercadoLibre (MELI), Exact Sciences (EXAS), Twilio (TWLO), ATAI Life Sciences (ATAI) and exits Monday.com (MNDY)

💬 Ark Invest Direct Stock Commentary 💬

Ark shares weekly commentaries with investors on stocks part of their strategies that have appreciated or dropped more than 15% in a day during the course of the week.

🏦 Bonus Takes & Charts 🏦

A bit of throwback as I posted on Twitter:

👉chart show just how unstable the atmosphere was in the months leading up to the Dow’s January 2022 peak

👉The second line of ARK Innovation ETF (ARKK) also shows how much worse it became once the Dow, S&P 500 and NASDAQ started to decline in unison

Ark Research on Amazon’s Robotics: robot growth exceeded employee growth from 2021 to 2022 (Robots: 48.6%, Employees: 23.9%):

Cathie Wood calls ARKK ‘the New Nasdaq’ via Bloomberg.

Ark Invest teams up with Swedish broker to launch local fund via FT.

The latest content related to the ARK Venture Fund, Replit Investment Thesis:

Last but not least in case you missed it, Cathie Wood’s letter on 2022 with mentioned companies: AMZN, COIN, GM, HTZ, ROKU, SHOP, SQ, TSLA, WMT: What The Market Overlooked in 2022: A Letter from Cathie Wood, ARK Founder, CEO, & CIO.
Fun fact & nice read, we also have an ‘Anti-Cathie Wood Investor’ (strategy wise) out there which built a stock empire on oil, tobacco and banking which is everything that Cathie Wood is not into: https://financialpost.com/investing/anti-cathie-wood-stock-empire-oil-tobacco-banks. Food for thought … .

I hope you enjoyed this publication & it would be great to hear your feedback both in terms of what is currently inside & further coverage you would like to see further.

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Have a great week!

Maverick Equity Research