Welcome back to the State of the ARK, my quarterly series about adding context to Cathie Wood's
biggest buys in each ARK Invest fund over the previous quarter. Since this channel focuses
a lot on their research, the goal is to see how ARK Invest is putting their money where
their mouth is. And since there's just too much to cover in a single episode, I've split
the State of the ARK into a few episodes which I'm releasing around the end of Quarter 3.
I'm calling the whole series of episodes ARK Week. So, welcome to, uh, the second week
of ARK Week. Part one covered the biggest changes to ARK Invest's combined positions.
Part two highlighted some of the biggest buys inside ARKW and ARKF, ARK Invest's funds themed
around next-generation internet applications and Fintech innovations, as well as a pretty
interesting inconsistency between them. This is part three, which covers ARKQ, Cathie Wood's
fund themed around the autonomous revolution, and ARKX, the 6-month-old space exploration
fund. You can watch these episodes in any order and timestamps are always enabled for
your convenience. In the previous episode, I mentioned a trend that I'm finding very
interesting. At the end of the quarter, ARKF had 38 stocks in it, a whopping 18 of which
can also be found in ARKW. That's 47% of ARKF's positions that can be found in ARKW as well.
If you compare by weight instead of just by stocks, that overlap is about 35%, which is
still nothing to sneeze at. For example, if Square stock, ticker symbol S Q, is 10% of
ARKF and 4% of ARKW, that's a 4% overlap between the funds because both funds are at least
4% Square stock. We don't want the funds to overlap too much because, well, then there's
less of a meaningful difference between them, what stocks and risks they expose you to,
and how their prices move over time, right? Well, ARKQ and ARKX have an even bigger amount
of overlap. ARKQ had 38 stocks in it at the end of the quarter and ARKX had just 35, 18
of which are the same stocks. If you go by weight, these funds overlap by a whopping
47% still, because of a few big positions that sit inside both funds, like Trimble,
Kratos Defense and Security, UiPath, Unity Software, Iridium, Lockheed Martin, and several
others. So, I'll show you the trades in each fund individually, highlight the ones they
have in common, and then I'll wrap up with my commentary, which I always try to keep
separate from my overviews of the data so you can make your own, unbiased, data-driven
decisions. One final note before diving into the data; I was on vacation for the last 5
days. It was actually the first vacation I've taken since becoming a full-time investor
and YouTuber. So, some of the numbers I'm showing may be slightly different from the
previous ARK Week episodes because I've updated them to include the last two trading days
of the quarter. As always, you can find a link to download the full State of the ARK
presentation for free at ticker symbol you dot com using the URL on your screen right
now and I'll leave a copy in the description below as well. There's no catch here; I'm
just building a website with the community so that no one has to hunt through youtube
video descriptions to find what they're looking for.
Great. Now that all of quarter 3's trading days are accounted for, here's how the assets
under management of each fund have changed. On July 1st, 2021, ARK Invest's funds totaled
just over 49 billion dollars combined. On October 1st before market open, Cathie Wood's
combined funds had under 38 billion dollars in them, marking a whopping 23% decrease in
total assets under management. This should give you a good sense of how rocky and volatile
these funds are, as well as how fickle some people who claim to be long-term investors
can be. That's not a dig on anyone; I'm saying that because for every person who sells low,
there's someone buying low on the other side, right? When you pick and choose companies
to invest in, you need to be ready for the volatility that comes with that choice, unless
you want to be on the wrong side of those trades. We've all been there. The point is
to do better next time. Anyway, here are the updated numbers for each fund at the end of
the quarter. ARKK's assets under management dropped by almost 24% and are now back under
$20 billion dollars in A U M. ARKG dropped a whopping 27%, from almost 10 billion dollars
at the start of the quarter down to 7 billion dollars by the end. ARKW and ARKF each dropped
by about 20%. And as for ARKQ and ARKX, which are the focus of this episode, their assets
under management dropped by about 20 and 14%, respectively. The reason I always cover assets
under management first is because that's the baseline for looking at the changes in ARK
Invest's positions inside each fund. Here's the table of Cathie Wood's positions inside
ARKQ. Each row is one stock, the rows are ordered by the size of that stock's position
in ARKQ, and the rows are colored by the change in position over the quarter RELATIVE TO the
change in ARKQ's assets under management. Since the total amount of money inside ARKQ
shrank by about 20% since the start of the quarter, positions that are in white shrank
by around 20%, right in line with the fund. Green rows show positions that shrank by less
than 20%, meaning they grew relative to the fund, and red rows shrank by more than 20%,
meaning they shrank relative to the fund. Since Cathie Wood can't control the prices
of the stocks she buys, the first column shows the percent change in her share count and
the second column shows the percent change in share price, which are the two things that
affect the total position size of each stock. The numbers on the right show you each stock's
rank in this ETF and how that's changed over the quarter, as well as its rank when you
combine all six ARK Invest ETFs. Lower ranks are always better. For example, Tesla is always
Rank 1 in ARKQ, since it's the biggest position. Tesla's rank in ARKQ hasn't changed at all.
It's also ARK Invest's biggest overall position, so rank 1, and that hasn't changed at all
over the quarter either. Using this framework for analyzing ARK Invest's data, all we have
to do is look for is the darkest green rows. Simple, right?
For example, Cathie Wood increased UiPath, ticker symbol P A T H, inside ARKQ by over
75%. As a result, it's now the 4th biggest position in the fund, increasing 6 ranks from
where it was at the start of the quarter. The amount of UiPath shares held in ARKQ actually
more than doubled while its price dropped by almost 25%. Now that I've gone through
how to read the data, let me highlight the other biggest changes. Unity Software, ticker
symbol U, Komatsu, K M T U Y, Aerovironment, A V A V, and Blade Air Mobility, B L D E,
all saw substantial increases in position size over the quarter. If we look toward the
bottom half of the fund by weight, we can also add Markforged, M K F G, Archer Aviation,
A C H R, and Palantir, ticker symbol P L T R to the list, because they got added after
the start of the quarter, making them huge position increases. Just for clarity, Cathie
Wood added 26 million dollars worth of Palantir to ARKQ this past quarter, while only adding
about 10 million dollars worth of Proto Labs, ticker symbol P R L B, which is the position
immediately above it. The reason Palantir's row isn't darker green is because there was
no data to compare it to at the start of the quarter. Interestingly, every company I just
mentioned except Unity Software is trading at a lower price today than they were 90 days
ago. I'm not a financial advisor and this isn't an endorsement to buy or sell any security
or fund. The fact that Cathie Wood is loading up on these companies AND they're cheaper
now than 90 days ago tells me that I should throw them on my watch list and do some extra
research, not that I should make any impulsive decisions. Here's the table of Cathie Wood's
current positions inside ARKX. ARKX only dropped by about 14% for the quarter instead of 20%
like ARKQ, but otherwise, I'm looking at the changes the exact same way. Remember that
overlap thing I was talking about earlier? Let me uh, just highlight the biggest changes
for you. We have Unity Software, ticker symbol U, Aerovironment, A V A V, UiPath, P A T H,
Blade Air Mobility, B L D E, Markforged, M K F G, Archer Aviation, A C H R, and Palantir,
ticker symbol P L T R. No, you didn't accidentally hit the rewind button; those were the biggest
purchases in both funds over the quarter. Now, I'm being a little cheeky here, because
Joby Aviation, ticker symbol J O B Y, got added to ARKX and not ARKQ, but hopefully,
you're seeing my point about these funds overlapping by more and more. So, let's talk about these
positions. Whether you've been following this channel for a while or you're just joining
for ARK Week, you'll be familiar with Unity Software, UiPath, and Palantir. Unity software
sits inside every ARK Invest fund except ARKG and ARKF. On the other hand, UiPath and Palantir
are the only two stocks to be in literally all six of ARK Invest's funds. Because of
that, I heavily featured them in the first episode of ARK Week and I've put out dedicated
deep-dive videos on each of them. I put together one convenient playlist of all my stock market
deep dives for you. I'll leave that in the right-hand corner of your screen right now
and in the description below as well. So let me highlight the four other stocks that Cathie
Wood has loaded up on in both ARKQ and ARKX over the last quarter.
Aerovironment, ticker symbol A V A V, is a drone manufacturer that focuses on building
small and medium unmanned aircraft systems as well as technical missile systems such
as GPS-guided artillery shells. Their non-missile systems do things like relay communications,
surveil a given area, track things on the ground, map out a region, and more. In my
opinion, the biggest risk to Aerovironment is the fierce competition in the drone space,
especially in the defense industry, where there are massive companies providing drone
solutions of all kinds. Right now, Aerovironment is focused primarily on government contracts
but they also put out media about entering the agriculture market, which certainly is
a beneficiary of drone technologies. Because Aerovironment focuses on smaller form factors
though, their drones could be suited to lots of other industries, even beyond agriculture.
I'm excited to see what they come out with over the next few years as we see the adoption
of drone technologies continue to, uh, take off. Get it? Take off? You know, like -- [cut
screen]
Blade Air Mobility, ticker symbol B L D E, is currently a helicopter seat-booking company
that carries passengers in crowded urban areas via helicopters, jets, and seaplanes. The
big idea is skipping dense city traffic to get where you need to go in a fraction of
the time for a competitive price. Their future is all about progressing into the urban air
mobility space via electric vertical take-off and landing vehicles, or E VTOLs. The reason
for that is because a major limiting factor for the growth of urban air mobility is the
amount of noise helicopters generate along their flight paths and EVTOLs are much quieter.
Just like Uber has on the ground, Blade is developing the infrastructure and routes and
brand recognition with customers while keeping their own company asset-light. And just like
Uber pays drivers for their time and vehicle costs, Blade has to pay aircraft operators
the same way. Blade is a former SPAC that has shown consistent growth but is currently
still trading at around its $10 dollar SPAC price after landing back on earth from a sky-high
$18 dollars per share earlier this year, which was something like a 1 and a quarter billion
dollar market cap.
Markforged, ticker symbol M K F G, is a 3D printer manufacturer and the creator of the
Digital Forge, an integrated metal and carbon fiber 3D printing platform. The Digital Forge
uses machine learning algorithms to learn from each print from any of their printers
to fine-tune the next one. Their platforms are used by Google, Tesla, Amazon, the US
Airforce, and even NASA. Markforged greatly reduces the friction associated with learning
to 3D print parts from scratch by using AI to streamline every step of the process. They
recently announced a piece of software called the Eiger Fleet, which gives organizations
a secure and centralized control point for all of their Markforged 3D printers, users,
and libraries of parts. Eiger Fleet is designed to help manufacturers integrate additive manufacturing
technologies into their existing workflows. That's a smart move because a lot of legacy
companies still see 3D printing as a huge investment to replace something that isn't
really broken, but Markforged can start by securely augmenting existing capabilities
and scaling as customer adoption continues to increase over time.
Archer Aviation, ticker symbol A C H R, is designing and developing electric vertical
takeoff and landing aircraft, or EVTOLs, for use in urban air mobility. So, it's a flying
taxi maker making a flying taxi called the Maker. The Maker is a two-person, 12-rotor
aircraft with a range of 60 miles, a top speed of 150 miles per hour, and a cruising altitude
of about 2,000 feet. Like I pointed out with Blade Air Mobility, noise is a very important
factor. The Maker will only generate about 45 decibels of noise, which is about 100 times
quieter than a helicopter. They're also working on a five-seater aircraft for groups. Importantly,
Archer just completed a reverse merger with the SPAC Atlas Crest Investment Corp, ticker
symbol A C I C in mid-September and is now trading for well below the $10 dollar SPAC
price after Archer Aviation and Atlas Crest agreed to cut the deal value by about 37%,
from $2.7 billion dollars to $1.7 billion. This isn't really a big deal in the long term,
since Urban Air Mobility and vertical take-off and landing vehicle companies are probably
at least 5 years away from generating real revenues anyway. They're currently still sitting
under a 2 billion dollar market cap, so basically right at the value of their reverse merger,
making it a good company to research further while the price is still at ground level.
So, comment below or tweet me at ticker symbol you with your thoughts on these different
aerospace and supporting technology stocks. Are you interested in autonomous mobility
in general or urban air mobility specifically? Do you want exposure to drones in your portfolio
or do companies like Markforged appeal to you more because they can support a wide variety
of industries and market sectors? Should I try to buy a consumer-grade drone from a publicly-traded
company and test it out for the channel? I'm excited to hear your thoughts.
As for me, after the previous episode of ARK Week, I was a little worried that I'd be questioning
why more and more stocks were included in ARK Invest's funds. I'm happy to say I think
these stocks make a lot of sense for ARKQ because of the focus on robotics and autonomous
mobility and they definitely make sense in ARKX because of the clear ties to Sub-orbital
Aerospace. I believe that drone and 3D printing technologies are definitely core technology
platforms to these funds and would love to see them lean even harder into that theme.
The two reminders I'll throw out there are that urban air mobility companies are still
several years away from being serious revenue generators AND that both ARKQ and ARKX are
pretty niche funds, so make sure you're not overweighting your holdings in these types
of companies just because they make super cool physical products. I've been guilty of
that, myself. If we add Unity Software, UiPath, and Palantir back into the mix, we actually
cover almost the entire value chain here, including making interactive visualizations,
automating a lot of the day to day processes, and analyzing all of the data associated with
the whole enterprise of moving people and stuff through the sky. AND! All of these stocks
are trading for lower prices today than they were at the start of the quarter. Well, except
for Unity Software, but we all know that Ticker Symbol U is only going to get more and more
valuable as time goes on. Speaking of Ticker Symbol You becoming more and more valuable,
don't forget that the full State of the ARK presentation is available for download for
free at ticker symbol you dot com using the URL on your screen right now and I'll leave
a copy in the description below as well.
Thanks for watching. Until next time, this is Ticker Symbol YOU, my name is Alex, reminding
you, that the best investment you can make... is in you.