Something big just happened between ARK Invest's holdings data and their publications which
makes me VERY bullish. In this episode, I'm going to show you some big indicators
I follow, what Cathie Wood is buying and NOT buying, and how that guides my research and
my investing habits. Stick around to the end and I'll show you how you can track these
indicators for yourself.
If you enjoy this type of commentary and analysis, consider liking this video and subscribing
to the channel with all notifications turned on. That way, you'll be the first to know
when I come out with new research, regardless of how YouTube tunes its algorithm. Let's
dive right into it.
I seriously watch that clip a couple times a week during markets like this one because
it helps me build good habits like constantly re-evaluating my own personal cash position
to make sure I can take advantage of bargain basement prices.
But there's something pretty interesting about that statement coming from Cathie Wood, which
is that her actively managed funds actually can't hold a lot of cash. In fact, here's
how much cash those funds are holding right now. ARKK is 0.36 percent cash right now.
ARKG is 0.31 percent cash right now. ARKW is 0.36 percent cash. ARKF, ARKQ, and
ARKX are all also under half of one percent cash, which is much lower than the 5 or 10%
or more that most of our portfolios contain. So, what gives?
It turns out that there are rules on how much non-invested cash actively managed ETFs that
charge fees can hold, so Cathie Wood instead holds "cash-like" stocks that she can sell
when she wants to make more aggressive investments. That's our first indicator; Cathie Wood just
completely sold out of Apple, ticker symbol A A P L.
In my opinion, Apple is one of ARK Invest's MOST cash-like positions, meaning it's an
early indicator for when ARK invest is building up or spending cash. So, let's look at
when ARK started selling it and see what we can find from their data over that time.
Let's look at a chart of where ARK's investments since the start of May. Each line is a
stock they hold and the height of the line is how many dollars they have in that stock
when you combine their 6 actively managed ETFs. The top line here is Tesla, ticker
symbol T S L A and we can see they had 3.5 billion dollars in it at the start of the
month and about 2.9 billion dollars in it today, mostly because it's price dropped by
15% between then and now.
Let's highlight Apple. We can see at the start of the month they held $80 million in
it, making it their 105th biggest position over all. Remember, Apple acts like cash
and it's not their only cash-like position, so we never really expect it to have a very
high rank compared to a company like Tesla or Square.
ARK started selling Apple on May 7th. They sold over 50% of their shares there.
Then they sold another 30% of their shares on May 11th. Then they sold out of Apple
pretty much completely on May 18th and 19th and sold the last share on May 21st. That's
cash that ARK had but is now deploying somewhere else.
There are a couple other indicators that I want to share really quick before we look
at what ARK is buying this month because it's all of them put together that are making me
so bullish.
The "Cathie Indicator" is a measure of how "concentrated" the ARK funds are. During
an interview, Cathie Wood said that when the market bottomed in early 2020, ARKK had as
little as 33 positions in it. Obviously in hindsight, that was the best time to buy.
So, my logic is the fewer unique stocks there are in each fund, the fewer cash-like positions
Cathie Wood has in them because she's selling out of them to buy more innovative companies
she thinks are at bargain basement prices. So, when the number of names in ARKK, ARKG,
ARKW goes down, we could be seeing a good time to buy these stocks.
You can check out my full video on the Cathie Indicator here if you're interested. Again,
this isn't about timing the market, it's about putting myself in the best position for whenever
the time is right in the market.
At the start of the week, ARKK had 58 positions in it. At the end it had 55. ARKG dropped
from 60 to 58 names over the week. ARKW from 53 to 51. ARKF dropped from 48 to 44
and one of those was Apple. ARKQ dropped from 48 to 47 positions. ARKX grew by
2 positions but it's a brand new fund, so everything about it will look a little different
until it has more time to settle. Also, Apple was only in ARKF when they sold out,
so the other funds are dropping stocks that are not Apple, in case you think I could be
double-counting it.
So, that's 2 bullish indicators: ARK Invest dropping Apple specifically and concentrating
their funds in general. Let me give you 2 more and then show you what Cathie has been
buying as these indicators continued to line up.
The last quantitative indicator is the American Association of Individual Investors, or AAII's
Investor Sentiment Survey. Each week they do a survey of market participants with a
single question: are you bullish, bearish, or neutral on the stock market over the next
6 months?
As you can see, the 1 year bullish high was the week ending April 7th, 2021, with more
than 5 in 9 market participants saying they were bullish. In my opinion, that's crazy
high and not sustainable. Remember, sentiment doesn't move the market, CHANGE in sentiment
does. People sell when their outlook changes from positive to negative. When 5 out
of 9 people are bullish on the market, the only direction sentiment can go is down.
And down is where it went. Specifically, bullishness dropped from 44% to 37% over the
last 2 weeks, with about half those participants each moving to neutral or bearish. That's
a big downward change in sentiment. Being greedy when others are fearful and fearful
when others are greedy means you should know when others are being greedy and fearful.
The AAII sentiment survey is one way to keep track of that and it says greed is down.
The last indicator before we get into ARK Invest's buys comes from Cathie Wood herself.
ARK Invest just released a market commentary article written by Cathie Wood. The whole
article is worth a read but here are the highlights that make this a really focused bullish indicator
for me.
After rewarding innovation-based strategies handsomely in 2020 and early 2021, equity
markets have rotated aggressively toward cyclicals and other value-based strategies during the
last few months. In our view, this rotation has broadened and strengthened the bull market
significantly, preventing another tech and telecom bubble and setting the stage for another
leg up in innovation-based strategies.
I don't think Cathie Wood can be any more clear here. She's been saying that innovation
was due for a much-needed correction and that this rotation prevented a bubble from forming
and popping. Sure, it hurts in the short term but this is great news for the long-term.
The article continues.
Had the equity market continued to narrow toward innovation, the odds of a bust like
that after the tech and telecom bubble would have increased. Instead, valuations have
reset, particularly in “stay-at-home” stocks, many of which have been cut by more
than half since last summer. In our view, the pandemic transformed the world significantly
and permanently, suggesting that stay-at-home and other innovation-driven stocks will regain
momentum.
I personally agree strongly here too. Think about how much work, shopping, and entertainment
has moved online. Sure, some fraction of that will move back to in-person as things
continue to open back up, but people won't easily forget how productive, convenient,
and frictionless, their online experiences have been for the last year or more. Here's
the other piece of the article I think is really relevant:
The good news is that fear, uncertainty, and doubt (FUD) have provided investors with an
opportunity to average down into some innovation strategies at an approximate 30-40% discount
to their recent peaks. Typically, FUD accelerates the adoption of new technologies
as concerned businesses and consumers change their behavior patterns and adopt products
and services that are less expensive, more productive, and more creative than those in
the legacy world.
The pandemic accelerated behavior shifts that already were underway and are unlikely to
reverse now that the world is recovering from its shock. For the most part, therefore,
during the past three months our long-term earnings projections associated with companies
enabling the 14 technologies involved in disruptive innovation have not changed. Their stocks,
however, have dropped 30-40% on average as noted previously.
This article came out on Friday May 21st and is the final indicator making me confident
on buying more in the short term. Let's dive into what ARK Invest has been buying
since they started selling Apple stock in the start of May.
This is a table of all the stocks ARK invest holds across all of their actively managed
ETFs, ordered by the total amount of money they have in that stock. So, Tesla, ticker
symbol T S L A is the highest, since they have $2.8 billion dollars in it overall.
Teladoc, ticker symbol T D O C is currently 2nd, and so on. The more green the row,
the more ARK Invest's position has grown in that stock since they started selling Apple
and concentrating their funds.
The most green rows are Twilio, ticker symbol T W L O
Coinbase, ticker symbol C O I N
Palantir, P L T R
UiPath, P A T H, which is the only stock to be in ALL SIX of ARK's funds
Draftkings, D K N G
Skillz, S K L Z
and Berkeley Lights, Ticker symbol B L I
All of the stocks I just mentioned are in ARK Invest's top 50 holdings when you combine
their funds and all of them have seen increases in share counts by 20% or more this month
alone, even as ARK Invest's total assets under management shrank by over 10%. To me, that
speaks a lot to ARK's conviction in these stocks.
Note that almost all of them are in ARKW, ARK Invest's fund themed around the next generation
of internet applications, reflecting Cathie's thoughts about online and stay-at-home stocks.
Internet- and AI-focused companies were some of the hardest hit in this rotation out of
growth and tech stocks and it's nice to see ARK's commentary being so consistent with
their trades. These are the stocks I'm going to be researching next to see if there's
a great opportunity among them. Likewise, ere's what ARK Invest has been selling.
Baidu, ticker symbol B I D U was ARK Invest's 9th biggest holding at the start of May with
just under $1 billion dollars in it. It's now in Rank 71 with under $150 million in
it held by ARK. I think this reflects a MASSIVE shift in their conviction in Baidu and I'm
excited to figure out why.
Novartis, ticker symbol N V S
Regeneron Pharmaceuticals, R E G N
Pure Storage, P S T G,
Intercontinental Exchange, I C E,
Synopsis Inc, S N P S
KE Holdings, B E K E,
Roche Holdings, R H H B Y,
Lending Tree, T R E E
Hubspot, H U B S
Workhorse, W K H S,
and this is not an exhaustive list. In my opinion, all of these companies are great
companies or ARK Invest wouldn't hold them in the first place, but something has changed
in the last month. That something could be the share price, new information during
an earnings call, or just an opportunity opening up elsewhere.
I'm not a financial advisor, but based on all the indicators I covered, I personally
think we might be near the current market bottom for growth stocks. So, based on
popular demand I'm working on making these ARK Invest data dashboards more accessible
to my Patrons on Patreon and my channel members right here on YouTube. That way, you can
check the combined bar chart of ARK Invest's holdings, how those holdings are changing
day by day, the Cathie Indicator, and around 10 other dashboards for yourself instead of
hoping I cover it in a video.
I'm also happy to do special live streams, Q&A sessions, and exclusive updates if that's
interesting to you. Comment below with what you'd like to see while these growth
stocks are still selling at a steep discount.
I'm also watching the data more closely and focusing on ARK's biggest buys and sells,
since we know they concentrate their funds down to their highest conviction pure-play
names to buy at bargain-basement prices. I'm excited to figure out which stay-at-home
stocks may have been hit the hardest and if other companies got caught in the cross-fire.
Hopefully, this gives you a sense how I use ARK Invest's data to guide my tech research
and my individual stock picks. By using data as my guide instead of my gut, I'm constantly
being exposed to new ideas, technologies, and businesses both on the bullish side as
ARK Invest buys and on the bearish side as they sell. When I feel those ideas have
some merit, I share them with you.
And, speaking of things I share with you,
I
maintain a completely free Google spreadsheet that auto-updates for the latest day because
I really like giving back to the community. That sheet has a lot of the basics, including
bar charts of the funds, overlaps between fund holdings, and so on, I'll leave a link
to that in the description below as well. In my opinion, better information today means
better investments tomorrow. And if you found the information here or the resources in the
description below valuable, let me know by investing in the like button and subscribing
to the channel with all notifications turned on. That's a great way to invest in the channel
that invests in you. Until next time This is ticker symbol you, my name is Alex, reminding
you, that the best investment you can make is in you.
I don't currently hold any of the stocks she's selling but I have held Workhorse in the past.
One thing I always do is see if there's a pattern among the stocks being sold. Are
they all big conglomerates? Do they share a theme, like genomics or robotics? If I do
find an underlying trend to their sales, I'll try to find a law or policy or technology
or something in the news that could be disrupting that whole space. If they don't, I'll
start listening to individual earnings calls to see if these companies are talking about
something short-term or long-term affecting their performance.
If you want access to these dashboards so you can see these breakdowns of ARK Invest's
data for yourself, they're currently available to my Disruptor-tier Patrons. I share
many different breakdowns of the data, including the Cathie Indicator, the combined bar chart
of all of their holdings, and how those holdings change day by day. All in all, there are
over a dozen dashboards in the package. So, if you'd like to support the channel and
want the most up-to-date insights on ARK Invest's holdings without waiting for me to make new
content, I'll leave a link to my Patreon in the description below.
Here's a pro tip: Patreon charges at the start of the month, so if you're on the fence, wait
until then and you'll basically get a 4 week trial for free. If I'm not providing you
the value you want, just cancel before the start of next month. Easy peasy.
If that's not up your alley,