ARK stands for Active Research Knowledge. Its thematic investing approach focuses on a few key areas; disruptive innovation, total addressable market, and the companies that will emerge as winners.
The Cycle Of Innovation
From investment prodigy to a dumpster fire, it’s been a wild ride for Cathie Wood’s ARK innovation fund over the last few years. It has to be said, however, that it comes with the territory.
Considering many of its picks — which includes the likes of Teladoc and Coinbase — are yet to reach any sort of profitability, naturally, Ark Invest has been hard-hit from the back half of 2021 to now. When markets took a turn, there was nowhere to run and hide.
The majority of Cathie Wood’s picks are undergoing a rocky bear market as a result, but that’s not to say that ARK’s investment thesis should be thrown out the window. The famous fund manager has undergone heavy criticism before after all. Tesla, for example, brought her name to the media spotlight, during a time when many saw that investment as the equivalent of lighting your money on fire. Just as she reiterated her conviction then, she advocates for her thesis again now.
We still have to acknowledge that the ARK Fund has outperformed the S&P 500, providing just under a 200% return over a seven-and-a-half-year period, compared to the 100%-ish return, had you invested in the S&P 500. Growth stocks can act as tremendous vehicles for above-average returns but over the course of their life cycle, these climbs and falls are inevitable — the nature of speculation and market sentiment weighs heavily on what investors are willing to pay.
Many of these picks will need the time to play out, but who knows, several more could yet reach their full potential — we’ve even added a few to our own shortlist. We’ll have to see if the naysayers are wrong with time, but long-term believers could still be rewarded with the multi-bagger returns they’re after when it’s all said and done.
Financial Writer at MyWallSt
David's favorite stock is Google. He's a daily user of its YouTube platform, where you can learn or find something brand new at the touch of a button. He believes the company will continue to grow for many years to come.