After one of the most dramatic weeks to date for ARK Investment Management, Wall Street is no doubt anymore. Cathie Wood is sticking to her strategy and her investors are sticking to her.
Both possibilities were questioned this year as speculative tech stock sales wereted on her future-focused exchange-traded funds. Wednesday was a particularly low level, with the flagship ARK Innovation ETF (ticker ARKK) falling 10%, the third worst drop on record.
One of the biggest obstacles of the day was Coinbase Global Inc., the largest cryptocurrency exchange in the United States. This fell 26% amid disappointing results and a surge in digital assets. But while the rest of Wall Street is throwing away shares, Wood and her team stick to their playbook and add about 860,000 shares a week until Thursday to increase their holdings. I used a drop.
In the eyes of many, it is a system that risks burdening the loser. Often caught in a highly speculative and concentrated portfolio of bets, which leaves many critics on Wood and her company. But the clarity of the goal, chasing a company that can win big from a major technology shift, and ARK’s commitment to it, has gained a very loyal fan base.
“Cathie Wood hasn’t shaken her confidence in her strategy at all and, in fact, has doubled her strategy,” said Nate Gerachi, president of the advisory firm ETF Store. “It’s attractive to certain segments of investors.”
ARKK actually recorded an inflow because it plunged on Wednesday. While relatively small for a $ 7.8 billion ETF (about $ 45 million), the net inflow in 2022 will exceed $ 1.5 billion. This is the case for vehicles that have plummeted 61% this year.
“Investors participating in this strategy are loyal to this strategy, have a long-term view and see the sale as an opportunity to develop additional capital,” said Todd Rosenbluth, Head of Research at ETF Trends. Says.
Of course, there is no shortage of investors ready to bet on ARK. According to data from IHS Markit Ltd, the short interest ratio of the main fund is relatively high at 14.8% of the outstanding shares.
Meanwhile, by Wednesday’s closing price, the price of the Tuttle Capital Short Innovation ETF, which aims to provide the opposite performance of innovation funds daily, has more than doubled the price of ARK ETFs. In other words, betting on Wood’s flagship strategy for a day costs twice as much as buying the fund itself.
But by the weekend, Ark’s situation looked more positive as tech stocks managed the rebound. Innovation funds surged 12% on Friday after rising 5.6% the day before. Robinhood Markets Inc., one of Wood’s hottest picks, soared after cryptocurrency billionaire Sambankman Fried revealed a major stake.
It’s a long way to undo the recent damage to Wood’s main ETF. Funds need to jump about 260% from here to regain record highs. But at least it provides some rest to the believers.
Ultimately, investors will continue to rely on ArkETF as a means of getting in and out of disruptive technology. During the turbulent week of the flagship fund, trading volumes surged to a record 316 million shares.
As Ark sticks to that strategy, investors “know exactly what they will get” and can rely on that money to make a pure deal of innovation, Gerachi said. “The advantage of Cathie Wood, unwavering from her strategy during this brutal recession, is that it helps Ark’s long-term survival.”
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