Losing Faith
The Wall Street Journal comments Investors Are Losing Faith in Cathie Wood’s ARK Innovation
Investors heeding a “buy the dip” rallying cry poured money into the fund in each of the first five months of the year—a net $1.89 billion—as markets tumbled. Since then, their enthusiasm has waned. They pulled money in three of the next six months, or a net $76.5 million, according to FactSet. On Nov. 30 alone, they yanked $146 million, which was among the largest single-day outflows of the year.
The three largest holdings in the fund—which is known by its ticker symbol ARKK—are Zoom Video Communications Inc., ZM, Tesla Inc., and Exact Sciences Corp., companies Ms. Wood has said have the potential to change the world.
Shares of Zoom and Tesla have lost about half their value this year, while Exact Sciences, an unprofitable provider of cancer screening and diagnostics tools, is down 43%. Ms. Wood has also been a proponent of bitcoin, which has fallen about 75% from its November 2021 peak.
ARKK added 931,000 shares of Coinbase worth roughly $43 million in November, according to FactSet. ARKK is the second-largest holder of Coinbase shares, which are down 84% year-to-date.
Wood’s Predictions
- The price of bitcoin will hit $1 million by 2030, a roughly 6,000% increase from current levels.
- Wood calls for Zoom, ARKK’s largest holding, to approach $1,500 a share in 2026. That is based in part on expectations of a worker backlash against returning to offices. Her bear case is for shares to trade at $700.
Zoom Round Trip
Is there any reason to believe Zoom is about to take off again? It has a trailing PE of about 32 according to Y-charts.
ProductMint describes Zoom’s Business Model.
If monthly corporate subscriptions are not about to soar, where is it headed? Nonetheless, Wood’s bear case is $700, well above the pandemic adoption high.
$1 Million for Bitcoin by 2030?
Chief Futurist
On September 7, 2022, Cathie Wood’s Ark Investment Management named its first “chief futurist“, Brett Winton.
What a hoot.
What About Tesla?
Cathie Wood’s Ark Open Source Model Predicts Tesla Shares Will Hit $4,600 by 2026
Please recall my April 18, 2022 post Cathie Wood’s Ark Open Source Model Predicts Tesla Shares Will Hit $4,600 by 2026
Is Tesla really going to capture 50% of the autonomous market outside China? That’s what the model says.
By 2030 ARK predicts a share price of about $22,500 equating to a market cap of roughly $22.5 trillion.
US Real GDP in 2021 was $19.8 Trillion.
ARK is predicting the valuation of Tesla will exceed the entire US real GDP by the early 2030s.
Yes, this is more than ridiculous. It also says something about ARK’s open source share price model.
Ridiculous Price Targets
Wood and her chief futurist are sticking with absurd price targets. This can hardly inspire confidence.
And it doesn’t as measured by huge outflows.
Looking Ahead
Certainly ARKK is a better buy now than any time since 2018. But if you started dollar cost averaging then, you are now back to even.
Looking ahead, do you want to hold Ark’s Basket of Zoom, Tesla, Exact Science, Teledoc, Roku, Square, Shopify Coinbase, etc.?
If so, make the case.
This post originated on MishTalk.Com.
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Mish
Fusion absolutely requires tritium, and tritium, not the ROI on energy, is the greatest challenge facing fusion. Frankly, it’s quite hard to see how that challenge can be overcome.
We can rejoice that there is an ROI on fusion certainly, but we cannot magically create more tritium without inventing a technology capable of creating large amounts of tritium. We may well do that one day, but with just around 8 lbs of tritium in the entire world (only 2 of which is actually recoverable), it’s difficult to see how fusion can move forward.