Cathie Wood Provides Lesson of the Day: Don’t Invest in Fairytale Stocks

May 20, 2022

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6:53 pm

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55 comments

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Economics

All charts courtesy of StockCharts.Com, annotations by Mish

Tesla Loses Top Spot in Cathie Wood’s Flagship Fund

Bloomberg reports Tesla Loses Top Spot in Cathie Wood’s Flagship Fund

Elon Musk’s firm was top ARKK position on most days since 2017
Roku pips Tesla to take the pole position in ARKK’s holdings
ARK Investment and its flagship fund have been selling Tesla shares for at least four quarters in a row, according to Bloomberg-compiled data.
The firm owned nearly 1.59 million Tesla shares as of the end of March, down from nearly 5.79 million shares a year earlier.

ROKU Weekly Chart

Tesla Weekly Chart

ZOOM ZM Weekly Chart

Exact Sciences EXAS Monthly Chart

Block SQ Weekly Chart

Teledoc TDOC Monthly Chart

CRSP Weekly Chart

Notes

The above charts show technical support levels.
I used weekly charts unless there was little or no support left. If so I switched to monthly charts.
Coin is not new enough to have much monthly history. The above line shows the only long-term support remaining.

Fundamentally speaking, Tesla and Zoom have real products. They should survive, but at what price.

I am not familiar with all of the companies above, but It would not surprise me in the least to see some go to zero or close, and stay there.

Lesson of the Day

If you invest in big bubbles and believe in fairy tales this is what eventually happens.

Top Idea of the Month: What Needs to Happen Before Stocks Bottom?

History suggests markets bottom after the yield on the 10-year treasury note drops significantly. The implications are ominous.

For further discussion, please see Top Idea of the Month: What Needs to Happen Before Stocks Bottom?

This post originated at MishTalk.Com.

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55 Comments

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yooj

1 year ago

CRSP is well capitalized, in advanced trials and is a reasonable speculation. Fairy tales sometimes come true. Once upon a time a scientist won a Nobel prize … and, with Alzheimer’s treatments, we all lived happily forever after.

RonJ

1 year ago

Reply to yooj

The FDA approved extremely expensive Aduhelm, for Alzheimer’s, even though it doesn’t work. Once upon a time, a scientist won a Nobel prize for a drug which works, but is obstructed from use by the FDA.

It isn’t about science anymore.

honestcreditguy

1 year ago

Reply to RonJ

I think AVXL has best chance in that sector of biotech as it has platform with Retts, Parkinsons, Fragile X and Alz in late stage trials with great results and no issues on side effects….plus its a sigma 1 approach instead of the debunked Amyloid strategy

FooFooFed

1 year ago

Woods wins everyone else who drank the Koolaide is out. Modern day snake oil salesman. I would love to see her personal account.

BDR45

1 year ago

I bought OXY last year. Simple. Most of us need gasoline for our vehicles. Most of us use plastics in one form or another. We do NOT need coinbase. We do NOT need Teslas. And the rest of technology is pie in the sky. Yeah, someday you will become rich off of some technology, but in the meantime, stick to things people actually use.

Casual_Observer2020

1 year ago

Reply to BDR45

If someone could make affordable medium to large vehicles that are 100% battery operated and reliable, tesla would lose market share and oil demand would drop. The big auto companies are still on the take from big oil which is why no one has produced yet. Kia has a real opportunity here. Much of it for consumers is sheer economics.

Casual_Observer2020

1 year ago

This feels more like the 2000 implosion right now but feels like it will be followed by the 2008 style implosion.

MPO45

1 year ago

Reply to Casual_Observer2020

Ironically there is nowhere else to run. If you are an investor, where do you put your money?

War torn Europe with all the bureaucracy and taxation?

A locked down communist China that seems intent to invade Taiwan?

Other parts of Asia on the verge of bankruptcy or debt implosion?

Latin America that perpetually takes turns defaulting on debt?

Africa?

I’ve done a lot of research and for me it comes back to rental properties in the US and dividend equities. Some choose treasuries for added protection but if everything goes down, I can see the US default although others don’t want to see it. Honestly, why not default, where else are investors going to turn to? The rich take a huge haircut, the poor don’t miss a beat. The middle class takes a hit but with debt wiped, they can recover quickly.

Lisa_Hooker

1 year ago

Reply to MPO45

TINA 2 FOMO

PapaDave

1 year ago

I have no problem with Cathy Wood. She is just one more investor who lacks a crystal ball to tell her the future. She is welcome to invest in whatever she wants; fairy tale or not. And her clients are welcome to follow her.

The market is there for all to participate in. It is up to each individual investor to decide what to invest in and at what price. For every seller, there must be a buyer or the market would not function very well.

I am both a trader and a long term holder. Mostly in value stocks. I will buy what looks like good value. Currently, good value can be found in most oil and gas companies. Thanks to them, my portfolio was up again this week while most other areas of the market were down.

There are always opportunities to make money, no matter which direction the market is going.

MPO45

1 year ago

Reply to PapaDave

Well said. If Cathy’s portfolio had been up 1000% I doubt we’d have a post about how awesome it is (I’ve never seen praise of a portfolio here) but since it’s down, everyone is trying to pile on and kick someone while they are down. There is a theory about karma, what goes around comes around. I personally love people that take risks and try to do something different. I hope Cathy succeeds but we’ll see.

PapaDave

1 year ago

Reply to MPO45

Cathy may ultimately succeed. To me the point is moot. There are always winners and losers. Again, for every buyer, there is a seller.

I prefer when I see people here recommending what they are buying (or selling) and why. Then the readers can decide whether the strategy makes any sense or not.

That’s how I learned about the energy trade here. It made sense to me and after further investigation I decided to start accumulating the oil and gas stocks that were being named. And in spite of the success of these names, all most people here talk about is how it will never work out. I think some of them have been in cash for 10 years and will still be in cash 10 years from now, all while talking about how they are waiting to get back into the market at the bottom. And how everyone is a fool for being in the market.

MPO45

1 year ago

Reply to PapaDave

Agreed but I think it’s time you start thinking about the next big trade. Energy will be solid for the next 12 to 24 months and perhaps longer depending on what the Fed does but now is the time to look for the next big thing. With so many stocks down, there is a great deal of value propositions right now. I only wish I had more money to load up on so many opportunities.

My next big play will focus on boomers. A mix of pharmaceuticals, healthcare/medical equipment, and travel & leisure equities. Of course, they all have to be value equities.

PapaDave

1 year ago

Reply to MPO45

I am always on the lookout for value, whether it is a sector or individual stocks. Based on what some commenters said here, oil and gas should do well for this entire decade. Valuations are still incredibly attractive. Some are still trading at an EV/CF value of less than 2. However, once everyone else finally figures that out and bids the stocks up to nosebleed levels (EV/CF>10), they will no longer be good value and I will be onto other ideas. How long that will take is unknown.

I like your thoughts on other areas to keep an eye on.

Carl_R

1 year ago

A quick glance tells me that TSLA has dramatically outperformed the rest of the portfolio. I guess she should have sold less TSLA and more other things.

Mish

1 year ago

Reply to Carl_R

I am wondering if she sold Tesla to meet redemptions

MPO45

1 year ago

The next FOMC meeting is June 14-15 and with CNBC talking head screaming for 100 basis point hike, it may be possible the Fed does it. To that end I checked the put volume on SPY for June 17 and there is HUGE open interest and volume for the SPY at $350. it’s at $390 now that would be a drop of 11% from today’s level.

link to finance.yahoo.com

The put options are trading for $2.15 so maybe I’ll gamble a bit further OTM.

Bam_Man

1 year ago

Reply to MPO45

Don’t be surprised if they only raise by 25bps to support the stock market.

The excuse would be “evidence of demand destruction”, “slowing economy”, etc.

The resulting bear-market rally would be the face-ripper that we are now due for.

MPO45

1 year ago

Reply to Bam_Man

I am inclined to believe that 75 or 100 is more likely than 25. Everyone is talking about gasoline being at $6/gallon by August. If that happens, there will be a world of hurt for businesses and consumers. A HUGE world of hurt.

Mish

1 year ago

Reply to MPO45

no chance of 100 BPs

MPO45

1 year ago

Reply to Mish

I would have agreed with you Mish two weeks ago. Today, what I’m seeing, i’m not so sure. I hope YOU are correct. I really do because I see the market taking a huge battering if the fed does a surprise 75 or 100. God help us all.

bobcalderone

1 year ago

Reply to MPO45

I’m not sure the Fed does “surprise” anything anymore. Mustn’t cause another taper (or any other kind of) tantrum!

MPO45

1 year ago

Reply to bobcalderone

And what has been happening to the market the past weeks? It could be that the market is pricing in something we all don’t want to believe.

honestcreditguy

1 year ago

Reply to Mish

yep, .50 at most and then backing off, June will be inflation peak as folks will not have the money to buy things after…

honestcreditguy

1 year ago

EXAS is probably her best holding as it has real products that sell everyday and somewhat eliminates the need for colonoscopy. I made nice change on run to 100 and gone, entry price 18….

I’m on record last year stating the big boys were going to give her a hard lesson and shut her up. She is arrogant and some kind of know it all and just popped off way to much, like a crowded trade, it was easy pickings….

honestcreditguy

1 year ago

Reply to honestcreditguy

SJT pays out 10% right now and should rise to 20’s or 30’s in next 2 years….

Democrats talk green but energy does extremely well during their misdirection

Siliconguy

1 year ago

So in 2017 through 2019 she bought lots of Tesla at $70 a share.

In the last year she’s selling Tesla at $700 a share or better, and her fund has still fallen 74%? Have I misunderstood something?

If not, the to borrow a line from an old TV show, “You will know pain, you will know fear, the you will die.”

Bam_Man

1 year ago

Reply to Siliconguy

No, she is sitting on a Shiite load of losers.

Six000mileyear

1 year ago

Doubling down won’t save ARK

Captain Ahab

1 year ago

I’m not sure what a ‘fairytale stock’ is. Perhaps it is when an innovator going public with a better widget gets taken over infectious/irrational enthusiasm?

I’ve always kept a small % of my portfolio in innovator stocks. It is true, some bombed (like Liquidmetal), but a more than a few did not bomb (like Plug, American Superconductor, Stratasys). The trick, then as now, was knowing when to get out.It is always easy to make money in a rising market.

JackWebb

1 year ago

Reply to Captain Ahab

I am a retired financial professional. I would call them “earnings-free concept plays.” Others would call them “story stocks.” Whatever the label, the underlying nature of these things are the same. They’re the first to get hammered. What’s happening right now is par for the course.

JackWebb

1 year ago

The best performing stock of mine since the virus stock panic two years ago has been OKE, which distributes natural gas in the Great Plains. Pays a nice dividend. Bought at $20 and change two years ago. Closed today at $63 and change. To me, the main difference between speculation and investment is the time horizon. Past that, the risk level, with risk higher for “story stocks.” They’re the first to get killed in a bear market.

Bam_Man

1 year ago

IMHO, any so-called “investor” that has referred to equities as “stonks” fully deserves what they are now receiving.

JackWebb

1 year ago

An old colleague talked me into TSLA LEAPs about a year ago. I doubled my money and sold the LEAPs. He touted this as a risk-free trade, but I always look at risk. I identified a few risks: full self-driving might not work (it doesn’t); inflation might drive up interest rates and bring the stock down (it happened); geopolitical risks, both with Tesla and Starlink (still in the works). I also pointed out a looming problem for all EVs: those charging networks that are so slow. He snarled and called me an idiot.

Later, as inflation kicked in, I saw that Cathie Wood said “inflation is impossible.”

Bam_Man

1 year ago

All of TWO rate hikes and QT hasn’t even started yet, and look at the carnage on those stock charts.

Esclaro

1 year ago

Nice job by the PPT this afternoon to finish in the green. Those guys worked hard today buying and buying and buying.

Bam_Man

1 year ago

Reply to Esclaro

We are overdue for a face ripping bear market rally that should last several weeks.

This was the 7th straight down week for the S&P and that has only happened twice before.

JackWebb

1 year ago

Reply to Bam_Man

I’m waiting for a bear market rally to buy some LEAP puts on the S&P 500. I’ve been considering it for a couple months. I’m not a quick trader by inclination, and the idea of shorting the whole market didn’t sit well with me. Plus I’m looking for the right LEAP puts. Anyone here have any ideas?

Bam_Man

1 year ago

Reply to JackWebb

Buying long-dated puts with the VIX at this level will be rather costly.

Basically a bet on a longish-term deflationary outcome.

Good luck!

JackWebb

1 year ago

Reply to Bam_Man

I’m good at some things and not so good at others, so I’m being quite cautious on this. I don’t know why it’d be a bet on deflation, though. For me, it’d be a bet that inflation causes a recession and that the SP5 gets killed for that reason.

Bam_Man

1 year ago

Reply to JackWebb

By saying it would be a bet on deflation I meant that it would be a bet that the Fed would not step in and re-start QE in a big way and cut rates to zero (or less) to rescue the stock market – even in the face of higher than acceptable inflation.

I was not referring to a deflation in the general price level – but rather to the Fed’s willingness (or rather, lack thereof) to do everything within their power to reflate securities markets.

Sorry if I was unclear.

honestcreditguy

1 year ago

Reply to Bam_Man

someone took huge vix call spread today that if we sell off hard before June 16th would pay out 165M

Scooot

1 year ago

Reply to Bam_Man

I suspect the bear market rally will occur when we’re least expecting it. At the moment I get the impression many are waiting to sell into it.

Bam_Man

1 year ago

Reply to Scooot

Resolution of the Ukraine situation by peaceful means and it will be off to the races, big-time (for a while).

Zardoz

1 year ago

Reply to Bam_Man

PootyPoot needs a face-saving way out for that to happen, and nobody seems too interested in giving it to him. They’re debating removing the 40 year age limit to join the military, so that should give them more cannon fodder, but how many of those guys make it to 40 in any kind of shape to fight?

Zardoz

1 year ago

Reply to Esclaro

The chart looks like one of those big nets the factory fishing boats pull behind them. An apt metaphor perhaps?

Dr_Novaxx

1 year ago

So sorry. If you had any dealings with this ETF you have no business participating in financial markets. Get a real education from a successful trader and come back in a couple of years.

Gordofeo

1 year ago

Suckers! But seriously, where does an intelligent investor start to think it is a good price to buy? Portfolios should prob have some portion of exposure to innovation/tech etc. I am not in this, but starting to get intertested.

Casual_Observer2020

1 year ago

Let’s see how the Cathie Woods of the world do during a bear market followed by deep recession.

JackWebb

1 year ago

Reply to Casual_Observer2020

If she’s smart, she took some of that Wall Street money off the table and put it into tangibles of some sort.

Bam_Man

1 year ago

Reply to JackWebb

Of course she did. HER money, that is.

She has gotten fabulously wealthy and will remain so, long after most of her current clients have been ruined.

JackWebb

1 year ago

Reply to Bam_Man

Probably, but you really never know.

Nuddernoitall

1 year ago

Reply to Casual_Observer2020

In a bear market, the “Cathie Woods” of the world would perform as bad as… the worst adverb you could find to describe it. (I can’t find one really bad enough that would describe that performance.)

But, to be fair, I think a better question to ask is, “Let’s see how the “normal” investors of the world would do in a bear market followed by a deep recession.” (To play the game, no shorting allowed.) Of course I own energy too, but eventually, everyone on the planet is going to showcase soon a portfolio of 90% energy (and materials) and then what?

Zardoz

1 year ago

Reply to Nuddernoitall

Back around to beanie babies.

Lisa_Hooker

1 year ago

Reply to Zardoz

Pet rocks in the original box.

Cathie Wood Provides Lesson of the Day: Don’t Invest in Fairytale Stocks

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