Follow The Leader: ARK Invest Is Moving Stocks Like No Fund Before

By: Spencer Israel

Cathie Wood has made a name for herself and her firm, ARK Invest, by making extraordinarily bullish calls on tech stocks.

Her biggest was the 2018 prediction that Tesla (TSLA) would hit $4,000 per share within five years. At the time, Tesla was trading around $325. Three years and one 5-for-1 stock split later, it’s at $847. If you take away the split adjustment, that comes out to $4,235.

Cathie Wood was right, and two years ahead of schedule at that.

Everybody, it seems, has taken notice. In a trend that harkens back to previous high-flying funds like the Magellan Fund, money is flooding into ARK Invest ETFs as investors chase her performance.

According to Bloomberg’s Eric Balchunas, the seven ARK ETFs took in more than $20 billion of inflows in 2020—more than any other fund provider outside the “Big Three” of Vanguard, BlackRock, and State Street. On January 21, Balchunas noted that the group had taken in more than $1 billion in just one day, surpassing the 2021 flows of BlackRock and State Street in the process.

But it’s not just the ARK ETFs overseen by Wood that have the eyes of Wall Street—it’s the stocks those funds are buying.

‘What Did ARK Buy Today?’
There’s one major difference between Wood’s funds and every other star fund manager to come before her: transparency.

The ARK ETFs are actively managed, meaning their holdings are constantly being adjusted. And unlike previous mutual fund stars like Peter Lynch (and even other legendary investors like Warren Buffett), ARK Invest posts its buys and sells daily for investors to see.

This has created an unprecedented opportunity for people looking to chase ARK. Here are just a few examples.

JANUARY 11
Over 50,000 shares of Experience Investment Corp (EXPC) were added to the ARK Autonomous Technology & Robotics ETF (ARKQ). The following day the stock closed 12% higher.

JANUARY 19
Just over 87,000 shares of Salesforce (CRM) were added to the ARK Next Generation Internet ETF (ARKW). The next day shares of Salesforce rose 3%, its best day since the company announced the acquisition of Slack on December 1.

About 429,000 shares of Skillz (SKLZ) were also added to ARKW this day. It rose 7% the next day.

JANUARY 20
Approximately 174,000 shares of Paccar (PCAR) were added to the ARK Innovation ETF (ARKK). The next day the stock rose 10%.

JANUARY 21
ARK disclosed the addition of approximately 218,000 shares of Incyte (INCY) to its ARK Genomic Revolution ETF (ARKG). The next day the stock rose 4%.

The Upshot
No, these rules don’t always apply. Not every single stock added to an ARK fund rises the next day. Nor can the opposite be said for stocks the fund sells.

In some of these cases (such as with SKLZ), the stock was already in the fund. In others, an ARK buy did little to boost a stock higher.

But Cathie Wood’s influence cannot and should not be questioned right now.

Take what happened on January 13 when ARK filed to launch a space exploration ETF. The next day a number of stocks with exposure to the space economy “blasted off.” AeroVironment (AVAV) closed up 30%. Both Virgin Galactic (SPCE) and Maxar Technologies (MAXR) closed up 19%. Kratos Defense & Security Solutions (KTOS) closed up 9%.

Yes—merely the thought that ARK could choose to include a stock in its not-yet-in-existence fund is enough to send it higher.

It’s been said that the ARK family of actively managed tech ETFs are the closest thing to private equity in the capital markets. Maybe that’s true. Maybe it isn’t. But what’s undoubtedly true is this is Cathie Wood’s market. The rest of us are just living in it.

The author is long the S&P 500 and ARKW

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