Cathie Woods Is In A Mess Right Now
Pandemic superstar fund, ARKK Innovation ETF, has been facing tremendous pressure as its stock continues to dip. Economic conditions and the losses recorded by its holdings have contributed to its woes. We believe buying the dip on ARKK is not wise at this time.
avatar
Precious Njoku is a Financial Writer with extensive knowledge about the stock market.
2022-05-14 10:48

ARKK Innovation ETF, founded by Cathie Woods, outperformed several U.S equities in 2020 at the height of the pandemic. Its holdings in companies like Zoom Video Communications Inc. (NASDAQ: ZM), and Teladoc Health Inc. (NYSE: TDOC), made it a household name, and Cathie Woods became celebrated in investment circles. As a result, the company began to see billions of investment inflows. But now, she and her company are taking the heat as the pandemic bubble burst.
Cathie Woods Is In A Mess Right Now
Since the beginning of this year, ARKK has been down 65%. It is about 76% below its February 2021 high. The fund is at its pre-pandemic low of March 2021, as it trades at $36.93 this afternoon, which was before $5.2 trillion was unleashed on the markets to support the economy by the Federal Reserve and Congress.

The big question, however, is: What Could Be Causing Cathie Wood’s Woes?

Cathie Woods Woes
Well, she thinks her problems are from the Feds. She claims that the Feds are taking a very aggressive path of increasing rates. According to her, they are going the wrong way. She believes the global economy is in a recession, and the Fed is acting too late. But we tend to disagree with her. This is because funds like hers would make no money in a rising interest rate climate, and she should be aware of that from the get-go.

Among her woes is that the companies she invested in are facing losses.

For one, Cathie Woods has heavily invested in Coinbase Global Inc ($205.77|1.09%), a global cryptocurrency exchange. The rising volatility and plunge in cryptocurrency prices have affected Coinbase's stock. It missed earnings estimates, and many feared the company's bankruptcy, which the CEO downplayed. Coinbase fell 28% after that. On Wednesday, Coinbase's woes compounded that of Cathie Wood's when it dragged down ARKK ETF by 8% and put it at the March 2020 low. Coinbase is the second-largest holding of the fund.

Teladoc (NYSE: TDOC) stock is also another example of what is behind the ETF’s woes. Teladoc is among its top 10 holdings. Teladoc has fallen 60% since the beginning of this year alone. Its Q1 results were pitiful, and its guidance was lower for 2022. The company is being affected by negative trends in the mental health markets and the market for chronic conditions. Teladoc’s losses have had a significant effect on ARKK ETF.

Another significant example is ROKU. ROKU (NASDAQ: ROKU) is the third-largest holding of ARKK ETF. However, during its Q1 earnings call, the company reported a deceleration in user growth, and its guidance for the second quarter of 2022 was lower. Generally, streaming companies like Netflix (NASDAQ: NFLX) and ROKU have faced many low subscriber numbers and pressures since the pandemic slowed.

ARK Innovation ETF is currently trading at $43.51. Down 56.25% YTD. What should investors do at this point?

Should You Buy The Dip In ARKK Innovations ETF?
The short-term prospects for ARKK are not promising. But things could change in the long term. The past impressive results of ARKK have made it attractive to many investors. Its present woes, though, do not make it a good idea.

Only a few months ago, in January, when the ETF dipped, many investors were worried whether that was the bottom. Then suddenly, it had a rally in February. But right now, it is down 50% from the February peak. So this time, investors could think that it would rally again and represents an opportunity to buy the dip for potential profits.

But ARKK has been dipping for three months now. 50% is no small number. Furthermore, we are facing uncertain economic conditions. So, we believe it would be wise to stay away from ARKK for now until conditions improve. For one, we only have the fund on our watch list. Nothing more.


Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.

Rate this article

positive
negative
Published On
2022-05-14 10:48

avatar
About the Author
Precious Njoku is a Financial Writer with extensive knowledge about the stock market.

$205.77
$2.211.09%
Perf. YTD19.40%
52W high-3.04%
52W low343.18%
PE Ratio552.4
MKT Cap40.23B
Other:  TDOC , ARKK , ROKU

Analyst Ratings
Target Price$75.4
# of Analysts25
Last updated2022-12-17

buy-coffee
You've read 1 article in the last year
..thank you for supporting us and for visiting our site. Unlike many other sites, The Dog of Wall Street is available for everyone to read. Our focus is to provide great content for free. Do you like what we are doing? Buy us a cup coffee. It is the fuel that keeps us going..

NVIDIA Earnings: Will They Even Matter?
Let’s examine the bear and bull case for NVIDIA’s earnings next Wednesday.
By Mike Sakuraba | 2 weeks ago

2 Stocks I'm Avoiding as Markets Hit New All-Time Highs
People like to throw around the term bubble a lot when the market goes up a large amount in a short time. But is it really a bubble or did they just miss out on the action? I usually say it’s the latter.
By Mike Sakuraba | 3 weeks ago

2 Earnings Calls I'm Watching Next Week
It’s been a while since I’ve done this but it was a good practice and forced me to actually listen to the earnings calls of companies I invest in.
By Mike Sakuraba | 3 weeks ago

2 Stocks You Can Still Buy at All-Time Highs
For some reason, we have always been taught to try and buy low and sell high. While that might seem logical, it is a good way to miss out on buying some of the best stocks.
By Mike Sakuraba | 3 weeks ago

24 Assets to Invest in for 2024: Part 7
In Part 6, I spoke about chip stocks, Axon (NASDAQ: AXON),Celsius (NASDAQ: CELH),and the iShares Bitcoin Trust (NASDAQ: IBIT).
By Mike Sakuraba | 4 weeks ago

2 Stocks I'm Buying When Markets Pull Back
Here are 2 stocks I’m prepared to pull the trigger on as soon as the market pulls back.
By Mike Sakuraba | 4 weeks ago

24 Assets to Invest in for 2024: Part 8
In Part 7, I spoke about Rivian (NASDAQ: RIVN),Chainlink, and Evolution AB (OTC: EVVTY)
By Mike Sakuraba | 4 weeks ago

Tesla Bears Rejoice: Another Bad Quarter from Tesla
I think the next year or two is going to be tough for the company and the stock.
By Mike Sakuraba | 1 month ago