Once upon a time, in the near-mythical years 2020 and 2021, Cathie Wood’s ARK Innovation ETF (ARKK) – an exchange-traded fund focused on promising yet highly speculative technology stocks – captivated investors. It had an impressive track record, outperforming the broader market with a series of successful investments. From March 2020 to its peak in February 2021, the ETF soared approximately 313% after the end of the COVID-19 recession.
However, the tides have turned, and ARKK has been plagued by a series of missteps. As of May 31, 2024, the ETF is trading just $5 above its pandemic-era lows at $42.79.
Image: ARKK all-time price chart. Source: Finbold
To understand the extent of the losses, Finbold decided to analyze how much a $1,000 investment made near the peak in May 2021 would have lost. Back then, ARKK appeared to be in a correction phase, with its price falling from its first-quarter highs but still strong at over $100.
If an investor had bought $1,000 worth of ARKK shares on May 28, 2021 – a reasonable trade considering the fund’s recent performance – they would have acquired 8.92 shares at a price of $112.10 per share.
Fast forward to today, with ARKK’s price at $42.79, those shares would be worth approximately $381. This means that an investment in Cathie Wood’s technology-focused ETF would have incurred a loss of $619, a decline of 61.9%.
ARKK’s struggles can be attributed not only to the significant drops in holdings like Tesla and Roku, which account for about 20% of the ETF’s portfolio, but also to a series of questionable and poorly timed trades.
One notable blunder occurred between November 2022 and January 2023 when Cathie Wood sold off the ETF’s position in semiconductor giant Nvidia. At that time, Nvidia was just beginning to recover from a prolonged downturn that lasted from November 2021 to October 2022. Since the end of January 2023, Nvidia shares have surged by as much as 423.70%.
Unfortunately, recent activity does not indicate a reversal of ARKK’s fortunes. In late May 2024, the ETF purchased 200,000 shares of UiPath just before an earnings report. Shortly after the trade and the publication of the report, UiPath’s stock plummeted by nearly 40%.
As always, it’s important to remember that investing is speculative, and the content of this article should not be considered investment advice. When investing, your capital is at risk.
