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2022 has been a rough year for most investors. The S&P 500 is down over 25% since the beginning of the year. One fund that has experienced the market downturn the worst is Ark Innovations which is managed by investor Cathie Wood. Ark Innovations is down almost 58% at time of writing and is down around 64% over the last 12 months. Things have not been going well at all for Ark Innovations.
The fund's biggest holding is Tesla. Tesla stock has skyrocketed over the last few years which has massively benefitted Ark Innovations. The fund currently has 9.56% of assets in Tesla stock. Their second biggest holding is Roku which is down almost 76% this year. Teledoc Health is their third biggest holding, and their stock is down over 73%. This is a trend with many of the stocks that are bought through this fund. Many of them are down over 70%.
It's important to look at the stocks that make up Ark Innovations to hypothesize on the future of the fund. I wouldn't want to buy this fund even at the cheaper price it is in because many of the stocks that it holds are stocks that I would not buy myself. Many of the stocks that Ark holds are stocks that I think are still overvalued even with the massive drop in price. Because of this, I have to conclude that Ark is still overvalued as well.
Ark Innovations has a lot of really risky plays. This makes sense as Ark Innovations entire point is to invest in innovative stocks. My issue with Ark is that it seems to invest into these stocks once they are already tremendously overvalued. Stocks like this are not a good position to be in during a market downturn.
Ark Innovations was up tremendously during the bull run that was 2020, but I believe that it didn't capitalize on this like it should have. Zoom, which is another major holding of Ark, made perfect sense to buy in 2020. It was experiencing massive adoption. It's a play that I wish I would have made myself. Now, however, I personally do not consider it a stock I would want to own. Zoom benefitted heavily by COVID, but it is becoming more and more unnecessary. Ark did good in buying the stock, but I believe it should have taken profits a long time ago. Instead, it remains one of their biggest holdings.
I do believe that the future of Ark Innovations is bleak. I believe that the companies it owns are largely overvalued and still have a ways to fall. I hope that I am wrong and that the fund does well in the future.
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