Major tech-focused ETFs have missed out on the strong rally in tech stocks this year.of ARK Innovation ETF (ARKK) It's down more than 12% so far this year, far behind the 4% rise. Invesco QQQ Trust (QQQ) And that Technology Select Sector SPDR Fund (XLK).
Investors withdrew $495 million from Cathie Wood's flagship fund in the first four weeks of the year after dismal results, reducing assets under management to $7.7 billion.
The large outflows suggest investors stuck with ARKK during the 2022 crash, during which time the ETF lost two-thirds of its value.
The fund rebounded 67% in 2023, more than enough to outpace VGT and QQQ's 50% gains. But while these tech ETFs ended the year at record highs, ARKK remained 67% below its all-time high.
Now the gap is even wider. ARKK is 71% below peak levels, while QQQ and VGT are 5% and 8%. On top of that Their previous peak.
Unlike VGT or QQQ, which track cap-weighted indexes with an emphasis on big tech stocks like Apple, Microsoft, and Nvidia, ARKK is an actively managed ETF that relies on the stock-picking abilities of famed fund manager Cathie Wood. It is.
Unfortunately for ARKK investors, Wood's stock picks haven't received much attention lately. She made the controversial decision to bail out Nvidia in early 2023, just before the AI chip maker's stock price soared.
Mr. Wood also avoids investing in other high-flying tech stocks, such as Microsoft and Apple, because that would be detrimental to the ETF's investors.
a disastrous bet
Wood's ARKK's best-known investment is, of course, Tesla. This ETF has a sizeable 8% stake in stocks. Since ARKK first acquired Tesla in 2016, the electric car company's stock price has risen a whopping 15 times, and the success of that investment was largely responsible for propelling Wood to stardom in the investment world. ing.
But even investments in Tesla have soured recently, with the electric car company losing nearly a quarter of its value since the beginning of the year.
But this is not the only investment that has worked against ARKK. Shares of Coinbase, Roblox, Unity Software and Block have fallen between 10% and 25% this year, and each is among the fund's top 10 holdings.
With a few exceptions, nearly every stock in ARKK's portfolio is down at least half its all-time high. So it's no wonder ETFs are at such depressed levels.
Cathie Wood's stock picking has been terrible lately. Not only has ARKK stock performed poorly, but investors in the ETF are also missing out on the impressive returns that many tech stocks have delivered over the past year and a half.
The AI hype that has brought huge profits across the tech sector hasn't yielded any returns for ARKK investors, which is a big disappointment for an ETF that promises to invest in “disruptive innovation.” .
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