Last year, “Mama” Cathie Wood of Ark Invest was Cinderella at the ball.
Her Ark Innovation ETF (NYSE: ARKK) returned over 150% in 2020, destroying the 18% return of the S&P 500…
Good times all around. The problem is, they don’t ring a bell at the top when the party’s over.
But when people start selling all kinds of “fan” merch with a money manager’s name on it … I hear the bell ringing.
The End of the Ball
In 2021, the clock struck midnight. And the carriage turned back into a pumpkin and the fancy dress into rags.
ARKK is now 34% off its February peak and trailing the gains made by the S&P 500.
ARKK’s holdings are focused on big technological trends that Cathie sees as disruptive — like electric vehicles and genetic editing.
Don’t get me wrong. I also believe some of these technologies can absolutely be life-changing.
In fact, in our Alpha Investor portfolio, we have companies that are taking advantage of these trends, too. (If you’re not yet an Alpha Investor, you can find out how to get the details on our latest electric vehicle play right here.)
But the difference is the price Cathie pays on her big bets…
Real Dollars and Cents
As I wrote last week, the price you pay for any investment is what determines your return.
And when it comes to ARKK, that price is very high.
In fact, Robin Wigglesworth (who I sat down with in yesterday’s interview) touched upon this in a recent Financial Times article:
[It’s] a high-risk, high-return strategy that is focused on the most promising, but most expensive parts of the market.
This is because ARKK is heavily invested in companies that aren’t yet profitable.
But the Real Talk is that profits matter. They always have, and it’s something I never forget.
Would you invest in a business that doesn’t have a single dollar in its coffers?
I wouldn’t. If you’re not investing in a business making real dollars and cents, then you’re investing in story and hype.
And investing in just story and hype is like riding a bronco. You better have a butt made of steel. Because there will be a lot of ups and downs, and you will fall off.
But I like to sleep easy at night. So, when it comes to the Alpha Investor portfolio, I look for companies that make money and have profits … or will very soon.
And if you’re a subscriber, I’ll be going over this in more detail in my video update later today. I’ll also share how the bigger picture matters when it comes to performance.
You won’t want to miss these important year-end insights for our Alpha Investor portfolio.
But even if you’re not yet a subscriber, it’s not too late to get in before the new year.
If you check out all the details on how to join us now, you’ll still have time to take advantage of some stocks on the Alpha Investor shopping list.
Founder, Alpha Investor