Cycle Trading

[No-Quarter]

In case anyone is blocked from seeing the entire article due to subscription requirements, below is the entire article.

I am currently working to identify the individual equities in each of the ARK funds that are being accumulated the most aggressively, this so once the expected market pull-back occurs, I can swoop in and pick up a few at a discount- GLTY

https://seekingalpha.com/article/4392294-embrace-disruption-ark-next-generation-internet-etf

Embrace Disruption With ARK Next Generation Internet ETF

Dec. 1, 2020 11:03 AM ET|31 comments | About: ARK Next Generation Internet ETF (ARKW), Includes: CRM, GBTC, NFLX, PINS, PSTG, PYPL, ROKU, SPOT, SPY, SQ, TDOC, WORK, ZM

Alexander J Poulos

Growth At A Reasonable Price, Healthcare, Long-Term Horizon, Value
(4,688 followers)

Summary - The global pandemic of 2020 has sparked tremendous advance in innovation due to the unique challenges imposed by the COVID-19 outbreak.

The disruption to everyday life due to the pandemic has forced us to embrace change far more rapidly which speeds up the adaption curve of new technological advances.

Not all technologies will thrive, it is often difficult to know well in advance which company will emerge as the dominant player in its field.

My goal is to capitalize on these emerging trends while mitigating risk as much as possible.

The ARK Next Generation Internet ETF in my view, is an excellent vehicle to accomplish my objective will avoiding the risk of overweighting a company that does not pan out.

Overview
My choice to invest in and subsequently profile the ARK Next Generation Internet ETF (ARKW) revolves around the ETF's stellar long-term performance as the ETF five-year average return north of 40% is staggering. To put up numbers of this magnitude, you typically have to have a smaller portfolio with a higher concentration of stocks. ARKW does exhibit this characteristic with an ETF size between 35-50 names. The smaller size itself does not reflect the entire story as the top ten names account for nearly 42 percent of the ETF's weightings as of Nov 27, 2020. In essence, ARKW is a very concentrated portfolio - hence my review of the merits of ARKW will entirely revolve around its top 9 holdings.

Tesla
Tesla (NASDAQ:TSLA) is the number one holding in ARKW with a weighting of 10.63 percent of the ETF. I'm not going to spend lots of time giving an overview of TSLA as it is one of the most widely/controversial equities in the market today. The big bet in TSLA has paid off handsomely as TSLA is up over 7X the past year, no doubt fueling a significant amount of ARKW outperformance in 2020. The great part of ARKW is that even with the stellar call in TSLA, the ARK team uncovered other gems and detailed below.

Roku
The streaming device company Roku (ROKU) rounds out the second spot with a weighting of 7.32 percent. Roku is a unique way to capitalize on the trend of cord-cutting without investing in Netflix (NFLX). The outstanding Roku player allows non-tech-savvy individuals such as myself seamlessly install and enjoy the benefits of purchasing and watching what I want. Feel like watching Yellowstone on the Peacock network? Easily sign-up via Roku, and they handle the billing, nice and easy. Short on cash and want to catch something without a subscription fee? Roku has you covered via the Roku channel with a wide plethora of shows. Yes, you may have to watch a commercial or two (great time for snack/bathroom break), a small price to pay for saving a few bucks. The market thus far in 2020 remains smitten with Roku's prospects as the equity is up over 100%.

Square
Fintech darling Square (SQ) is the third holding with a 5.4% weighting in the ARKW. Square continues to disrupt the financial industry first with its mobile dongle with slim fees for small merchants (the big banks ignore the small merchant with astronomically high fees versus what is paid by larger merchants) to its fast-growing app, the brilliantly named Cash App. In my view, SQ is a disruption on steroids as it continues to pivot into adjacent fields in finance. One of the overlooked aspects of the Cash App is the ability to purchase stock or bitcoin. The commissions earned from bitcoin sales helped provide a boost to earnings in the past two quarters. Bitcoin continues to catch on with rival Paypal (PYPL), announcing it has gotten into the crypto game, mirroring SQ.

I suspect the vast majority reading this post have access to traditional banking services (checking accounts, debit cards, credit cards, etc.). SQ is angling for the nearly 50 million adults in the US who are underbanked. By offering ease of use, near-instant ability to pay or receive funds while offering "boosts" for a percentage off a purchase from specific merchants. SQ recently agreed to purchase Credit Karma for $50 million. The purchase will allow SQ to offer a free tax preparation service, thus expanding its ecosystem offerings. In my view, SQ is building a very compelling financial ecosystem that may prove to be very sticky. If my thesis does play out, SQ may be proven to be cheap at this level - however, we are still in the early innings.

For the investment case in ARKW, the team's skill on display once again, with SQ posting a stellar showing of nearly 240% in 2020. That's correct top three holdings up over 100% each!!!

Slack Technologies
Slack Technologies (WORK) rounds up the fourth position with a weighting of 3.9 percent of the portfolio. WORK is up nearly 80percent year to date - however, the recent jump the past week on the rumor Salesforce (CRM) is in talks to acquire the company. In my view, WORK is one of ARK's few misses in 2020 as the work from home play Zoom Video Communications (ZM) has thoroughly trounced the return of WORK, producing a TSLA-esque return of over 580% YTD. WORK remains a costly miss, with ZM held at position number 44 in the ETF with a weighting of 0.89 percent.

Teladoc
ARKW quickly regained its mojo with Teladoc (TDOC), the fifth-largest holding with a 3.32% weighting in the ETF. TDOC is an early winner of the pandemic as its adoption curve has been pushed many years forward due to necessity. TDOC operates a network that allows users to access healthcare through the privacy of their own home via an app. The service aids in the face to face conversations with a health care provider that helps lower the overall cost to deliver healthcare. TDOC is up over 130% in 2020 - I am interested to see how the equity performs in 2021 once the pandemic wanes. If utilization rates remain steady or increase, TDOC is well on its way to disrupting the US healthcare market.

Spotify and Pinterest
The music service Spotify Technologies (SPOT) and social media platform Pinterest (PINS) round out the sixth and seven spots with a weighting of 3.26 and 2.7 percent, respectively. Both entities are early in their growth trajectory, with SPOT debuting the public markets in late 2048 and PINS making its entrance in April of 2019. Interestingly, neither performing well initially post the IPO, with SPOT trading well below its opening IPO price for over two years. PINS did perform initially better until a disappointing earnings report torpedoed the stock in November 2019. The pandemic fueled growth on the platform, with the equity breaking out to new all-time highs the past six months. SPOT is up 85% in 2020, with PINS up over 270%.

Pure Storage
In my view, the most puzzling position in the fund is Pure Storage (PSTG), a pure-play on data storage. I have no doubt the need for storage will continue to ramp higher the performance of this holding - in my view, does not merit a position as a top ten holding. PSTG has underperformed the market with a YTD gain of roughly 8%. The equity is up 45%, badly trailing the S&P 500 (SPY), which is up 73% in the same time frame.

Grayscale Bitcoin Trust
The ninth holding is the Grayscale Bitcoin Trust (GBTC), a fund that offers direct Bitcoin ownership. Each share of the GBTC is equal to 0.00095189 of Bitcoin, a unique financial instrument. Bitcoin's opinions vary wildly, somewhat reminiscent of TSLA, with numerous pundits coming out of the woodwork to trash TSLA. As each gained wider acceptance, the gains made for the early adopters are life-changing. In my view, GBTC is a legitimate financial instrument akin to a commodity, not a currency with inherent volatility. The recent one-day 12% drop underscores Bitcoin's volatile nature, which will take some of the froth off the recent stellar run. Even with the recent drop, GBTC is up nearly 130% YTD, a wise move by the team at ARKW.

Concluding Thoughts
After reviewing the top holdings of the ARKW ETF, I remain confident in my investment. The ETF is overweight some early disrupters with notable outperformance in TSLA, SQ, and PINS. I do not believe the run is over and plan on letting it ride as we may still be in the early innings of a new bull market.

Investors are always reminded that before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.