- All of the five active ETFs run by Cathie Wood's ARK Invest returned more than 100% in 2020.
- This strong performance helped the firm rake in over $20 billion last year and bring its total assets under management to $50 billion, according to Morningstar and Bloomberg data.
- In a Tuesday markets update webinar, Wood shared her 2021 outlook on the economy, breaking down why the current bull market is very different from the dot-com bubble.
- ARK crypto analyst Yassine Elmandjra also detailed a new three-layered framework to value bitcoin's fundamentals while analyst Tasha Keeney shared her Tesla outlook for 2021.
- Visit Business Insider's homepage for more stories.
By all accounts, Cathie Wood's ARK Invest has had a blockbuster year.
The innovation-focused asset manager's $21.5 billion Ark Innovation ETF (ARKK), $6 billion ARK Next Generation Internet ETF (ARKW), and $9.4 billion ARK Genomic Revolution ETF (ARKG) returned 153%, 157%, and 181%, respectively while all beating 99% of their category peers, according to Morningstar data.
Its smaller ETFs — the $2.2 billion Ark Autonomous Technology & Robotics ETF (ARKQ) and $2.3 billion Ark Fintech Innovation ETF (ARKF) — also gained 107% and 108%% each during the quarter, the Morningstar data shows.
On top of all that, Wood ran one of the top 10 mutual funds in 2020: the $1.3 billion American Beacon ARK Transformational Innovation fund, which trounced 99% of its peers to return 147% in 2020.
Those incredible gains have helped ARK rake in over $20 billion in less than four months, bringing the firm's total assets under management to $50 billion in mid-December from $28.4 billion in early September.
With all that history made last year, ARK is already starting off 2021 strong, bringing in $3 billion in new assets as of January 12 and $11 billion in the past five weeks, according to Bloomberg Intelligence's Senior ETF Analyst Eric Balchunas.
"If it keeps up this pace, it will take in about $105 billion this year – which is about what BlackRock took in last year," Balchunas said in a Tuesday tweet.
To be sure, ARK's shot to fame made such a splash last year that some investors are skeptical about whether the firm can continue its impressive streak. Specifically, the firm's three largest ETFs are starting to attract short-sellers, with short interest on the Ark Innovation ETF jumping to 1.9% from about 0.3% a month ago, according to Bloomberg.
Wood's 2021 outlook on the economy and markets
The bearish bets on ARK seem to have come in lockstep with the recent talks of a market bubble and impending correction. However, Wood appeared unperturbed in a Tuesday markets update webinar.
"The V-shaped recovery that we've been talking about for quite some time might have experienced a little bit of a wobble in some of the statistics coming out these days," she said, referring to the surprise payroll decline in December. "But it was all leisure, hospitality, and more small business-oriented."
While the V-shaped recovery may be somewhat subdued, Wood sees "explosive earnings" ahead, propelled in part by potential bipartisan action on infrastructure, healthcare, and clean energy.
"We'll probably see maybe more bipartisan action given how dysfunctional government has seemed and how policymakers probably don't want to be perceived as part of the problem," she said. "They want to, hopefully, become part of the solution."
What further confirms her view on the V-shaped recovery is the continued rise of cyclical stocks in the market.
"What's been beautiful about the equity markets recently is the bull market has been broadening out," Wood said. "We've reached a new high in the equity markets, which means the recovery is over and the bull market has resumed."
She continued: "This is not like the tech and telecom bubble when the market narrowed towards the internet stocks, effectively, and biotech. Instead, it's broadening out, we think that's very healthy."
Bitcoin — what's special about this bull market
In the same webinar, ARK's blockchain and cryptoasset analyst Yassine Elmandjra shared what he believes to be the drivers of bitcoin's meteoric rise.
The digital asset has had an extremely volatile few weeks, doubling in value to breach $40,000 per bitcoin in the first week of January from $20,000 in mid-December, before plunging to just above $35,000 as of Wednesday.
"I think what's unique about this breakout relative to previous breakouts is a combination of institutional momentum and adoption and strong underlying network fundamentals and holding behavior," he said. "And then in relation to bitcoin's underlying fundamentals, it really appears that that holding behavior has never been more long-term focused."
Elmandjra noted that bitcoin skeptics have tended to zero in on the digital currency's alleged lack of fundamentals, but he believes the claim "is rooted in bitcoin's inability to fit neatly within the framework associated with traditional assets."
To evaluate bitcoin's investment merits, Elmandjra has come up with a three-layered framework to assess bitcoin's fundamentals, which is also detailed in his latest research note.
Broadly, the framework relies on the open-source data that is transparent and published in real-time on bitcoin's blockchain, which refers to the public ledger or database that records bitcoin transactions.
The first layer of the framework, which is relevant to all bitcoin holders, addresses "the general health of the network that ranges from network security to monetary integrity to transparency."
The second layer delves deeper and segments data by bitcoin wallet addresses.
"This layer, an analyst can basically see each holder's position and the cost basis of those positions at any given time," he said. "And this is particularly relevant to long-term investors and holders who are really just trying to track the holding behavior and long-term trends of Bitcoin holders."
The final layer is particularly useful for active managers where the data can provide buy and sell signals in the crypto market, according to Elmandjra.
"It is leveraging off of the two lower layers. And here you can manipulate data and derive relative valuation metrics that identify short- to mid-term inefficiencies in bitcoin's price," he said. "As institutional investors start to really gain exposure to Bitcoin and are convinced in the underlying long-term thesis, we believe that these three data layers are going to be core to their understanding of and confidence in the fundamentals."
A year of expansion and scale for Tesla
In February 2018, Wood raised eyebrows when she shared her controversial price target for Tesla on CNBC.
Less than three years later, she was sufficiently vindicated when Tesla surged more than 7% on January 7 to hit $4,000 per share on a split-adjusted basis.
Tesla, which continues to be a major holding for ARK, will likely see another year of expansion in 2021, ARK analyst Tasha Keeney said on the webinar.
On the autonomous-driving front, she is keeping an eye on the "full self-driving" driver-assistance system subscription service that is expected to be rolled out early this year.
"I think we're looking for future developments on the full self-driving front in terms of when will they be able to unlock the autonomous taxi network," she said. "It's hard to say exactly for sure because there's still an unsolved problem but Elon's made comments that it could be within the year."
Keeney is also watching for the geographic expansion of Tesla in its core electric vehicle business.
"Their Shanghai factory is still expanding. They're building in Germany, Austin, and they just opened an India office," Keeney said. "Their core EV business, looking out for what progress they make there and in terms of scale over the next year will certainly be something else to watch for."
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