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ARK Auto Tech & Robotics ETF: Buying Area for Long-Term Investment

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ARK Foundation for Autonomous Technology and Robotics by Cathie Wood (Bates:ARKQ) is deep in bear market territory after losing about 50% of its value in the past 12 months amid concerns about the fastest rate hike in the past four months contracts. However, the sale provided an excellent entry point for investors who believe in disruptive technologies and long-term capital appreciation. The short-term outlook for ARKQ is less favorable, but once the market stabilizes, it is likely to start reversing losses. The global push for clean energy and increased corporate interest in technologies that reduce costs and improve supply chains are just some of the reasons to be optimistic about Ark’s autonomous technology and robotics ETFs.

ARK Autonomous Technology & Robotics ETF – Risky short term game

Cathie Wood’s ARK Autonomous Technology & Robotics ETF has been hit harder than the rest of the tech stocks in the past 12 months due to its exposure to rate-affected tech companies. The ARKQ pain is likely to extend into the following months as the chances of another rise of 75 basis points in November increased significantly after temperatures warmed more than expected. inflation And jobs are higher than expected data. Market volatility is likely to increase if interest rates rise from their current levels, exposing stocks focused on disruptive technology to greater risk. in Open Letter to the Federal Reserve Cathy criticized Fed policy and warned that raising interest rates would increase the risk of a deflationary meltdown.

Billionaire fund managers, banks and other rating agencies have also expressed concerns about the policy of raising interest rates. According to Ray Dalio, the stock market will Suffers Losses The economy will go into recession if the Fed raises interest rates to 4.5%. Jeremy Siegel, another Wharton professor, said Fed policy could crush the economy. Subsequently, disruptive technology investor Elon Musk chirp An excerpt from Siegel’s interview confirmed his position.

Quantitative Valuations ARKQ ETF

Quantitative evaluations (alpha search)

Additionally, looking at quantitative ratings for Alpha means that ARKQ’s price performance will not be adequate in the short term. With a total score of 1.37, the ETF is rated as a sell. The ETF received poor scores for momentum and risk, two key factors when it comes to measuring short-term price performance. Economic uncertainty, high inflation, and the possibility of an interest rate hike in the next two months of 2022 also increase downside risks. On the plus side, the improvement in asset flow is a positive sign, which indicates that buyers on the dip are showing interest in the ETF.

A worthy choice for long-term investment

A wide range of disruptive technologies, including blockchain, artificial intelligence, machine learning, autonomous systems, robotics, and big data, have made a significant contribution to the lives of the general public and helped improve the performance of companies over the past few years. The pace of adoption has accelerated at an exponential rate during the COVID pandemic. As a result, a large number of companies and startups have attracted record investments in the past few years with many companies such as Tiger Cubs and Ark Invest founder, Cathy Wood, making investments in disruptive technologies as the foundation of their businesses.

ARKQ Technology Breakdown

Technology Collapse (etfs.ark-funds.com/)

Cathie’s ARKQ is an ETF that allows investors to learn about trends in the fastest-growing categories of disruptive technology, such as autonomous transportation, robotics, 3D manufacturing, manufacturing, energy storage and space exploration. The ETF’s price soared to around $100 a share in late 2020 and remained strong the following year before seeing a price crash in 2022. However, the price correction created an attractive entry point for long-term investors. This is because ARKQ has strong fundamentals as the majority of its portfolio consists of companies working in autonomous vehicles and energy storage, the two areas likely to see the most benefit from the world. commitment To move towards clean energy. In fact, century-old automakers such as Ford (F) They began to see their future in electric cars as governments offered incentives to electric car makers and capital markets were flooding electric car companies with cash. For example, Tesla Inc. (TSLA) is the only automaker in history to have surpassed $1 trillion in market capitalization, thanks to investor confidence in its future fundamentals. Although its market value has fallen to about $650 billion at the moment, it is still well above the total value of its largest competitors, including Volkswagen AG (OTCPK: VWAGY), Toyota Motor Corp. (TM), general motors (GM), and Ford Motor Co.

Furthermore, ARKQ’s 50% portfolio concentration in large, highly capitalized technology companies helps reduce the risk factor and strengthens its fundamentals. This is because these companies are well positioned to generate annual revenue and long-term profit growth. About 31% of its portfolio is made up of small and micro companies, while more than 16% is made up of medium-sized companies. Its portfolio includes 39 stocks, with its largest holdings representing 57% of the portfolio as a whole.

ARKQ top 10 stocks holdings

Top 10 Stock Holdings (ark-funds.com)

Tesla is the largest share in the ARKQ portfolio, accounting for 9.5% of the total portfolio. It is a leading electric vehicle manufacturer with significant penetration in key markets such as the United States, Europe and China. A growing belief in the future foundations of electric vehicles helped drive Tesla’s stock price from less than $20 a share in 2019 to over $400 at the end of 2021. Increased profitability and strong operating performance have boosted investor confidence in the company. When it comes to financial growth, Tesla has an impressive track record. The company has been profitable every quarter since the third quarter of 2019, while its quarterly revenue has only fallen twice since 2017. In addition, Wall Street analysts said anticipation Its earnings will double by 2025 from estimates of $4.26 per share in 2022.

Besides Tesla, the majority of ARKQ’s top ten holdings are also poised for double-digit growth in the coming years. Annual revenue and earnings growth of around 15% means that P&L numbers will double in the five years, which bodes well for steady growth in the stock price in the long run. For example, Kratos Defense & Security Solutions Inc. (KTOS), which is ARKQ’s second largest stock holding, is well-appointed reach Double-digit annual revenue growth in fiscal 2022, while Wall Street estimates Suggest Double-digit revenue growth will continue into the future. Similarly, the Trimble (TRMB) has earned a strong buy rating from SA authors amid its innovative products along with a proven track record of achieving steady growth in revenue and profits. Furthermore, iridium contacts (IRDM), the fifth largest ARKQ stock holding has posted record revenue and earnings in the June quarter and Starch Annual revenue and profit forecast due to strong growth trends. Besides the top ten stocks, the remaining stocks in ARKQ also include established names such as Magna International (MGA), Lockheed Martin (LMT), Larva (cat), NVIDIA (NVDA) and GM and the Alphabet (The Google).

Is ARKQ in a buy zone?

It is crucial to find the right entry point when it comes to buying in order to increase your capital over the long term. As mentioned earlier, ARKQ carries a high risk in the short term due to the interest rate hike policy and the potential for broader market volatility. in my last Article – CommodityI predicted that the Nasdaq would bottom around 9,000 and the S&P 500 would hit 3,000 by the end of this year or early 2023. In that case, high-beta ETFs like ARKQ could extend their losses in the coming months. I think ARKQ is already in buy territory after losing about 50% of its value, but an ideal entry point may come by the end of this year or early 2023 when the broader market declines and begins to reverse losses.

Finally

While the current bear market has wiped out trillions of dollars of stock market value so far in 2022, it has also opened up excellent investment opportunities in ETFs like ARKQ, which have the potential to deliver solid returns over the long term. The concentration and diversification of the ETF portfolio also supports the long-term investment thesis. Moreover, ARKQ also offers small annual dividends to investors, which also helps in improving overall returns in the long run.

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