Don’t buy ARKK ETF stock in 2023: Buy this alternative instead

Ark Innovation Fund (NYSE: ARKK) stock price has been in a freefall as constituent companies implode. Cathie Wood’s flagship ETF crashed to a low of $29.29, the lowest level since August 2017. It has plunged by more than 81% from its highest level in 2021. 

ARKK portfolio is imploding

Ark Innovation Fund is the flagship fund of Cathie Wood’s company. At its peak, the actively managed fund had over $40 billion in assets. Today, as a result of redemptions and a collapse of its portfolio companies, the fund has just $7.5 billion in assets.

Are you looking for fast-news, hot-tips and market analysis?

Sign-up for the Invezz newsletter, today.

Most ARKK portfolio companies have come under intense pressure in the past few months. Tesla, one of its biggest constituents, has been in a freefall. It crashed by more than 70% in 2022, shedding over $700 billion of value. As a result, the company is now the fifth-biggest ARKK constituent. 

Other ARKK companies have imploded as well. Teladoc, which was once valued at over $30 billion, has lost so much value that it has a market cap of $3.7 billion. That’s a shame for a company that spent almost $18 billion to acquire Livongo Health in 2021.

Coinbase share price collapsed by more than 87% in 2022 as cryptocurrencies collapsed and companies like Voyager Digital and FTX imploded. Kathie Wood has continued to buy Coinbase shares amid the collapse.

After experiencing remarkable growth during the pandemic, Zoom video stock price has shed over 65% of value in the past 12 months. Roku has dropped by 83% in the same period. Other companies like Shopify, Crispr Therapeutics, and Uipath have shed over 73% of value.

Unfortunately, as I wrote in this report, the American economy is facing a triple whammy of high-interest rates, stubborn inflation, and increased recession risks. Tech companies tend to underperform in such an environment. 

Another risk for ARKK is that the ETF is simply too expensive. It has an expense ratio of 0.73%, which is higher considering that Invesco’s Nasdaq 100 fund has a ratio of 0.05%. For anyone betting on a recovery of tech stocks, we recommend buying the mini QQQ fund by Invesco, which tracks the Nasdaq 100 index. Alternative Nasdaq 100 ETFs by Vanguard and Blackrock are equally good.

Ark Innovation Fund stock forecast

The weekly chart shows that the ARKK stock price has been in a steady bearish trend in the past few months. It recently moved below the important support level at $32.63, the lowest level on March 9 2020. 

The fund has formed a death cross, which forms when the 200-day and 50-day moving averages make a bearish reversal. Therefore, in this case, the trend is your friend and it will likely continue falling as sellers target the key support level at $25.