“This is a Cathie stock” is a new meme on Wall Street. It is at the heart of the three stocks to buy ideas today.
Love it or hate it, Ark Invest is popular and it’s not going away soon. I consider these trade opportunities short term. However, they could also form a successful longer-term investment thesis. Regardless of conviction, investors would be smart to not go all in.
The pandemic changed the whole world on so many levels. It forced a complete reset button for Main Street. But the ripple effects also spilled onto Wall Street, and brought a new era of trading. A big part of it is the emergence of Ark Invest. Today we seek opportunities in the ARK stocks to buy going into 2022.
Of late, there have been common themes of pain rippling through the indices. Fintech stocks, which are a popular segment of the financials, are suffering heavy losses. Stocks like PayPal (NASDAQ:PYPL) and even Square (NYSE:SQ) are falling fast and furiously. This is in spite of them presenting great arguments for being stocks to buy on dips. It’s as if there is a program unfolding and nothing is going to stop it. The pain also extends into successful small cap stocks like Palantir (NYSE:PLTR) for example.
Watch the Fundamentals
Price action aside, the fundamentals will eventually prevail. ARK brings a new twist on the old-school investment houses. Even though it’s not perfect, it is exciting to see the changes. At least they are less of a black box, and they present their arguments more openly. Main Street investors are able to track their positions more closely. However, investors do not need to reinvent their wheel. They can simply buy the exchange-traded fund instead. ARK made it easy to follow along with their publicly traded ETFs.
Today, we present three of those stocks to buy going into next year. Cathie Wood, who is the founder and front person for ARK, is now a household name. She nailed the Tesla (NASDAQ:TSLA) trade in spite of many critics, including myself. Her methods still need to stand the test of a bear market. Coming out of the pandemic, the entire stock market was rallying from the abyss. Winning was almost a guarantee, unless one was incredibly unlucky.
There is an advantage to trading an ETF, because it diffuses single-stock risks. It also allows investors to catch a falling knife but while it’s in a basket. The odds of losing fingers is much lower especially for momentum stocks. This concept is important to today’s pick of stocks to buy. I specifically tailored them to catch great stocks that are falling fast but indirectly.
The three ARK stocks to buy today are:
- ARK Innovation ETF (NYSEARCA:ARKK)
- ARK Fintech Innovation ETF (NYSEARCA:ARKF)
- ARK Autonomous Technology & Robotics ETF (NYSEARCA:ARKQ)
Stocks to Buy: ARK Innovation ETF (ARKK)
ARKK is their ETF to target innovation stocks, which is a pretty broad definition. Arguably that should include all of their stocks because that’s their mantra. If you visit their website, it’s right there in a giant font on the front page.
Nevertheless, the list of stocks within it is extremely interesting. The top 10 holdings encompass almost 50% of its value. This includes Tesla, Roku (NASDAQ:ROKU), Teladoc (NYSE:TDOC) and Square (NYSE:SQ). The next five include Zoom (NASDAQ:ZM), Shopify (NYSE:SHOP) and Twilio (NYSE:TWLO). As you can see, these are extremely exciting tickers to trade.
They move fast in both directions, but they all have one thing in common: success. These are strong growth businesses but somewhat controversial. However in the long run, odds are that they are all winners.
The ARKK also made room for crypto because Coinbase (NASDAQ:COIN) is ninth on its list. This is a great collection of future themes that have staying power. They are not cheap stocks, so value investors might shy away from them. That’s OK because not every trade is appropriate for all investors.
When markets are at all-time highs if they correct, investors are likely to shed frothiest tickers first. True or not, these are the ones who carry that label. Investors will need strong stomachs to own this ETF.
However, technically it has fallen into a perfect bounce level from early October. It found footing just below current price five months earlier. Looking even further, we see that $105 also was pivotal in March and November 2020. This is clearly a level in contention, which should bring out perspective buyers.
If it fails, investors should expect another leg lower. Smart traders take partial positions, or stop out immediately and trying again lower.
ARK Fintech Innovation ETF (ARKF)
Our second ARK ETF is ARKF, which is more on point chasing the fintech opportunity. Investors who are fans of Square, PayPal and Coin will like this one better. But the same caveats will apply here as it’s also volatile.
These are not easy stocks to own for those who cannot tolerate risk in the short term. However, I have high conviction that companies like SHOP and TWLO will be winners in the long term. I am just as confident that in the meantime they will give me heartburn. But without risk there will be no reward, and that’s why these are exciting opportunities.
Technically, this one has also fallen into its prior support. It is almost an exact replica of ARKK’s price action. Therefore interchanging the two is OK, but I wouldn’t double up on them. Here also, value is not good an argument because these is a collection of expensive stocks.
However, those who look for growth stocks shouldn’t be looking for bargains. You can’t deliver results while pinching pennies. Taking longs in ARKF means accepting some elements of hope on future successes.
Stocks to Buy: ARK Autonomous Technology & Robotics ETF (ARKQ)
Our third ARK ETF pick today is ARKQ. This one focuses strictly on the autonomous opportunity in tech. Of course, this would include Tesla and it is the heavyweight at 11%. But then the next nine holdings are a good cross-section of high-tech mega cap stocks. JD.com (NASDAQ:JD), Baidu (NASDAQ:BIDU) and Alphabet (NASDAQ:GOOGL,NASDAQ:GOOG) are three other that comprise another 16%.
Clearly this is a good diversification within the Nasdaq tech stock sector. You just can’t go super wrong by buying a bit of all these strong stocks. The companies behind them are successful in their own right and segments. If the markets were to continue higher, they should also be in the lead pack.
From all-time highs there will be periods of downside pressure. Technically, ARKQ is in better shape than the first two we shared. It is closer to its all-time highs, and it is higher than its recent lows. It has a better relative position within its recent range.
ARKQ has support below current price, but also another support zone below that. The same pivotal periods as the other two harbor buyers near $80, and $4 lower. This makes for a stronger base for the bulls to make recovery rallies in the short term.
As for which one to choose, this depends on one’s perspective and time frames. I bet that if one is up all three are up because of the themes they carry. ARKK and ARKF so far are trading in tandem, so I expect they continue to do so. ARKQ is pretty close but slightly in better shape. Regardless of which I choose, taking only one makes the most sense.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.