Cathie Wood’s ARKK is extremely oversold. Is it a good buy now?

Things keep getting worse for Cathie Wood. The Ark Innovation Fund (ARKK) stock crashed to the lowest level since March 2020. It has declined by more than 75% from its all-time high, meaning that it has shed all the gains it made during the pandemic. Also, despite its significantly high fees, the fund has underperformed the S&P 500 and Nasdaq 100.

ARKK stocks in the red

Most stocks in the Ark Innovation Fund have sold off lately. As a result, the fund’s total assets have crashed to just $12 billion. At its peak it had over $28 billion in assets under management. 

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The recent wave of the decline happened as investors dumped some of its most important stocks. For example, the fund holds more than 6.4 million shares in Unity Software. The stock crashed by more than 35% on Wednesday after the company published weak quarterly results. It has fallen by more than 60% from its all-time high.

Similarly, Ark Innovation Fund holds more than 12 million shares in Teladoc. The company’s shares collapsed by more than 40% after it published weak results. The firm is now valued at $4.7 billion, which is lower than its peak cap of over $40 billion. Its total valuation is also lower than the $18 billion that it spent to acquire Livongo Health. 

The ARKK fund also has over 695k shares in Shopify. Last week, the stock plummeted after the company signaled that its growth was slowing. It has fallen by over 70% from its peak.

The story repeats among most of its biggest holdings. For example, Zoom Video is now valued at $26 billion which is lower than its peak of over $120 billion. Other ARKK holdings that have dropped are Block, Exact Sciences, Robinhood, and PagerDuty among others.

Is Ark Innovation Fund a good buy?

The Ark Innovation Fund had a good performance during the pandemic as the Federal Reserve lowered interest rates. 

It then started crashing last year as the bank started hiking interest rates aggressively. As a result, many growth stocks have done poorly. 

Still, there is a ray of hope considering that the current phase of aggressive tightening could trigger a recession. If this happens, the Fed will slow its aggressive tightening, which will be beneficial to growth stocks. 

At the same time, there is a sense in which the ARKK stock price has become oversold. Therefore, a rebound cannot be ruled out in the coming months.

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