Did ARKK Miss Out on Other ‘Magnificent 7’ Opportunities? Cathie Wood’s Ark Rose To Prominence with Tesla Bet in 2020, But Did ARKK Miss Out Big On Other ‘Magnificent 7’ Opportunities? – Invesco QQQ Trust, Series 1 (NASDAQ:QQQ)

Photo of author

By Ronald Tech

The ‘Magnificent Seven’ group has led the stock market rebound from 2022’s dismal performance. Investors are wondering if Cathie Wood’s Ark Innovation ETF (ARKK) missed out on these opportunities.

The phrase Magnificent Seven was first used by BofA Securities analyst Michael Hartnett in 2023. The constituent companies spearheaded the stock market rebound during the year, thanks to the dominant market positioning, innovativeness, brand appeal, and financial muscle of these companies. This group comprises the biggest mega-cap techs including Meta, Apple, Alphabet, Amazon, Nvidia Corp., Microsoft, and Tesla, Inc.

The AI revolution is firmly taking hold, with Nvidia joining the elite club. The chipmaker was the best-performing S&P 500 stock in 2023, propelling the company to sixth place in terms of market capitalization. The exuberance reflects astounding growth prospects due to Nvidia’s exposure to AI.

The underperformance of Tesla has given rise to chatter about whether it should be booted out of the Magnificent Seven group.

Source: Benzinga

See Also: Best Artificial Intelligence Stocks

ARKK’s Trajectory: ARKK, which invests in companies with disruptive innovation potential, has Tesla as its second-most held stock with an 8.09% weighting. The ETF holds 3.39 million Tesla shares currently. The only other Magnificent Seven stock in ARKK’s portfolio currently is Microsoft (200,448 shares).

ARKK cashed out of Nvidia in January 2023, with Ark consciously trimming its stake in the chipmaker on the premise that the stock is overvalued.

The NYSE-listed ARKK was a high-flier amid the pandemic as most portfolio stocks such as Zoom Video Communications, Inc. were considered as COVID-19 plays and rallied during the pandemic. These shares have since then come back from their COVID-19 highs. ARKK was on a secular downtrend from February 2021 till the end of 2022 and has been going about a consolidation move around the depressed levels since then.

See also  Sprouts Farmers Market Upgrade and Strong Q4 ResultsAnalyst Boosts Sprouts Farmers Market Rating Amid Uber Eats Collaboration and Robust Q4 Performance

Source: Benzinga

Returns From $100 Investment: If an investor had invested $100 in each of the Magnificent Seven stocks at the start of March 2020, here’s how much he would have now.

Dollar Holdings (current) Returns (in %)
Alphabet $217.35 +117.35%
Amazon $181.05 +81.05%
Apple $283.80 +183.80%
Meta $243.98 +143.98%
Microsoft $264.48 +164.48%
Nvidia $1,041.75 +941.75%
Tesla $421.24 +321.24%
ARKK $92.20 (-7.80%)

If $100 were invested in each of the Magnificent Seven stocks, the combined return on the $700 plowed in would be $2,653.66. In percentage terms, the return would be 279.09% compared to ARKK’s negative 7.80% return.

The Invesco QQQ Trust (QQQ), an index tracking the Nasdaq 100, ended Wednesday’s session 1.03% at $431.99, according to Benzinga Pro data. ARKK added 0.30% to $47.31.

Read Next: Nvidia’s Valuation Set To Leapfrog Past Amazon, Alphabet As AI Stalwart’s Stock Closes In On $700 Mark: Is The Meteoric Climb Sustainable?