ARKK stock price on 10/1/2022

Cathie Wood’s Ark Invest flagship fund, ARKK, has formed a multiple bottom pattern suggesting it may have found a bottom, though the stock market is so volatile at the moment that it’s certainly not a given it won’t fall further as we have seen several multiple bottoms broken in individual stocks recently, some of which are heavily weighted in ARKK.

It wasn’t long ago that Roku formed a multiple bottom pattern, yet Roku has fallen to new lows once again before closing Friday at $56.40. Since Roku is one of ARKKs most weighted stocks, the same could certainly happen for the overall ARKK fund.

Cathie Wood recently bought more Tesla stock. Tesla is now ARKKs most weighted stock again at 10.27%. Cathie Wood previously sold Tesla when Tesla was considerably cheaper than it is today. Also, many analysts are suggesting that the car market, in general, could suffer a downturn in the worldwide recession if it hits.

Tesla has historically been the most weighted stock in the ARKK fund. However, during its recent downturn, it slipped behind Roku and Zoom, to be third on the list. During the last month, Tesla became ARKKs most heavily weighted stock again, overtaking Roku and Zoom.

If Wood had just held onto her Tesla shares over the last few years, her ARKK fund probably wouldn’t have fallen anywhere near as low as it has this year. To top it off, she sold Tesla during its decline and then bought back recently when Tesla had already risen a lot and many are now predicting it to potentially fall again. Tesla has a P/E ratio of 95.52 and a forward P/E of 45.37. Chinese EV stocks such as Nio and Xpeng have sold off heavily in recent weeks, though that is also because investors fear China is likely to face a serious economic downturn. Xpeng recently reported that interest in buying EVs in China was still very high.

Wood still thinks the US is likely heading for deflation. Some analysts I follow are also suggesting they see money managers coming back into the market in certain sectors they had once abandoned, suggesting they believe inflation is coming down. If inflation doesn’t come down, Tesla investors need to be nervous here given its very high P/E ratio for its market cap.

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