Can I beat ARKK at their own game? My "10X Best of ARKK" Portfolio challenge starts today.
Can I beat Cathie Wood picking 10 stocks among her holdings?
This is an experiment I want to run. My goal is to test if using my screening method I can deliver better results than the ARKK fund.
Step 1
Find all stocks included in the ARK funds. As of today, I found 120 stocks Cathie Wood is invested in right now:
ABSI, ACCD, ACHR, ADPT, ADYEN, ADYEY, AIR, AMD, AMGN, AMZN, ANSS, ARCT, AUR, AVAV, AVDX, BEAM, BFLY, BILL, BLDE, BYDDY, CAT, CCJ, CDNA, CERS, CMPS, COIN, CRSP, CRWD, DDD, DDOG, DE, DKNG, DSY, ESLT, ETHQ, EXAS, GENI, GH, GLBE, GOOG, GRMN, GTLB, HEI, HO, HON, HOOD, IBTA, ICE, INCY, INTU, IONS, IRDM, ISRG, JOBY, KIND, KMTUY, KSPI, KTOS, LAB, LHX, LMT, MASS, MELI, META, MGA, MKFG, MRNA, MSFT, MTLS, NET, NRIX, NTLA, NTRA, NU, NVDA, OKLO, PACB, PATH, PD, PINS, PLTR, PRME, PRNT, PSNL, PSTG, PYPL, QCOM, QSI, RBLX, RBRK, RDDT, REGN, RKLB, ROKU, RPTX, RXRX, SDGR, SE, SHOP, SNPS, SNTI, SOFI, SPOT, SQ, TDY, TEM, TER, TOST, TRMB, TSLA, TSM, TTD, TWST, TXG, U, VCYT, VEEV, VRTX, Z
STEP 2
Keep companies that are expected to grow over the next 2 fiscal years at least 15% on average and, at the same time, have TTM revenue of at least 100 million and a market cap of at least 75 mln.
Now I am left with 52 names (I am using the Revenue Forward metric from Seeking Alpha):
NVDA, MSFT, META, ISRG, BYDDY, SHOP, MELI, PLTR, CRWD, SPOT, NU, TTD, ADYEY, COIN, DDOG, SQ, NET, HEI, RBLX, KMTUY, PINS, HOOD, CCJ, KSPI, DKNG, NTRA, TOST, EXAS, RDDT, SOFI, GTLB, TEM, RBRK, GLBE, AVAV, BILL, RKLB, CRSP, GH, VCYT, TWST, IBTA, RXRX, NRIX, AVDX, GENI, PACB, ABSI, BLDE, DSY, MASS, QSI
STEP 3
Now using clean data (I use the Valens Research uniform data), let’s examine the above 52 stocks and find companies that are, at the same time:
profitable
improving profitability (ROA)
investing in themselves, expanding (Asset Growth)
improving earnings margins
undervalued to some extent (or fairly valued)
Now I am left with the following tickers: MSFT, META, SQ, HOOD, KSPI, DKNG, VCYT, AVDX, GENI, QSI, ABSI, PINS, TOST, EXAS, SOFI, RKLB.
STEP 4
Now I want to pick 10 stocks. So I asked ChatGPT to give each stock a score considering factors such as ethics, unmet needs fulfillment, innovation, alignment with major themes, branding, customer satisfaction, revenue growth, investment strategies, management effectiveness, and insider buying activities.
Here are the results:
Microsoft Corporation (MSFT) - Score: 85/100
Exact Sciences Corporation (EXAS) - Score: 75/100
Toast, Inc. (TOST) - Score: 74/100
Rocket Lab USA, Inc. (RKLB) - Score: 74/100
Veracyte, Inc. (VCYT) - Score: 73/100
Block, Inc. (SQ) - Score: 72/100
DraftKings Inc. (DKNG) - Score: 72/100
Meta Platforms, Inc. (META) - Score: 71/100
SoFi Technologies, Inc. (SOFI) - Score: 71/100
Genius Sports Limited (GENI) - Score: 70/100
Quantum-Si Incorporated (QSI) - Score: 70/100
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Absci Corporation (ABSI) - Score: 69/100
AvidXchange Holdings, Inc. (AVDX) - Score: 68/100
Pinterest, Inc. (PINS) - Score: 66/100
Robinhood Markets, Inc. (HOOD) - Score: 62/100
Not all of the above are undervalued, some are fairly valued. Yet, they are not overvalued and still align with my framework.
STEP 5: PORTFOLIO
I am starting today a portfolio that will include these top 11 names (10 & 11 have the same score). I will be fully invested and:
I will review the portfolio every 3 months and sell companies that don’t belong anymore using the same screening methodology
I will create a shared Google sheet file to track the performance of this portfolio “10X Best of ARKK” vs ARKK and the SP500
You can access the Portfolio at this link.
The portfolio at inception looks like this:
It’s a “paper trading” to test my methodology against a benchmark (ARKK).
I split 10.000 USD among the 11 companies identified as the most promising based on fundamentals and valuations. I did not look at their charts.
In mid-January I will go through the same process and update my picks, selling the ones that do not fit anymore the screening criteria and adding the ones that fit instead.
Let’s see how it goes.
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Important: This is not investment advice. Consult a licensed financial advisor before making any investment decision.