What can investors expect from ARK Innovation in 2022? - The Average Joe

    What can investors expect from ARK Innovation in 2022?

    Victor Lei β€” Head of Research

    October 13, 2021

    What Can Investors Expect from ARK Innovation In 2022?

    October 13, 2021

    ARK Innovation (NYSE:ARKK), the popular exchange-traded fund (ETF), was the top-performing ETF of 2021 β€” returning 152%.

    But this year, it’s down 10% and unless it can pull off a hat trick in the final few months of 2021, it could be its worst year since being founded in 2014.

    It’s been an all-around bad year for growth stocks β€” which make up the majority of ARK’s portfolio. Despite its underperformance, Cathie Wood remains a strong believer in her strategy of investing in innovation. But that won’t stop the haters:

    • Investors are betting against ARKK with short-interest (% of short positions) at 12% β€” a record level.
    • In August, it was revealed that famous investor, Michael Burry, made a big bet against ARKK.

    Investors are bearish on the stock, but does it mean ARKK will go down even more after being down 29% since February?

    What history says: Since 2014, ARK has averaged an annual return of ~30% β€” beating the S&P 500, which returned 14% annually in the same period.

    But as shown in the chart above, there were good and bad years. And with ARK focusing on riskier growth companies, volatility should be expected.

    • If we look at the past few years, investors benefited if they invested during underperforming years β€” with the ETF beating the market in the following years.
    • When it comes to investing, the past can help guide us but it doesn’t foresee the future.

    Stock returns tend to be mean-reverting β€” which means they tend to move back to their long-term averages.

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