I am a new Saul board follower here, so I will tread carefully. Oh how I wish I had come across Saul’s board 10 years ago as opposed to 3 weeks ago.
Having read the knowledgebase and other articles (thanks Saul for the great starting points), I clearly see that ARK family of products are not the topic of this board. I ask though - how do we, as individual investors in this time of masses of investors rushing to the new ideas, identify the new Amazon vs pet.com in the new areas as the SaaS investment space gets more crowded?
So my thesis is that funds like ARKG can be used to help identify potential future investments for this board. As nilvest pointed out, many of the genomics companies are clinical stage or early revenue so they don’t yet fit the model here – but some of them will in the future. So following ETFs such as ARKG can potentially aid in identifying them early before the masses rush in further.
Because I have just started reading Saul’s investing philosophies 3 weeks ago, my portfolio does not yet fully follow the model here. Thus I did not have 200% gains in 2020 that many of you saw, though I did beat the Nasdaq with a 57% gain (with a devastating March). My “OK” 2020 recovery was in part due to pivoting in April and May and taking positions in what I just learned were 8 of the top 20 holdings by board members - per the summary spreadsheet someone posted earlier this week. I guess already heading down the Saul path - thanks to TMF for some of these recommendations.
Another position I took in early May was in fact ARKG. After looking at 12 genome related companies, I narrowed my interest to 5 where I had higher level of interest. Since my conviction level was not what I would call high, I looked for smaller ETFs that had enough positions in the 5 where I would benefit from them if I was correct but “hedged my bet” a bit just in case. I found ARKG - at the time a ~$2B fund with 39 holdings. It had 3 in the top 5 holdings (NVTA, CRSP, TWST) and a 4th in the top 15 (FATE) for a total of 29.5% of the portfolio at that time.
ARKG also had in the top holdings:
- 2 high growth, high margin companies I was looking at that could potentially fit the Saul model (TDOC, PSTG)
- 1 testing company that I believe to have high growth potential (EXAS)
These 7 stocks were 41% of ARKG and I had reasonable (though not high) conviction in them based on my analysis at that time. So I pulled the trigger.
And after my initial success with ARKG, I later picked up some ARKK. My YE gains in these were 116% (ARKG) and 89% (ARKK).
Going forward, as I read more on this board and shift my DD more to of the model espoused by Saul and company, I will adjust my portfolios by selling existing positions and buying new or adding to positions based on strong convictions. In fact I have already closed out 5 positions this year and added to my existing positions in CRWD, DOCU, & OKTA.
That said, I think I will be holding on to ARKG (and maybe ARKK) for a while and watch Cathie Wood and her holdings closely to see what she thinks is the next big thing - to get ideas on where to investigate further as the SaaS investment space gets more crowded in 2021 and beyond. I do believe she will have a hard time replicating her results given the growth of her funds to $4B and $13B (and ARKW to over $5B), but I also believe we can learn from her to mine the gems that fit the model here for our purposes.
Thanks again to Saul and the rest of the active Fools here for getting me back on track with my investing. And I promise that any further posts will be on target for this board.