ARKK Investors, Take Note: The Power of DynaLogic's Sell Signals & Diversification
ARKK Investors, Take Note: The Power of DynaLogic's Sell Signals & Diversification
Learn how DynaLogic's sell signals helped investors navigate the ARKK journey and produced a 71% better return vs a buy & hold strategy
ARK Innovation (ARKK) is an actively managed ETF founded by Cathie Wood in 2014. ARKK focuses on investing in disruptive technologies to include artificial intelligence, DNA sequencing, CRISPR gene editing, electric vehicles, energy storage, fintech, 3D printing, and blockchain technology. It has also invested in cryptocurrencies. The company invests in stocks it projects to double in value over a five-year period. For several years, Tesla (TSLA) had been one of her largest holdings, early on she was criticized for her price projections for TSLA, only to be found credible with the stock’s rapid ascent. Investors fell in love with Cathie Wood and drove the ARKK ETF value to stratospheric valuations. It seemed like she was on CNBC promoting ARKK every week.
In January 2020, ARKK traded at $50 per share. By February 2021, it reached $156, a 300% gain in 13 months which far exceeded the return of the S&P, the market benchmark. Investors lived on every word Cathie uttered, she was heralded as the “Market’s New Oracle”. Owning ARKK was like being part of a cult.
We all know what happened. Cathie Wood & ARKK was overwhelmed with new investors, they made weak investments at the margin, TSLA turned south, all the pandemic stocks like Teladoc Health, Zoom & others crashed, and investors fled ARKK. As of June 26, 2023, ARKK closed at $41.90 down 73%.
Let’s examine two scenarios from 1/2/2020 to 6/26/2023. Scenario 1 is a simple Buy and Hold, while Scenario 2 uses the DynaLogic overlay sell strategy where proceeds are reinvested in S&P 500 ETF (SPY).
As the chart shows, there was a significant run-up starting in early April 2020 to February 2021, then the stock price collapsed ending up down 73% from its peak. This is an extraordinary decline for an ETF since it is made up of a basket of securities where some securities did better than others. ETFs offer more diversification than holding an individual security and thus are typically less volatile, though ARKK’s performance was certainly an exception to that!
Now lets overlay the DynaLogic sell signals onto the graph. Sell signals are only generated as prices are moving higher and reach a predetermined sell price.
You can see DynaLogic was telling subscribers to trim their positions and lock in gains during ARKK’s rapid ascent in 2020 and early 2021. DynaLogic continued to generate sell signals after ARKK retreated from its peak only when there was an uptick from recent prices that created an opportunity to unload shares at a favorable price.
Let’s look at how an investment of $10,000 fared in each of the scenarios.
Following DynaLogic’s sell signals and reinvesting the proceeds into the SPY ETF improved the overall return dramatically (by 71%) and created significant diversification.
Instead of continuing to own 100% of ARKK in Scenario 1, the concentration in ARKK was reduced to 25.5% with 74.5% invested in SPY in Scenario 2. The initial investment in ARKK created a massive opportunity to lock in gains from the substantial price increase, while reinvesting the sale proceeds in the SPY ETF preserved the price appreciation that was created. “Concentration creates wealth and diversification preserves wealth”.
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“DynaLogic doesn’t try to predict the future, DynaLogic prepares you for the future!”
Not convinced? Hear from some of our subscribers:
“The predetermined buy and sell triggers built into the strategy make life easier and a more efficient use of time as it takes the emotion out of the equation.” T.S.
“I've been using DynaLogic for 6 months now. I've already seen a big impact and it's provided me a roadmap for sound decision making. The best part... I am not one that is trying to make the decisions. I've spent far too many years guessing what to do with my investments based on what feels right. This lays it all out in a simple way and tells me when and how to make decisions.” - Wes
“I've been following for awhile and just observing, I've missed out on major increases, while losing 20% trading on my emotions, I could've tripled that amount in gains if I followed your signals!
It's a no Brainer to sign up...I'm excited to see where this leads.
Now I can focus on increasing my income while following your trade signals” - Tim
“I've been following DynaLogic for a while now, its an invaluable tool to use as part of my investing strategy. I find its difficult for me to sell stocks when they are rising, only to kick myself when I didn't take gains if it drops down the road. So many publications focus on telling you what stocks to buy but I haven't found anything like this that alerts you when to sell which is really helpful when you can't monitor all your stocks all the time. I've also had some really nice gains off the buy signals too.” - Kevin
