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2021-04-15
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Why This Little-Known ETF Will Outperform ARKK
Summary ARKK achieved a legendary performance in 2020. MLPA is an under-covered ETF in an out-of-fa
Why This Little-Known ETF Will Outperform ARKK
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{"i18n":{"language":"zh_CN"},"data":{"magic":2,"id":347119329,"tweetId":"347119329","gmtCreate":1618474153561,"gmtModify":1634292694027,"author":{"id":3579256753898144,"idStr":"3579256753898144","authorId":3579256753898144,"authorIdStr":"3579256753898144","name":"jkjkjkjk","avatar":"https://static.tigerbbs.com/176af14ad9797e8e2a824d2be763f06d","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":5,"crmLevelSwitch":0,"individualDisplayBadges":[],"fanSize":3,"starInvestorFlag":false},"themes":[],"images":[],"coverImages":[],"extraTitle":"","html":"<html><head></head><body><p><span>[微笑] </span><br></p></body></html>","htmlText":"<html><head></head><body><p><span>[微笑] </span><br></p></body></html>","text":"[微笑]","highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":1,"repostSize":0,"favoriteSize":0,"link":"https://laohu8.com/post/347119329","repostId":1158416535,"repostType":2,"repost":{"id":"1158416535","kind":"news","pubTimestamp":1618473920,"share":"https://www.laohu8.com/m/news/1158416535?lang=&edition=full","pubTime":"2021-04-15 16:05","market":"us","language":"en","title":"Why This Little-Known ETF Will Outperform ARKK","url":"https://stock-news.laohu8.com/highlight/detail?id=1158416535","media":"seekingalpha","summary":"Summary\n\nARKK achieved a legendary performance in 2020.\nMLPA is an under-covered ETF in an out-of-fa","content":"<p><b>Summary</b></p>\n<ul>\n <li>ARKK achieved a legendary performance in 2020.</li>\n <li>MLPA is an under-covered ETF in an out-of-favor sector.</li>\n <li>Why investors should weight MLPA over ARKK in 2021.</li>\n</ul>\n<p>ARK Invest and its founder and CEO/CIO Cathie Wood rose to stardom in 2020 as its ETFs (ARKK) (ARKQ) (ARKG) (ARKW) (ARKF) achieved remarkably strong results during the year:</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/b9cecd280b57639291eecac1a7f51e41\" tg-width=\"635\" tg-height=\"470\"><span>Data by YCharts</span></p>\n<p>Compared to the broader indexes (SPY) (DIA) (QQQ), the amount of outperformance was simply incredible:</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/5b79feae135773bede582c7560974885\" tg-width=\"635\" tg-height=\"436\"><span>Data by YCharts</span></p>\n<p>By far the most popular of these funds is the Disruptive Innovation ETF (i.e., ARKK), which holds Tesla (TSLA) as its undisputed largest and highest conviction holding and complements it with other popular disruptors like Square (SQ), Teladoc (TDOC), Zoom (ZM), and Palantir (PLTR).</p>\n<p><img src=\"https://static.tigerbbs.com/cbfb95d8bcac16f0d478241037e81576\" tg-width=\"640\" tg-height=\"248\" referrerpolicy=\"no-referrer\"><i>source</i></p>\n<p>Looking at ARKK's lifetime performance, we see that it has outperformed the market indexes handily even prior to 2020:</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/ce62d7f1798c005705f3d7a36db56d7c\" tg-width=\"635\" tg-height=\"453\"><span>Data by YCharts</span></p>\n<p>Cathie Wood has been proven remarkably correct about battleground and massively outperforming stocks like TSLA, Nvidia (NVDA), Amazon (AMZN), and even Bitcoin (BTC-USD), and there's certainly a case to be made for investing in disruptive tech: The companies with the most/best data and technology will be massive winners tomorrow as we move increasingly toward a winner-take-most economy that's hyper-dependent on emerging disruptive technological platforms. Therefore, it's prudent to forego profits today in order to reinvest cash flows into developing new and better technology instead of pouring cash into dividends and repurchases today. The ability to massively scale new technologies to achieve rapid and massive profitability is routinely undervalued by the market, making disruptive tech a highly profitable investing niche.</p>\n<p>That said, while we certainly believe that disruptive tech still has - and always will have - a place in a well-diversified portfolio, we believe investors would be better served to weight their portfolios more heavily towards the out-of-favor and underfollowed Global X MLP ETF (MLPA) for the following reasons:</p>\n<p><b>#1 - Massive Fee Disparity</b></p>\n<p>As Warren Buffettonce said:</p>\n<blockquote>\n <i>Performance comes, performance goes. Fees never falter.</i>\n</blockquote>\n<p>Few investors fully appreciate the power of investing fees to alter total returns. As a result, rather than chasing the latest high-flying fund, it's generally much better over the long term to invest in low-cost well-run funds.</p>\n<p>ARKK charges a hefty 0.75% expense ratio. That means, regardless of whether or not its strategy outperforms in any given year (or even generates a positive return), ARK Invest will take 0.75% of your capital. That means that if you were to invest $100,000 into ARKK today and earn a 10% annualized return over the next decade, your total cost of fees would be a whopping $18,809.49 over that period.</p>\n<p>In contrast, MLPA only charges a 0.46% expense ratio. Not only is this substantially less than ARKK's, but it's also less than its more popular fellow MLP ETF: The Alerian MLP ETF (AMLP), which charges a hefty 0.90% expense ratio. If $100,000 invested in MLPA were held over a 10-year period, you would only have $11,687.24 charged in fund expenses over that period, providing an incredible 7.12% return on investment boost to your holdings over that period relative to a similar amount invested in ARKK.</p>\n<p><b>#2 - Even Bigger Fund Flow Disparity</b></p>\n<p>Another major headwind facing ARKK is that its assets under management have ballooned along with ARK Invest's and Cathie Wood's growing popularity:</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/2e85734680e924a10d64d10595ddc9a1\" tg-width=\"635\" tg-height=\"419\"><span>Data by YCharts</span></p>\n<p>While this massive growth in assets under management is great for Cathie and company as it massively boosts their management fees, it also makes it harder and harder for them to efficiently manage investor assets. With tens of billions of dollars to deploy, it forces them to take on larger total positions to maintain the same degree of concentration. This in turn forces them to be less nimble in entering and exiting positions due to liquidity constraints and thereby not getting the best pricing possible. It also pushes them to invest in more positions than just their highest conviction picks as they search for additional places to deploy capital, thereby potentially diluting returns.</p>\n<p>While the challenges that come with greater amounts of assets under management are an issue for any fund, they are even greater for ARKK given its focus on a single niche, instead of the broader market. Furthermore, their particular niche is one of the most speculative and volatile, given its focus on wildly popular and mostly unprofitable tech companies. As a result, as fund inflows and outflows experience significant day-to-day volatility, ARKK will be increasingly challenged to buy and sell holdings efficiently in an attempt to maximize shareholder returns.</p>\n<p>MLPA, in contrast, is not only far smaller in terms of total assets under management, but its total number of assets under management are much less volatile. As a result, management is much better able to efficiently buy and sell holdings and allocate investor capital. When added to the expense ratio differential, MLPA gets a massive head start over ARKK moving forward.</p>\n<p><b>#3 - Incredible Valuation Disparity</b></p>\n<p>Last, but not least, there's a massive valuation disparity between the underlying holdings of these two ETFs.</p>\n<p>Innovative tech valuations sit at near all-time highs and face growing headwinds from the COVID-19 vaccine changing consumer behavior and the economic narrative, as well as surging inflation and rising interest rates as detailed inWhy High Yield Will Keep Pummeling Tech.</p>\n<p>Meanwhile, as detailed inWe Are Buying Midstream Hand Over Fist- MLPs look more attractive than ever right now with:</p>\n<ul>\n <li>Historically high yields even as interest rates sit at historic lows, resulting in record spreads:</li>\n</ul>\n<p><img src=\"https://static.tigerbbs.com/a09a7951601c6894a09e02ad795097dd\" tg-width=\"640\" tg-height=\"479\" referrerpolicy=\"no-referrer\"><i>source</i></p>\n<ul>\n <li>Cheap valuation multiples in a market environment where major indexes are sporting record high valuations.</li>\n <li>Remarkably resilient fundamentals in the face of a double black swan event stemming from the oil price collapse and COVID-19.</li>\n <li>Strong recovery in cash flows and client profitability as energy prices have bounced back sharply in recent months.</li>\n</ul>\n<p>Furthermore, MLPA holds blue chip MLPs as its top holdings, including Enterprise Products Partners (EPD), Energy Transfer (ET), Magellan Midstream (MMP), MPLX (MPLX), and Plains All American (PAA) as its top 5 positions.</p>\n<p><img src=\"https://static.tigerbbs.com/bb94cd983513980447f14b8b1952d49f\" tg-width=\"640\" tg-height=\"431\"></p>\n<p><i>source</i></p>\n<p>We are very bullish on each of these MLPs as they each possess investment grade balance sheets, trade at very attractive valuations with lucrative and well-covered yields, and have high-quality asset portfolios that are positioned to remain relevant well into the future even as the global economy continues to focus increasingly on green energy alternatives.</p>\n<p><b>A Better Alternative Than Either Of Them</b></p>\n<p>Low-cost ETFs concentrated on an out-of-favor sector with strong fundamentals like MLPA is a great option for unsophisticated and/or passive investors. They provide instant diversification with the purchase of a single share along with professional portfolio management.</p>\n<p>However, just like there's no free lunch, a drawback to ETFs is that they often pursue much broader diversification than we do in our portfolios and, as a result, often force investors to invest in positions that are not high conviction.</p>\n<p>Though we ourselves may occasionally invest in a specific sector’s ETF if we see a unique opportunity to add value with it, we generally greatly prefer investing in individual securities because it enables us to target stronger risk-adjusted returns.</p>\n<p>By pursuing a simple, but time-tested value investing strategy of</p>\n<ul>\n <li>Investing in what we know</li>\n <li>Avoiding bad management</li>\n <li>Buying attractive yields below a conservative estimate of fair value</li>\n <li>Overweightingcompanies with strong balance sheets</li>\n</ul>\n<p>we are able to invest in mostly winners and minimize our losers. As a result, since its inception, our well-diversified value and income focused real money Equity Portfolio at High Yield Investor has absolutely crushed the broader market indexes along with ARKK:</p>\n<p><img src=\"https://static.tigerbbs.com/f54358ccb1701431993365a154cdada3\" tg-width=\"480\" tg-height=\"289\" referrerpolicy=\"no-referrer\"></p>\n<p><i>source: Author</i></p>\n<p><b>Investor Takeaway</b></p>\n<p>ARKK has been on a remarkable run thanks in large part to their remarkable calls on top holding TSLA and aided significantly by the pandemic and the rise in popularity of disruptive tech. Meanwhile, as disruptive tech companies have soared to stratospheric valuations, MLPA has been weighed down by the MLP sector's deep unpopularity, the rise of renewable energy and ESG investing, and a demand plunge caused by COVID-19.</p>\n<p>We believe that rising interest rates, combined with a re-opening economy, will bring tech valuations back down to earth while giving MLPs a strong demand boost. Furthermore, we believe that MLPA's strong fundamentals of robust free cash flow generation, strong balance sheets, improved corporate governance, and well-covered and record-high distribution yields will lead to strong outperformance moving forward.</p>\n<p>While we think that intelligently following a value investing approach is best in this sector, for investors looking for a totally passive approach, MLPA is a very attractive option given its relatively low fees, easily managed assets under management, and high quality top holdings.</p>\n<p>Meanwhile, ARKK will be increasingly weighed down by the runaway valuations of its core holdings, major drag from its highly volatile and enormous volume of assets under management, and - worst of all - its rather high expense ratio.</p>\n<p>Prudent investors will find room in their portfolios for both disruptive tech and high yield real assets, but we believe that the risk-adjusted return outlook for MLPA is meaningfully superior to ARKK's right now.</p>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; 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height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhy This Little-Known ETF Will Outperform ARKK\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-15 16:05 GMT+8 <a href=https://seekingalpha.com/article/4418956-why-this-little-known-etf-will-outperform-arkk><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nARKK achieved a legendary performance in 2020.\nMLPA is an under-covered ETF in an out-of-favor sector.\nWhy investors should weight MLPA over ARKK in 2021.\n\nARK Invest and its founder and CEO/...</p>\n\n<a href=\"https://seekingalpha.com/article/4418956-why-this-little-known-etf-will-outperform-arkk\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"ARKK":"ARK Innovation ETF"},"source_url":"https://seekingalpha.com/article/4418956-why-this-little-known-etf-will-outperform-arkk","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1158416535","content_text":"Summary\n\nARKK achieved a legendary performance in 2020.\nMLPA is an under-covered ETF in an out-of-favor sector.\nWhy investors should weight MLPA over ARKK in 2021.\n\nARK Invest and its founder and CEO/CIO Cathie Wood rose to stardom in 2020 as its ETFs (ARKK) (ARKQ) (ARKG) (ARKW) (ARKF) achieved remarkably strong results during the year:\nData by YCharts\nCompared to the broader indexes (SPY) (DIA) (QQQ), the amount of outperformance was simply incredible:\nData by YCharts\nBy far the most popular of these funds is the Disruptive Innovation ETF (i.e., ARKK), which holds Tesla (TSLA) as its undisputed largest and highest conviction holding and complements it with other popular disruptors like Square (SQ), Teladoc (TDOC), Zoom (ZM), and Palantir (PLTR).\nsource\nLooking at ARKK's lifetime performance, we see that it has outperformed the market indexes handily even prior to 2020:\nData by YCharts\nCathie Wood has been proven remarkably correct about battleground and massively outperforming stocks like TSLA, Nvidia (NVDA), Amazon (AMZN), and even Bitcoin (BTC-USD), and there's certainly a case to be made for investing in disruptive tech: The companies with the most/best data and technology will be massive winners tomorrow as we move increasingly toward a winner-take-most economy that's hyper-dependent on emerging disruptive technological platforms. Therefore, it's prudent to forego profits today in order to reinvest cash flows into developing new and better technology instead of pouring cash into dividends and repurchases today. The ability to massively scale new technologies to achieve rapid and massive profitability is routinely undervalued by the market, making disruptive tech a highly profitable investing niche.\nThat said, while we certainly believe that disruptive tech still has - and always will have - a place in a well-diversified portfolio, we believe investors would be better served to weight their portfolios more heavily towards the out-of-favor and underfollowed Global X MLP ETF (MLPA) for the following reasons:\n#1 - Massive Fee Disparity\nAs Warren Buffettonce said:\n\nPerformance comes, performance goes. Fees never falter.\n\nFew investors fully appreciate the power of investing fees to alter total returns. As a result, rather than chasing the latest high-flying fund, it's generally much better over the long term to invest in low-cost well-run funds.\nARKK charges a hefty 0.75% expense ratio. That means, regardless of whether or not its strategy outperforms in any given year (or even generates a positive return), ARK Invest will take 0.75% of your capital. That means that if you were to invest $100,000 into ARKK today and earn a 10% annualized return over the next decade, your total cost of fees would be a whopping $18,809.49 over that period.\nIn contrast, MLPA only charges a 0.46% expense ratio. Not only is this substantially less than ARKK's, but it's also less than its more popular fellow MLP ETF: The Alerian MLP ETF (AMLP), which charges a hefty 0.90% expense ratio. If $100,000 invested in MLPA were held over a 10-year period, you would only have $11,687.24 charged in fund expenses over that period, providing an incredible 7.12% return on investment boost to your holdings over that period relative to a similar amount invested in ARKK.\n#2 - Even Bigger Fund Flow Disparity\nAnother major headwind facing ARKK is that its assets under management have ballooned along with ARK Invest's and Cathie Wood's growing popularity:\nData by YCharts\nWhile this massive growth in assets under management is great for Cathie and company as it massively boosts their management fees, it also makes it harder and harder for them to efficiently manage investor assets. With tens of billions of dollars to deploy, it forces them to take on larger total positions to maintain the same degree of concentration. This in turn forces them to be less nimble in entering and exiting positions due to liquidity constraints and thereby not getting the best pricing possible. It also pushes them to invest in more positions than just their highest conviction picks as they search for additional places to deploy capital, thereby potentially diluting returns.\nWhile the challenges that come with greater amounts of assets under management are an issue for any fund, they are even greater for ARKK given its focus on a single niche, instead of the broader market. Furthermore, their particular niche is one of the most speculative and volatile, given its focus on wildly popular and mostly unprofitable tech companies. As a result, as fund inflows and outflows experience significant day-to-day volatility, ARKK will be increasingly challenged to buy and sell holdings efficiently in an attempt to maximize shareholder returns.\nMLPA, in contrast, is not only far smaller in terms of total assets under management, but its total number of assets under management are much less volatile. As a result, management is much better able to efficiently buy and sell holdings and allocate investor capital. When added to the expense ratio differential, MLPA gets a massive head start over ARKK moving forward.\n#3 - Incredible Valuation Disparity\nLast, but not least, there's a massive valuation disparity between the underlying holdings of these two ETFs.\nInnovative tech valuations sit at near all-time highs and face growing headwinds from the COVID-19 vaccine changing consumer behavior and the economic narrative, as well as surging inflation and rising interest rates as detailed inWhy High Yield Will Keep Pummeling Tech.\nMeanwhile, as detailed inWe Are Buying Midstream Hand Over Fist- MLPs look more attractive than ever right now with:\n\nHistorically high yields even as interest rates sit at historic lows, resulting in record spreads:\n\nsource\n\nCheap valuation multiples in a market environment where major indexes are sporting record high valuations.\nRemarkably resilient fundamentals in the face of a double black swan event stemming from the oil price collapse and COVID-19.\nStrong recovery in cash flows and client profitability as energy prices have bounced back sharply in recent months.\n\nFurthermore, MLPA holds blue chip MLPs as its top holdings, including Enterprise Products Partners (EPD), Energy Transfer (ET), Magellan Midstream (MMP), MPLX (MPLX), and Plains All American (PAA) as its top 5 positions.\n\nsource\nWe are very bullish on each of these MLPs as they each possess investment grade balance sheets, trade at very attractive valuations with lucrative and well-covered yields, and have high-quality asset portfolios that are positioned to remain relevant well into the future even as the global economy continues to focus increasingly on green energy alternatives.\nA Better Alternative Than Either Of Them\nLow-cost ETFs concentrated on an out-of-favor sector with strong fundamentals like MLPA is a great option for unsophisticated and/or passive investors. They provide instant diversification with the purchase of a single share along with professional portfolio management.\nHowever, just like there's no free lunch, a drawback to ETFs is that they often pursue much broader diversification than we do in our portfolios and, as a result, often force investors to invest in positions that are not high conviction.\nThough we ourselves may occasionally invest in a specific sector’s ETF if we see a unique opportunity to add value with it, we generally greatly prefer investing in individual securities because it enables us to target stronger risk-adjusted returns.\nBy pursuing a simple, but time-tested value investing strategy of\n\nInvesting in what we know\nAvoiding bad management\nBuying attractive yields below a conservative estimate of fair value\nOverweightingcompanies with strong balance sheets\n\nwe are able to invest in mostly winners and minimize our losers. As a result, since its inception, our well-diversified value and income focused real money Equity Portfolio at High Yield Investor has absolutely crushed the broader market indexes along with ARKK:\n\nsource: Author\nInvestor Takeaway\nARKK has been on a remarkable run thanks in large part to their remarkable calls on top holding TSLA and aided significantly by the pandemic and the rise in popularity of disruptive tech. Meanwhile, as disruptive tech companies have soared to stratospheric valuations, MLPA has been weighed down by the MLP sector's deep unpopularity, the rise of renewable energy and ESG investing, and a demand plunge caused by COVID-19.\nWe believe that rising interest rates, combined with a re-opening economy, will bring tech valuations back down to earth while giving MLPs a strong demand boost. Furthermore, we believe that MLPA's strong fundamentals of robust free cash flow generation, strong balance sheets, improved corporate governance, and well-covered and record-high distribution yields will lead to strong outperformance moving forward.\nWhile we think that intelligently following a value investing approach is best in this sector, for investors looking for a totally passive approach, MLPA is a very attractive option given its relatively low fees, easily managed assets under management, and high quality top holdings.\nMeanwhile, ARKK will be increasingly weighed down by the runaway valuations of its core holdings, major drag from its highly volatile and enormous volume of assets under management, and - worst of all - its rather high expense ratio.\nPrudent investors will find room in their portfolios for both disruptive tech and high yield real assets, but we believe that the risk-adjusted return outlook for MLPA is meaningfully superior to ARKK's right now.","news_type":1},"isVote":1,"tweetType":1,"viewCount":1133,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"CN","currentLanguage":"CN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":6,"xxTargetLangEnum":"ZH_CN"},"commentList":[],"hasMoreComment":false,"orderType":2}