Today we are debuting our Growth at a Reasonable Price (GARP) Basket, which utilizes a proprietary algorithm in an attempt to find stocks that may be mispriced relative to their growth. In this report, we highlight some of the flaws of pure growth and value strategies before diving into the potential benefits of a GARP strategy. There are 50 stocks included in the GARP Basket, with brief descriptions provided for each one. This basket is weighted in proportion to S&P 1500 sector weightings and will be updated on a quarterly basis, which gives each company the ability to report an additional quarter of earnings.
Bespoke’s GARP Basket is available at the Bespoke Premium level and higher. You can sign up for Bespoke Premium now and receive a 14-day trial to read our GARP report. To sign up, choose either the monthly or annual checkout link below:
2022 has seen the bulls get slugged with a number of heavy blows. The S&P 500 has already experienced 14 separate one-day declines of 2% or more this year. That’s nine more than the entire total for 2021!
While there are still another six months left in the year, only ten other years have seen as many or more 2% daily declines in their entirety! At the current pace, 2022 would see 28 daily declines of 2%+, which would rank as tied with 2009 for the third most in the post-WWII period trailing only 2002 (29) and 2008 (41). Not great company. If 2021 was the year where nothing could go wrong for investors, 2022 has been the year where nothing is going right. Click here to learn more about Bespoke’s premium stock market research service.
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Early Thursday morning, investors were feeling pretty good about the trading week. At that point, the S&P 500 was up 1% on the day and about 2.7% week-to-date, and the index had actually just pushed back above its 200-day moving average.
There was nothing we could identify in the news that caused the S&P to peak around 10 AM ET, but from that point through the closing bell on Friday, the index fell 5.3% in basically as straight of a line lower that you can draw.
Fed Chair Powell did, however, make comments in a speech at the IMF mid-day Thursday where he confirmed that a 50 basis point hike was “on the table” for the May meeting. Markets have been pricing high odds for 50 bps hikes for some time now, but Powell’s comments basically cemented them (for now).
The Powell Fed is known for its jawboning and transparency when it comes to the path for rates. The chart below of equities and fixed income in 2022 tells you what these two asset classes currently think of that jawboning:
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While it is seeing a large bounce today currently up 5% as of this writing, Cathie Wood’s flagship fund, the ARK Innovation ETF (ARK), has had a rough go of it over the past year and change. The ETF peaked in February of last year and has fallen over 60% in the months since then, erasing the entirety of the post-pandemic rally. As for the current holdings making up the ETF, everything has pulled back from post-pandemic highs which were mostly set either in early 2021 or late 2021. To highlight this, in the chart below we show each current holding’s change (in percentage terms) from its respective 5-year high. The average holding is currently down over 70% from its high. (ARKK holdings are released daily at ARK’s website.)
Below is a snapshot of current ARKK holdings and where they’re trading relative to 5-year highs. Year to date, only one stock in the ARKK ETF, Signify Health (SGFY), has managed a positive move as the average YTD decline currently stands at 40.8%. That being said, SGFY is still down over 60% versus its February 2021 high. As previously mentioned, most other holdings similarly peaked in the first quarter of last year while many others peaked more recently last fall. As shown in the table, the average peak date for all ARKK holdings was 3/11/21.
One of the stocks that hit a high last fall is the mega-cap EV giant Tesla (TSLA). Since its November 4th, 2021 high, TSLA has fallen only 18.41%, and it is only down 5% year to date. Even though hardly anyone would wish to see an investment lose nearly a fifth of its value, that is a substantially better result than most other ARKK holdings. For example, Berkley Lights (BLI) down 94% from its 5-year high, while 43% of the ETF’s holdings have fallen by at least 75%. Given that TSLA is by far the largest ARKK holding with a 10.55% weight, its smaller decline relative to the rest of the ETF’s holdings has helped ARKK from falling even more.
With the average ARKK stock down 70% from its 5-year high, it’s going to take a huge rally in the “growth” space to get back to prior levels. As shown at the bottom of the table, the average stock in the ETF now needs to rally 348% to get back to prior highs! Click here to learn more about Bespoke’s premium stock market research service.
Bespoke Investment Group, LLC believes all information contained in this report to be accurate, but we do not guarantee its accuracy. None of the information in this report or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. This is not personalized advice. Investors should do their own research and/or work with an investment professional when making portfolio decisions. As always, past performance of any investment is not a guarantee of future results. Bespoke representatives or clients may have positions in securities discussed or mentioned in its published content.