In a world with more than 20,000 investments to chose from, then being my #2 selection for the year ahead is still pretty impressive. Discover why the ARK Innovation ETF (ARKK) has earned this top honor. The key is knowing when to buy your shares during the current bear market cycle. Read on below for full details.
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A couple weeks ago I posted my #1 investment pick for the coming year. That was featured in this article.
However, it is not easy to narrow down to just one pick when there are obviously so many quality choices out there. So, my solution is to roll out my #2 pick for 2023.
Let me set the backdrop first.
It is now late October 2022. And anyone reading my ongoing market commentary knows quite clearly that I am still very bearish on the on the short term outlook. My expectation is for the S&P 500 (SPY) to find bottom somewhere between 2,800 to 3,200 in early 2023.
But then things become glorious for the bulls.
Because from that darkest hour stocks will rise with gusto. We are truly talking about the “phoenix rising from the ashes” which is how all new bull markets begin.
In fact, going all the way back to 1900, the average first year gain for new bull markets is +46.2%.
My #1 pick for the market was TNA which is a 3X bullish ETF focused on small cap stocks. That’s because small caps outperform the S&P 500. Plus you get the benefit of 3X leverage.
However, with that 3X leverage comes additional risk that not everyone is going to stomach. So yes, it would be easy to simply switch to the 1X small cap ETF variety like IWM. Indeed that would do quite well as the bull market resumes. Gladly we can do a notch better than that.
Which is why my #2 investment for 2023 is: ARK Innovation ETF (ARKK)
Right now Cathie Wood’s fund is the laughing stock of the investing world as it has fallen nearly 60% in 2022. Yes, that is about three times worse than the S&P 500.
The reason is simple. She is focused on the highest growth stocks that also carry the highest beta. That is glorious when the bull is running…and an absolute death sentence when the bear comes to town.
Here again, we are talking about a great investment idea 2023…and buying it as the new bull market emerges. So if the average one year return for the S&P 500 during a new bull is 46.2%, then it would not surprise me to see ARKK double that return without any leverage.
Here again, look at the top 5 holdings to appreciate how far these stocks have fallen of late…and thus how much they will likely bounce when the bull is ready to run:
Tesla (TSLA)
Roku (ROKU)
Teladoc Health (TDOC)
Square (SQ)
Zoom Video (ZM)
Aye, But Here is the Rub…
If you buy too early, and the market is still racing lower, you will have tremendous losses on your hands. So I caution against just blindly buying it without some consideration for determining market bottom.
Again, right now it is late October 2022. So this is an evolving story that needs vigilant watch on all the key indicators like employment, earnings, inflation, Fed rates and price action. That is the only way to determine when it may be time to enact this ARKK trade. Probably some time in early 2023.
If you would like some help with that timing, then get your hands on my “Bear Market Game Plan“.
This will provide the top picks to make money now as the bear market grinds lower. Plus help with timing the market bottom so you can properly load up on your ARKK shares.
Discover “Bear Market Game Plan” >
Wishing you a world of investment success!
Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, StockNews.com
Editor of Reitmeister Total Return
ARKK shares closed at $38.89 on Friday, up $1.02 (+2.69%). Year-to-date, ARKK has declined -58.89%, versus a -17.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.
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