ARKK Sees $2.7 Billion Outflow Amid Profit-Taking, Continues Buying Deere Shares

The ARK Innovation ETF (ARKK.US), managed by a prominent investor, has recently experienced significant outflows, suggesting that investors may be taking profits. Reports indicate that the technology-focused ETF saw a $2.7 billion outflow by the end of last week, marking the largest single-week outflow in at least a year. Despite this, the fund's total assets remain substantial at approximately $13 billion.

Interestingly, the ETF also recorded a net inflow of around $2.8 billion for the week, the highest single-week inflow since 2021. Analysts suggest that such large inflows followed by partial outflows are a normal occurrence, but sustained outflows could force the fund to sell its holdings. The ETF's top holdings include Tesla, Roku Inc, Coinbase, Roblox, Tempus AI, Shopify, and Palantir. Despite the outflows, the fund's holdings did not show significant changes on Monday. Instead, disclosure documents revealed that the manager continued to buy more shares at lower prices.

The new purchases were primarily in the healthcare sector, including GeneDx, CRISPR Therapeutics, Beam Therapeutics, Intellia Therapeutics, Twist Bioscience, PagerDuty, and the agricultural machinery giant Deere. Notably, Deere stands out as a traditional industrial stock that has attracted attention due to its investments in artificial intelligence and automation. Since the company's financial report was released on August 14, causing a 6.8% drop in its stock price, the manager has been buying Deere shares for three consecutive trading days, acquiring approximately 75,000 shares, which is less than 1% of the total trading volume during the same period.

The financial report showed that Deere's earnings for the previous quarter exceeded expectations, but the company lowered its full-year net profit forecast to $5 billion, down from the previous $5.15 billion. Deere's net profit has declined from a peak of $10.2 billion in the 2023 fiscal year to $7.1 billion in the 2024 fiscal year, with an estimated $5 billion for the 2025 fiscal year. Market expectations suggest that the net profit will rebound to $5.7 billion in the 2026 fiscal year. The recent buying spree by the fund manager is seen as a positive signal, but its impact on Deere's overall stock price is expected to be limited.

The recent outflows from ARKK may be attributed to investors taking profits. The ETF has seen a cumulative increase of approximately 36% this year and a 75% increase over the past 12 months. As of Tuesday noon, ARKK was down 3.8%, while the S&P 500 Index fell 0.6% and the Dow Jones Industrial Average declined 0.1%.

One of ARKK's top holdings, Palantir, saw a significant drop of 9.35% on Tuesday, making it the worst-performing stock in the S&P 500 Index. The stock has been declining for five consecutive trading days since its strong financial report at the beginning of the month, with a cumulative drop of 12%. Over the past year, Palantir's stock price has surged by over 409%, with a year-to-date increase of 118%. However, the rapid rise in stock price has led to a high valuation, with a price-to-earnings ratio of 214 times the expected earnings for the next 12 months, far exceeding the average of 22 times for the S&P 500 Index. Analysts' opinions on Palantir remain divided, with a range of target prices from $45 to $210, indicating significant market disagreement.