eyeQ: is this star stock picker’s fund a buy?
Experts at eyeQ have used AI and their own smart machine to analyse macro conditions and generate actionable trading signals. Here, it considers a fund for those still bullish on US tech.
1st May 2025 11:15
by Huw Roberts from eyeQ
“Our signals are crafted through macro-valuation, trend analysis, and meticulous back-testing. This combination ensures a comprehensive evaluation of an asset's value, market conditions, and historical performance.” eyeQ
- Discover: eyeQ analysis explained | eyeQ: our smart machine in action | Glossary
ARK Innovation ETF*
Macro Relevance: 75%
Model Value: $43.54
Fair Value Gap: +14.37% premium to model value
Data correct as at 1 May 2025. Please click glossary for explanation of terms. Long-term strategic model. *Data is for the US-listed ETF only. You can find the UK version here: ARK Innovation ETF A USD Acc (LSE:ARKK)
eyeQ’s model for ARK Innovation ETF A USD Acc (LSE:ARKK) suggests the exchange-traded fund (ETF) should be trading around $43.54. It sits over 14% north of there right now, which is a big enough valuation gap to trigger a bearish signal.
Like many of its peers, the first half of April was brutal for Cathie Woods’ thematic fund, which provides exposure to disruptive innovation. But US equities staged an impressive bounce-back over the second half of the month.
Given the latest leg of that move has been fuelled by strong earnings from Microsoft Corp (NASDAQ:MSFT) and Meta Platforms Inc Class A (NASDAQ:META), it’s no surprise that an ETF that aims to identify the Magnificent Seven stocks of the future has also rallied hard. But this move has now overshot the broad macro environment.
It is notable that ARKK’s macro regime (which has strong explanatory power) wants a return to the days when US exceptionalism prevailed - reflation, easy money and a strong dollar.
eyeQ model value has stopped rising, which could just be a pause for breath or it could signify that macro conditions are losing a little momentum. Either way, these don’t look great levels to chase.
Even if you are bullish US tech, the risk-reward suggests you should wait for better entry levels.
Source: eyeQ. Past performance is not a guide to future performance.
Useful terminology:
Model value
Where our smart machine calculates that any stock market index, single stock or exchange-traded fund (ETF) should be priced (the fair value) given the overall macroeconomic environment.
Model (macro) relevance
How confident we are in the model value. The higher the number the better! Above 65% means the macro environment is critical, so any valuation signals carry strong weight. Below 65%, we deem that something other than macro is driving the price.
Fair Value Gap (FVG)
The difference between our model value (fair value) and where the price currently is. A positive Fair Value Gap means the security is above the model value, which we refer to as “rich”. A negative FVG means that it's cheap. The bigger the FVG, the bigger the dislocation and therefore a better entry level for trades.
Long Term model
This model looks at share prices over the last 12 months, captures the company’s relationship with growth, inflation, currency shifts, central bank policy etc and calculates our key results - model value, model relevance, Fair Value Gap.
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