Arkk ETF Review – The Innovative ETF that Invests in Growth
If you think you missed out on the high-growth stock revolution of 2020, think again. This Arkk ETF review will take a deep dive into the innovative ETF that everyone is talking about since its explosive year in 2020.
The Ark Innovative ETF (NYSE: ARKK) outperformed in 2020, growing over 150% in 2020 alone. So far this year, ARKK stock hasn’t performed like a high-growth ETF should, being essentially flat year to date.
With investors now worried about macroeconomic factors like the Federal Reserve beginning to taper the purchase of assets, can the popular ARK ETF maintain its current pace of growth? Let’s find out what factors it’s going to take to get there.
ARKK ETF Review – Innovative Beginnings
The infamous Ark Investment Management was registered with the SEC in 2014 by the one and only Cathie Wood, CEO and Chief Investment Officer. The Ark Innovative ETF or ARKK was one of the original four ETFs launched by the Ark Fund.
Cathie’s “actively-managed” investment style was considered too risky at her past employer, which led her to start her own fund. Since the Ark Innovation ETF launched in 2014, the fund has returned over 34% to investors on an annualized basis.
The ARKK ETF actively invests in “disruptive innovations” that have the potential to change how the world around us functions and works. A few of the innovative technologies the fund looks to invest in include:
- Robotics
- Blockchain
- DNA Technology
- Internet of Things
- Next-Generation Energy
- Internet Infrastructure and Services
- Business Automation and Manufacturing
- and Financial Technology
The ARKK ETF fund has outperformed the market from the beginning. Growing over 520%, compared to the S&P 500 index growing 127% for the same time period. The fund’s massive growth is largely thanks to an impressive performance in 2020, where the fund went from less than $50 a share in March 2020 to over $156 per share in February 2021.
Since the innovation fund hit an all-time high price of nearly $160 per share, the ETF has taken a step back, and the ARKK stock price is now about 20% off its highs.
ARKK ETF Review – Disruptive Innovations
The ARK Innovation ETF is actively managed, meaning Cathie Wood, the investment manager, will make investment decisions based on her research that she believes will outperform the market. This is opposed to a passive fund, where the returns will be based on an index’s return.
Ark Investment specifically seeks out “disruptive innovators” or companies capable of changing our way of living. Here are a few of the ARKK ETF current top holdings:
1) Tesla (NASDAQ: TSLA)
- Weight: 10.46%
- Market Value: $2.3 billion
- Primary Focus: Electric vehicles/ clean energy
The first and largest holding in our ARKK ETF review is Tesla. Cathie Wood and the investment team at Ark Investment have a high conviction on Elon Musk and his team at Tesla. Being the fund’s biggest holding, the electric vehicle maker’s success last year is one of the primary reasons ARKK was so successful in 2020.
Elon Musk has had a busy year so far this year as well. Total vehicle deliveries for the second quarter were over 200,000, growing over 120% year over year. And the company’s net income was particularly strong, coming in over $1 billion for the quarter.
2) Teladoc Health (NYSE: TDOC)
- Weight: 5.52%
- Market Value: $1.2 billion
- Primary Focus: Telehealth/ virtual healthcare
Teladoc is another company aiming to disrupt an entire industry by reshaping healthcare. The telehealth company offers several remote services like general care, mental health services, specialists, and total wellness care.
The Covid19 pandemic made it hard for many people to get the help they needed. In turn, the demand for remote healthcare services skyrocketed, boosting Teladoc’s business.
In 2020, total revenue grew 98% to over $1 billion, with total visits increasing 156%. CEO Jason Gorevic had this to say “As virtual care shifted to become a consumer expectation in 2020, Teladoc Health not only met the rapidly growing demand, but we transformed our company to define a new category of whole-person virtual care.”
3) Roku
- Weight: 5.27%
- Market Value: $1.1 billion
- Primary Focus: Streaming
The next holding on our ARKK ETF review is Roku. During the pandemic, as everything from bars to gyms and movie theaters was closed, people turned to streaming to fill the new void and get their entertainment fix. This created a race for companies to get on the streamlining bandwagon and generate recurring monthly revenue through a subscription-based service.
Corporate giants like Disney (NYSE: DIS) and Apple (NASDAQ: AAPL) darted ahead and released their streaming services to gain their share of the rapidly expanding streaming market. One of the biggest winners of the streaming war was Roku.
Roku added 14.3 million active accounts in 2020, and the growth doesn’t look to be slowing down anytime soon. If the latest quarter is any hint that Roku is still growing, then investors should be excited about the future.
In the second quarter, platform revenue grew 117% YOY to $532 million while adding another 1.5 active accounts in the first quarter of 2021.
4) Coinbase (NASDAQ: COIN)
- Weight: 4.84%
- Market Value: $1 billion
- Primary Focus: Cryptocurrency
In a wild trading session, the much anticipated Coinbase IPO lived up to the publicity when it debuted on April 13, 2021. The cryptocurrency exchange’s market cap briefly crossed the $100 billion threshold but quickly lost its momentum.
Also, since the company’s debut, the cryptocurrency stock has not performed as investors would have hoped. The stock is currently down just over 20%, but investors like Cathie are looking towards the future for a company with over $180 billion assets on its platform.
The second quarter was a bright spot for investors as the verified users reach 68 million. The cryptocurrency company’s revenue reached $2 billion while net income was $1.6 billion.
ARKK ETF Review – Can the Innovations Continue?
Love her or hate her, this ARKK ETF review confirms Cathie Wood has generated impressive returns over the years with her aggressive investing style. But can she maintain her track record and keep up the strong returns?
The ARK Innovation ETF is one of the most highly anticipated actively managed ETF’s to date that has the chance to deliver incredible returns to shareholders with a basket of rapidly growing companies. However, the ETF also has several high-profile critics like Michael Burry betting against ARKK’s biggest holding in Tesla.
To learn more about the latest disruptive companies in the stock market, check out our free Profit Trends newsletter. Matthew Carr and David Fessler are full of valuable insight to help you discover the latest market trends.
About Pete Johnson
Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives. He has over ten years of personal investing experience. Digging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t researching stocks or writing, you can find him enjoying the outdoors or working up a sweat exercising.