“Rising star investor” Cathie Wood has changed the rules for exchange-traded funds, which usually have “modest expectations” about returns, according to Dan Caplinger of The Motley Fool, because they have a broadly diversified portfolio (https://www.fool.com/investing/2021/02/18/if-youd-invested-10000-in-cathie-woods-ark-invest/). Wood’s ARK Invest management company “has five actively managed funds, and they’ve absolutely crushed the stock market over the past year,” Caplinger said. Wood is a longtime Tesla and technology stock investor.
Caplinger added that people who invested $10,000 in any of Wood’s five ARK Invest active ETFs would have more than doubled their money in one year, in spite of the bear market immediately following the shutdowns at the beginning of the pandemic. Here is a breakdown of the funds:
ARK Autonomous Technology & Robotics ETF, the smallest of Cathie Wood’s active ETFs, has assets of approximately $4.2 billion. It would have turned a $10,000 investment last year into $23,060. The ETF incorporates a range of industries and applications, including 3-D printing technology, space exploration, and robotics and automation. Wood’s focus in this area has been autonomous transportation, with Tesla and Baidu, which are both involved in exploring self-driving technology.
ARK Fintech Innovation ETF, another minor player in the ARK Invest lineup, has about $4.7 billion in assets under management. In the past year. People who invested $10,000 in ARK Fintech now have shares worth $23,410. Square is the biggest holding, but other electronic payments specialist PayPal Holdings is in the top three. Also in the mix are real estate tech specialist Zillow Group and cryptocurrency banking specialist Silvergate Capital.
The largest segment is ARK Innovation ETF, which has nearly $28 billion in assets and has risen by more than $10 billion since the beginning of the year. It has also turned a $10,000 investment into $26,000 in a year. ARK Innovation includes stock ideas from all four of ARK Invest’s other active ETFs, including Tesla and Baidu from the automation ETF, Square and Zillow from fintech, Roku from next-generation internet and Teladoc Health from genomic revolution.
Investors in ARK Next Generational Internet ETF have achieved even stronger returns. A $10,000 investment become $26,440 in one year. The fund has attracted assets of over $9.4 billion. It focuses on companies attempting to use cloud computing, data analytics and artificial intelligence to obtain key business insights, as well as cybersecurity and blockchain companies. Tesla fits in because of its artificial intelligence research. Others are cryptocurrency, Square, remote medicine pioneer Teladoc Health and connected TV up-and-comer Roku.
The ARK Genomic Revolution ETF has given shareholders the best of all ARK Invest funds. A $10,000 investment has become $29,330 since February 2020. The fund has grown to over $12.7 billion in assets under management. The ETF specializes in companies attempting advances in molecular diagnostics, targeted therapeutics, bioinformatics and other areas of genetics and genomics. Big holdings are Teladoc, Pacific Biosciences and Twist Bioscience.
Wood is “betting heavily on genomic stocks,” according to Matthew Fox of Webull. (https://pub.webull.com/us/news-html/629d224890ad4e62aa1ca571ca2df238.html). “The biggest upside surprises are going to come from the genomic space, and that’s because the convergence of DNA sequencing, artificial intelligence, and gene therapies are going to cure disease,” said Wood said in an interview with Bloomberg. The Ark Genomic Revolution ETF, launched in 2014, is for investors convinced of the growth of genomics.
Crispr Therapeutics is a large holding in ARKG and the third-largest holding in ARKK, representing one of Wood’s biggest wagers on genomics. Crispr is one of several gene-editing companies, along with Editas Medicine and Invitae Corporation. Twist Bioscience makes synthetic DNA. One of the most recent additions to the Ark Genomic ETF is Veeva Systems, a cloud-based company focused on the pharmaceutical and life sciences industries. Another company to watch could be Berkeley Lights, a 2020 IPO in the cell biology field. The Ark Genomic ETF has also been adding to its position in the SPAC Longview Acquisition Corp., which is making portable ultrasound company Butterfly Network public. Fox related that shares of the Ark Innovation ETF were up 170 percent in 2020 and that The Ark Genomic Revolution was up 215 percent during the same time period.
Wood has retained majority ownership of her asset-management company Ark Invest following a bid for control by minority shareholder. She is the CEO and chief investment officer of Ark Invest. ARK Invest, which she founded in 2014.
Wood, who released her Big Ideas report on 15 areas Ark views as strong investments, said, “The best opportunities focus on beneficiaries of disruptive innovation, according to an article by Ginger Szala in Think Advisor (https://www.thinkadvisor.com/2021/02/21/arks-cathie-wood-5-big-investing-ideas-for-2021/). She provided five ideas, all technology-based, with explanations of why these areas are so solid. Because she seems to understand the market intrinsically, her returns have bypassed those of other managers on Wall Street, Szala said. ARK Innovation ETF was up 149 percent in 2020. By February 2021, she had more than $50 billion in assets, up from $3 billion a year ago. Her ETF inflows are second only to Vanguard’s thus far this year.
According to Szala, “Her method includes good timing and a different kind of research. She defines her goal as identifying ‘large-scale investment opportunities by focusing on who we believe to be the “large-scale investment opportunities by focusing on who we believe to be the leaders, enablers, and beneficiaries of disruptive innovation,” as she writes in her Big Ideas 2021 report. “While we believe innovation is the key to growth, the opportunities it creates can be missed or misunderstood by traditional investment managers who are more focused on sectors, indexes, short-term earnings, and price movement.”
Wood believes that ARK is successful because of a “deeper understanding of the convergence, market potential and long-term impact of disruptive innovation by researching a global universe that spans sectors, industries and markets. Today, we are witnessing an acceleration in new technological breakthroughs.” Not every disruption will succeed, and there will be risks such as the rapid pace of change, exposure across sectors and market cap, regulatory hurdles, political or legal pressure, and the competitive landscape, she said.