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Proprietary Data Insights Financial Pros High-Growth ETF Searches in the Last Month
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ETFs |
Can ARKK Return to Glory? |
ARK Invest founder and CEO Cathie Wood was relatively unknown in 2018 despite her long career on Wall Street. That year, her $4,000 call on Tesla put her on the map. And her investing style made her a star during the pandemic. She believes investing in disruptive growth stocks is the best strategy, regardless of whether the companies are profitable. Her ARK Innovation ETF (ARKK) returned 35.2% in 2019 and 152.5% in 2020. But in 2021 and 2022, it lost 23.4% and 66.7%. That hasn’t stopped financial pros from digging into the ETF, though. In fact, it remains among the most popular ETF searches, according to the latest data from our proprietary Trackstar sentiment indicator, despite ARKK’s poor performance for the last two years. The ETF is off to a hot start in 2023. Will this be the year Wood’s fund returns to glory? Key Facts About ARKK
Wood really made a name for her fund when it returned a whopping 152.5% in 2020. ARKK is an actively managed ETF. It invests in what it calls “disruptive innovation.” This includes companies in fintech, artificial intelligence, automation, robotics, energy storage, and DNA tech. Since the fund is actively managed, the number of holdings fluctuates. At any given time, it has 35 to 55 positions. The top 10 holdings make up approximately 63% of its weight: Source: Ark Invest Tesla (TSLA) is the fund’s largest holding, weighing 10.51%, followed by Zoom Video Communications (ZM) at 8.03%. Approximately 52% of the fund’s weighting is in mega- and large-cap stocks. Source: Ark Invest Performance ARKK began trading on October 31, 2014. It has delivered a cumulative return of 119.7% since its inception (as of 01/31/2023). But the returns were horrendous last year, as the fund lost nearly 67%. Source: Ark Invest Trading & Investing in ARKK ARKK is one of the most actively traded ETFs in the market, with a daily average stock volume of 26.3 million shares. In addition, it offers options trading ranging from weekly to LEAPS. If you seek income, ARKK probably shouldn’t be on your list, as it doesn’t pay dividends. Competition If you seek access to a basket of high-growth stocks via ETFs, you have several options. Some of the more notable ones include the Vanguard S&P Mid-Cap 400 ETF (IVOO), iShares Russell Mid-Cap Growth ETF (IWP), Invesco S&P 500 High Beta ETF (SPHB), and Invesco S&P SmallCap 600 Revenue ETF (RWJ). Portfolio Composition
RWJ has 597 positions in its portfolio, notably more than IWP at 407, IVOO at 407, SPHB at 102, and ARKK at 55 or fewer. ARKK’s top 10 assets comprise 62.9% of its portfolio, followed by RWJ at 18.9%, SPHB at 13.6%, IWP at 12.1%, and IVOO at 5.7%. Fees
IVOO is the cheapest ETF of the group, with an expense ratio of 0.10%, followed by IWP at 0.23%, SPHB at 0.25%, and RWJ at 0.39%. ARKK has the highest expense ratio of the group at 0.75%. But that’s not excessive considering it’s also actively managed, with the fund making daily transactions. Dividend Yield
If you’re an income investor, IVOO is your pick, with a dividend yield of 1.47%. But that’s still a relatively low yield. Three-Year Cumulative Performance
The best performer over the last three years has been RWJ at 95.1%. ARKK has been the worst performer – and the only negative one – at -29.2%. Our Opinion 2/10 The problem with ARKK is it’s a discretionary ETF. How it selects stocks isn’t clear. In other words, you’re really investing in the manager. Despite an amazing return in 2020, the fund is still down 6.4% over the last five years. ARKK had a strong bounce early this year. But we view the ETF as a trading vehicle, not a long-term investment. You’d be better off with RWJ or SPHB, both of which have offered solid returns with more consistency (and dividends). |
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