After a rough September, October’s trading has shown some bullishness. A major topic of discussion among investors is the apparent disconnect between the stock market and the real economy. The markets have shown huge volatility in recent sessions, with the elections and stimulus hopes playing a pivotal role. However, the COVID-19 pandemic really shed a light on the importance of having exposure to disruptive innovation that is likely to change the world and the ways we live our lives far into the future.
As the last quarter of the year has already begun, it’s perhaps the right time to start shortlisting stocks or ETFs for the coming year. According to the Wharton School professor Jeremy Siegel, the stock market is likely primed for strong gains next year, regardless of who occupies the White House. However, investing in individual stocks in the near term could be risky. Exchange traded funds (ETFs) help you mitigate this risk as they hold a broad and diversified exposure at minimal operating costs.
ARK Innovation ETF (ARKK)
ARKK is an actively managed fund that targets companies poised to benefit from disruptive innovation. The fund combines the strategies of three other thematic funds issued by ARK – genomic revolution, industrial innovation, and Web x.0. The investment objective of ARKK is long-term capital growth. It invests primarily in domestic and foreign equity securities, both in developed and emerging markets.
The ETF is uniquely designed and thus tracks no underlying index. However, the fund seeks to beat the MSCI ACWI + Frontier Markets IMI Index. The ETF has an MSCI ESG Fund Rating of BBB based on a score of 5.57 out of 10.
ARKK is weighted across different disruptive innovation elements such as a 10.1% weighting in cloud computing, followed by 9.8% and 9.4% exposure to e-commerce and molecular diagnostics, respectively. In terms of sector exposure, the portfolio is heavily inclined towards healthcare and information technology names. The fund typically holds 35 to 50 companies in total with an average market capitalization of $76.3 billion. The top 3 holdings in the fund are Tesla Inc (TSLA), Invitae Corp (NVTA), and Square Inc (SQ), with the weights of 11%, 8.8%, and 6.4%, respectively.
The ETF paid an annual dividend of $0.38 last year, which translates into a dividend yield of 0.38%. ARKK has AUM of $10.7 billion and an expense ratio of 0.75%. Financial advisors who believe that indexing always wins over actively managed portfolios may want to re-think that belief. The ETF has witnessed a massive net inflow of $4.4 billion over the past six months.
ARKK closed yesterday’s trading session at $97.95 with a year-to-date gain of 95.7%. The ETF has recently hit its 52-week high $105.20 and is up more than 84.6% over the last six months.
How does ARKK stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Industry Rank
B for Overall POWR Rating.
It is ranked #1 out of 95 ETFs in the Technology Equities ETFs group.
ARK Genomic Revolution ETF (ARKG)
ARKG is an actively-managed fund that targets companies involved in the genomics industry. The ETF reaches across multiple sectors and geographies for companies that are best positioned to profit from advancements in energy, automation, manufacturing, materials and transportation. The fund invests in companies such as those that develop, produce or enable targeted therapeutics, bioinformatics, stem cells or molecular diagnostics. ARKG has an MSCI ESG Fund Rating of B based on a score of 2.56 out of 10. The ETF is uniquely designed and thus tracks no underlying index.
96% of the ETF’s holdings are in US healthcare-related companies, with biotech naturally leading the way, with over a 67% weighting. The ETF has a thematic exposure of 23.5%, 17% and 13.7% to molecular diagnostics, beyond DNA and gene therapy, respectively. The top 3 out of 34 holdings of the fund are Crispr Therapeutics AG (CRSP), Invitae Corp (NVTA), and Illumina Inc (ILMN), with weights of 9.3%, 8.5% and 8.3%, respectively.
The fund has $3.1 billion in AUM and an expense ratio of 0.75%. The ETF paid an annual dividend of $2.11 last year and has a dividend yield of 2.96%. Rising government funds for research on genomics drives the growth of the single-cell genomics market. The government funding focuses on efforts to resolve the complexity of the human genome. Consequently, the ETF has witnessed a net inflow of $1.4 billion over the past six months.
ARKG is soaring this year even though many of its holdings aren’t directly engaged in the fight against COVID-19. The ETF closed yesterday’s trading session at $67.73, gaining 102% so far this year. The ETF has gained huge momentum during the pandemic and is up nearly 70% in the last six months
ARKG is rated a “Buy” in our POWR Ratings system. It holds an “A” in Trade Grade and Industry Rank, and a “B” in Buy & Hold Grade. It is ranked #4 out of 38 ETFs in the Health & Biotech ETFs group.
ARK Web x.0 ETF (ARKW)
ARKW, also known as the ARK Next Generation Internet ETF, is an actively-managed fund that seeks long-term growth of capital by investing in companies benefiting from shifting the bases of technology infrastructure to the cloud, enabling mobile, and local services. The fund is tasked with identifying companies as the next generation of Internet evolution.
The ETF is uniquely designed and thus tracks no underlying index. However, the fund seeks to beat the Thomson Reuters Global Internet Services Total Return Index. The ETF has an MSCI ESG Fund Rating of BB based on a score of 4.15 out of 10.
ARKW is primarily focused on new technologies such as the Internet of Things, shared technology, digital currencies, and wearable technology. The fund overweights cloud Computing and e-Commerce, each with a weighting of 18.7%. The fund has a 40% exposure to the IT sector, followed by 33% in communication Services. The top 3 holdings of the fund are TSLA, SQ and NVTA, with weights of 10.7%, 7.9% and 6%, respectively.
The ETF has an AUM of $3 billion and an expense ratio of 0.76%. The technology sector has significantly outperformed the broader market amid the health crisis, as the coronavirus pandemic has accelerated the shift to e-commerce. As a result, the ETF has witnessed a net inflow of $1.5 billion in the past six months.
ARKW closed yesterday’s trading session at $117.51 with a year-to-date gain of 104%. The ETF has gained huge momentum over the last six months as tech has been a major driver of the sharp market recovery. ARKW has recently hit its all-time high of $122.17, and is up more than 86.7% over the past six months
The ETF is rated a “Strong Buy” in our POWR Ratings system, with “A” in Trade Grade, Buy & Hold Grade, and Peer Grade, and a “B” in Industry Rank. Out of 95 ETFs in the Technology Equities ETFs group, ARKW is rated #6.
Renaissance IPO ETF (IPO)
IPO is an ETF which invests in US–listed companies that have recently gone public. It holds the largest, most liquid newly-listed public offerings and adds a new company to its basket within 90 days of listing, and removes a firm after two years of public trading. Despite the coronavirus throwing a wrench in the global economy, business has resumed with more start-up companies going for an initial public offering.
The IPO ETF has an MSCI ESG Fund Rating of B based on a score of 2.56 out of 10. IPO seeks to replicate the price and yield performance of the Renaissance IPO Index, which is a portfolio of companies that have recently completed an initial public offering (IPO) and are listed on a US exchange.
With a holding of 47 stocks, IPO has the largest exposure to Zoom Video Communications Inc (ZM) with a weighting of 10.5%. This is followed by a weight of 8.6% and 6.3% in Uber Technologies Inc (UBER) and CrowdStrike Holdings Inc (CRWD), respectively. The ETF has a sectoral weightage of 52% in technology, 21.5% in healthcare, and 7.1% in communication services at the end of the second quarter.
The ETF has an expense ratio of 0.6% and an AUM worth $282.4 million. It also offers a dividend yield of 0.25%. It declared a dividend of $0.07 in March this year, increasing its payout by 3.1%. The fund witnessed approximately $190 million net inflows over the past six months.
The primary market is very hot right now and is starting to pick up. IPO closed yesterday’s trading session at $54.10, with a year-to-date gain of 74.4%. The ETF has recently hit its 52-week high of $57.40 and is up nearly 80% in the past six months.
It’s no surprise that IPO is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade and Buy & Hold Grade, and a “B” in Industry Rank. IPO is ranked #3 out of 4 ETFs in the IPO ETFs group.
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ARKK shares were trading at $97.70 per share on Thursday afternoon, down $0.25 (-0.26%). Year-to-date, ARKK has gained 95.20%, versus a 7.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...
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