ARKK: 2 "Strong Buy" Robinhood ETFs to Own in February

The stock market recovered and galloped ahead at an incredible pace after a correction last March. There has been a record influx of new stock investors amid the coronavirus pandemic, particularly millennials, and the Robinhood platform has soared in popularity due to its ‘no-commission trade’ feature.

The trading platform allows investors to trade stocks, options, ETFs, and cryptocurrencies. Stocks and ETFs that are creating a lot of buzz among millennial investors are on the Robinhood 100 Most Popular list.

Given current market uncertainties, investing in individual stocks could be risky. But exchange traded funds (ETFs) help one mitigate this risk because they hold broad and diversified stock exposure at minimal operating costs.

ARK Innovation ETF (ARKK) and Vanguard S&P 500 ETF (VOO) are two popular ETFs as denoted by their inclusion in the Robinhood 100 list. So, we believe it could be wise to add them to one’s portfolio now.

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. ARKK’s investment objective is long-term capital growth. It invests primarily in domestic and foreign equity securities, in developed and emerging markets.

The ETF is uniquely designed and thus tracks no underlying index. It has an MSCI ESG Fund Rating of BBB based on a score of 4.33 out of 10. ARKK has $23.9 billion in AUM and an expense ratio of 0.75%. The ETF also pays an annual dividend of $2.04, which translates into a dividend yield of 1.39%.

ARKK is weighted across different disruptive innovation elements, such as a 12% weighting to e-commerce, followed by 9.7% and 9.4% exposure to digital media and cloud computing, respectively. In terms of sector exposure, the portfolio is heavily inclined towards healthcare and information technology names. The fund currently holds 48 companies, among which the top three holdings are Tesla Inc (TSLA), Roku, Inc. (ROKU) and Teladoc Health, Inc. (TDOC).

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Financial advisors who believe that indexing necessarily outperforms active investing may want to rethink that belief. The ETF has generated an impressive net inflow of $7.54 billion in the past three months.

ARKK closed yesterday’s trading session at $141.83, gaining 80% in the past six months. The ETF recently hit its 52-week high $149.80 and is currently trading just 5.3% below that level.

How does ARKK stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

A for Industry Rank

A for Overall POWR Rating.

You cannot ask for better. It is also ranked #3 of 103 ETFs in the Technology Equities ETFs group.

Vanguard S&P 500 ETF (VOO)

VOO tracks a market-cap-weighted index of U.S. large- and midcap stocks selected by the S&P Committee. The fund seeks to invest in stocks in the S&P 500 Index, one of the world’s most famous benchmarks that includes the largest 500 U.S. companies. In fact, VOO delivers the most basic of market exposure.

VOO has $184.1 billion in AUM and an expense ratio of 0.03%. The ETF has an MSCI ESG Fund Rating of BBB based on a score of 5.17 out of 10. VOO also pays an annual dividend of $5.30, yielding 1.50%.

VOO is exposed to various industries, with information technology leading the way with an 27.6% weighting. The index also has an exposure of 13.5% and 12.7% to Healthcare and Consumer Discretionary sectors, respectively. The fund’s top three holdings are Apple, Inc. (AAPL), Microsoft Corporation (MSFT) and Amazon.com (AMZN).

VOO is probably one of the safest equity investments. It is a quality choice for investors seeking broad mega- and large-cap exposure and it is more diversified than most. The ETF has witnessed a net inflow of $1.38 billion over the past six months.

VOO closed yesterday’s trading session at $352.80, after hitting its 52-week high of $354.64. The ETF has gained 19.7% over the past six months and is poised to hit fresh highs.

It is no surprise that VOO is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, Buy & Hold Grade and Industry Rank, and a “B” in Peer Grade. The ETF is ranked #4 of 234 ETFs in the Large Cap Blend ETFs group.

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ARKK shares were trading at $142.16 per share on Wednesday morning, up $0.33 (+0.23%). Year-to-date, ARKK has gained 14.19%, versus a 1.52% 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...