After two straight years of losses throughout 2021 and 2022, Cathie Wood’s Ark Invest’s flagship ARK Innovation ETF (ARKK - Get Rating) is finally back on the radar, up more than 30% year-to-date. The ETF focuses on companies that exhibit “disruptive innovation,” technologically enabled new products or services, and technological advancements that change how the world works.

With the significant potential of disruptive innovation firms that make up the ARKK fund, investing in this ETF could be wise this month for solid returns.

ARKK is an actively managed Exchange Traded Fund (ETF) that seeks to generate long-term growth of capital by investing in domestic and foreign equity securities of companies that exhibit disruptive innovation. The fund is managed by the team at Ark Invest, an advisory firm led by well-known investor Catherine Wood.

Companies within ARKK rely on or benefit from the development of new products or services, technological improvements, and advancements in scientific research relating to the areas, including Artificial Intelligence (AI), DNA sequencing, automation, robotics, energy storage, and fintech innovation.

Ark Invest CEO Cathie Wood is considered a star stock-picker who advocates investing in disruptive technologies and reportedly shot to fame in 2020 when all her six ETFs saw astronomical returns of over 100%. Despite poor performance last year, her flagship fund, ARKK, is up 34.6% year-to-date, primarily driven by bets on Elon Musk-led company Tesla Inc. (TSLA).

TSLA is Ark Innovation’s top holding. According to Cathie Wood, the company is on the cutting edge of AI. “Tesla… probably is one of the biggest beneficiaries of artificial intelligence and it is the only auto manufacturer to design its own AI chip. And we do believe that it is in the pole position to be the leader in a winner-take-most market called autonomous taxi platforms,” she said.

Cathie Wood added that between now and 2030, autonomous taxi platforms’ revenue opportunities might be between $8 trillion and $10 trillion from $0 in revenue now. While Tesla is bound to see competition as the EV/AI market matures, Wood sees it as a cut above other auto companies and tech companies, thanks to the data collection it has already engaged in.

Given AI as one of the major areas of innovation, along with TSLA, Wood’s investment firm purchased stock in Zoom Video Communications, Inc. (ZM), UiPath, Inc. (PATH), and others. Moreover, earlier this year, Ark Invest estimated that AI software would increase at a 42% CAGR to reach $14 trillion by 2030.

Here are the factors that could influence ARKK’s performance in the near term:

Robust Fund Stats

ARKK has assets under management of $7.81 billion. The fund’s top holding is Tesla Inc. (TSLA), with an 11.41% weighting, followed by Zoom Video Communications, Inc. Class A (ZM) at 7.30%, and Roku, Inc. (ROKU) and UiPath, Inc. (PATH) at 7.13% and 6.76%, respectively. It has a total of 29 holdings.

In addition, the ETF has net inflows of $117.23 million over the past month.

Impressive Price Performance

ARKK has gained 12.5% over the past month and 16.6% over the past six months to close the last trading session at $42.06. The ETF is currently trading 21.9% below its 52-week high of $53.86, which it hit on August 8, 2022. The fund’s NAV of $42.03 as of May 5, 2023.

POWR Ratings Reflect Promising Prospects

ARKK’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

ARKK has a grade B for Trade, consistent with its recent price performance. In the A-rated 119-ETF Technology Equities ETFs group, it is ranked #66.

Click here to see the POWR Ratings for ARKK (Peer and Buy & Hold).

View all the top ETFs in the Technology Equities ETFs group here.

Bottom Line

Cathie Wood’s Ark Invest investment company’s flagship ETF, ARKK, was one of the hottest funds following 2020’s huge stock market gains. However, the ETF was hit hard in 2021 and again in 2022. Despite various macroeconomic headwinds, such as high inflation, rising interest rates, and recessionary fears, ARKK has been witnessing gains lately.

The ARKK fund’s recent gain results from stock success stories in cutting-edge tech areas, including AI, robotics, and automation. Disruptive innovation companies that ARKK holds have huge growth potential.

Given ARKK’s impressive fund statistics, solid price performance, and high growth potential, investing in this ETF this month could be wise for substantial gains.

How Does ARK Innovation ETF (ARKK) Stack Up Against Its Peers?

While GLDM has an overall POWR Rating of A, one might consider looking at its Technology Equities ETFs category peers, Technology Select Sector SPDR ETF (XLK - Get Rating), iShares U.S. Technology ETF (IYW - Get Rating), and VanEck Vectors Semiconductor ETF (SMH - Get Rating), with an A (Strong Buy) rating.

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ARKK shares rose $0.04 (+0.10%) in premarket trading Tuesday. Year-to-date, ARKK has gained 34.64%, versus a 12.11% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...

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