Every bull market comes with its own set of fund managers who post exceptional performance and become larger than life figures. This time, we have Cathie Wood and her family of ARK ETFs.
She posted spectacular returns after successful, concentrated bets on companies like Tesla (TSLA) and Square (SQ). As a result, ARKK more than tripled between its March 2020 low and February 2021 peak.
In recent weeks, the ARK Innovation ETF (ARKK) declined by 33% before bouncing more than 10% today. Is now the time to buy ARKK? Will the fund head even lower? Let’s find out.
ARKK is en vogue due to its track record of successful investments in innovative companies. ARKK holdings are geared toward growth across posterity, fueled by disruptive innovators. Check out ARKK’s holdings and you will find each is an innovator with considerable irreverence for the convention. These disruptors operate in a wide array of sectors ranging from transportation to artificial intelligence, energy, automation, genomics, and financial services.
ARKK weighting is largely determined through macroeconomic analysis, assessing each company’s unique potential and even ESG considerations. Slightly more than 85% of ARKK holdings are based in the United States. About 5% of the fund’s stocks stem from China. Tech is the fund’s most heavily weighted sector, representing slightly more than one-third of holdings. Healthcare is the next largest sector represented in ARKK holdings, comprising 30.91% of the fund, followed by consumer cyclicals at 18%, industrials at 11%, and financials at 7%.
Tesla is the top ARKK holding, representing just under 10% of the fund. Square is next at 6%, followed by Roku, Teladoc, Baidu, Zillow, Spotify, Shopify, Zoom Video, and CRISPR Therapeutics. The fund’s top 10 holdings account for 47.66% of the entire ETF.
Buy the Dip? Consider ARKK’s Historical Price Returns
If you are salivating at the opportunity to invest in ARKK after its recent decline, you are not alone. ARKK is held in high regard as it provided a ’20 return of 152%. The fund increased 35% across the entirety of ’19. Though ARKK had a mere 0.3% return in ’18, the fund was up more than 85% in ’17. It is particularly interesting to note ARKK is up more than 43% across the prior six months. The ETF’s return across the prior half-decade is a whopping 599.90%.
In other words, Cathie Wood is doing a fantastic job of managing this fund. Though ARKK is unlikely to increase another 599% between now and 2026 as it did in the prior half-decade, Wood will likely pave the way for the fund to grow in the months, years, and decades ahead.
ARKK POWR Ratings
ARKK is not exactly a POWR Ratings beast. The ETF has an overall POWR Rating grade of C. ARKK has a C Buy & Hold grade along with a D Trade grade. If you are curious as to how ARKK fares in the rest of the POWR Ratings components, click here to find out.
Of the 108 Technology Equities ETFs, ARKK is ranked 48th. You can learn more about these ETFs by clicking here.
Is the Time Right for an ARKK Investment?
Indeed, it is. Investors should jump at the opportunity to invest in ARKK during this temporary pullback. Even those who already own ARKK should give serious consideration to adding to their existing position while the fund is beaten down.
If you have any doubt as to whether an ARKK investment is justified at this point, consider the fact that past behavior is the most likely predictor of future performance. Invest in ARKK and you are essentially investing in the prudence and analytical prowess of Cathie Wood, the most respected fund manager in the business. Though some ARKK holdings certainly have the potential to decline in the months and years ahead, you will sleep soundly knowing Wood will pivot accordingly, altering weights and divesting as appropriate, ultimately safeguarding your investment as though it is her own.
ARKK shares rose $0.45 (+0.37%) in after-hours trading Tuesday. Year-to-date, ARKK has declined -2.20%, versus a 3.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...