Building an ARK with Disruptive Technologies

10/26/2020 5:00 am EST

Focus: ETFS

Brian Kelly

Publisher, MoneyLetter

ARK Investment Management LLC (also called ARK Invest) believes that you can invest in the future — today, asserts Brian Kelly, fund expert and editor of MoneyLetter.

ARK Invest has a family of ETFs — both active and passive — that seeks to invest in disruptive innovation. Or to paraphrase hockey great Wayne Gretzky, they aim to skate where the puck is going.

ARK Innovation ETF (ARKK)

ARK Innovation is the flagship product of ARK Invest and as of June 30 had $4.8 billion in assets under management. It is a multi-segment solution that ARK describes as tapping "the Cornerstone Theses of Disruptive Innovation."

They go on to describe this as the product that presents the "best risk-reward opportunities" from ARK's innovation-based themes. In other words, it is the one-stop shopping solution to gain exposure to disruptive technology.

ARKK will typically hold between 35 and 50 holdings. Its top five holdings as of Sept. 22nd were Tesla (TSLA), Invitae (NVTA), Square (SQ), Roku (ROKU) and Crispr Therapeutics (CRSP).

Looking at sector weights, the majority of the allocation falls into the heathcare (36.6%) and information technology (31.7%).

ARK Autonomous Technology & Robotics (ARKQ)

ARKQ is focused on companies that are expected to benefit from advances and improvements in energy, automation and manufacturing, materials, and transportation.

More specifically, this ETF is investing in energy storage, robotics and automation, 3D printing, space exploration, and autonomous transportation. Indeed, autonomous vehicles, robotics and 3D printing account for roughly 84% of total assets as of 6/30/20.

The fund's top five holdings were Tesla, 2U (TWOU), Materialise NV ADRs (TLS), Xilinx (XLNX) and Proto Labs (PRLB).

ARK Next Generation Internet (ARKW)

ARKW expects to benefit from the transition to the cloud resulting in increased use of shared technology, new payment methods, the continued drive toward big data, the internet of things, and social media.

Therefore, ARKW looks to invest in companies within the following segments: cloud computing and cyber security, e-commerce, big data  and artificial intelligence, mobile technology and the internet of things, social platforms and blockchain.

ARKW's focus results in a portfolio that is heavily weighted towards information technology (44.2%) and communications services (29.4%). Its top five holdings are Tesla, Roku, Square, Zillow Group (Z) and Facebook (FB).

ARK Genomic Revolution (ARKG)

ARKG seeks to invest in those companies that are focused on — and expected to benefit from — extending and enhancing the quality of human and other life through technological and scientific developments.

The segments covered within genomics include CRISPR, targeted therapeutics, bioinformatics molecular diagnostics, stem cells and agricultural biology.

The fund's top holdings are Invitae, Crispr Therapeutics, Pacific Biosciences of California (PACB), Compugen (CGEN) and Arcturus Therapeutics (ARCT UQ).

ARK Fintech Innovation (ARKF)

Innovation in fintech, according to ARKF, is defined as "the introduction of a technologically enabled new product or service that potentially changes the way the financial sector works."

Within this segment of the market, ARKF seeks to invest in businesses engaged in transaction innovations, blockchain technology, risk transformation, frictionless funding platforms, customer facing platforms and new intermediaries.

The Fintech Innovation ETF's top five holdings are Square, Mercadolibre (MELI), Zillow Group, Pinterest (PINS) and Sea Ltd. ADR (SE).

Since this product is looking at ways to change the current way the financial sector operates, the financial sector itself is only 17.6% of the portfolio as of 6/30/20. The three sectors with a higher weight are information technology (39.2%), communications services (22.2%) and consumer discretionary (19.3%).

Why does ARK Invest focus strictly on disruptive technology? Catherine Wood, founder and CIO of ARK Invest believes, "Disruptive innovation is often not priced correctly by traditional investment strategies … they aren't sizing the opportunity and they aren't analyzing the disruption."

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