ETF Talk: This Fund Seeks Out Disruptive Stocks

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

The Ark Innovation ETF (ARKK) is an actively managed exchange-traded fund (ETF) that targets companies poised to benefit from disruptive innovation in one of three areas: industrial innovations, genomics or Web x.0.

ETF.com’s 2017 ETF of Year, ARKK launched in 2014 and currently has a market cap of $1.36 billion. Ark Innovation is up almost 25 percent year-to-date, more than double the 11 percent average on the S&P 500.

The fund follows an active, all-of-the-above approach. Investing over 99 percent of its assets in stocks (78 percent of which are based in the United States), ARKK is full of cutting-edge firms, such as Tesla (NASDAQ:TSLA), Twitter (NYSE:TWTR) and Alibaba (NYSE:BABA) ripped from the headlines. That said, ARKK’s mandate is so broad that it includes almost any company that might benefit from new technologies, such as Disney (NYSE:DIS) and Charles Schwab (NYSE:SCHW).

Its top 10 holdings include Tesla Inc. (NASDAQ: TSLA), 8.67%; Stratasys Ltd. (NASDAQ: SSYS), 7.55%; Invitae Corp. (NYSE: NVTA), 5.48%; NVIDIA Corp. (NASDAQ: NVDA), 5.48%; Square Inc. A (NYSE: SQ), 5.20%; Baidu Inc. ADR (NASDAQ: BIDU), 4.86%; Illumina Inc. (NASDAQ: ILMN), 4.55%; Intellia Therapeutics Inc. (NASDAQ: NTLA), 4.48%; Twitter Inc. (NYSE: TWTR), 4.42%; and Teradyne Inc. (NASDAQ: TER), 4.13%.

Chart courtesy of StockCharts.com

ARKK’s top holding, Tesla Motors, is poised to potentially become a $4,000 stock, according to the “bull” case CEO and CIO Cathie Wood shared in an interview on CNBC.

“This is a five-year time horizon,” Wood said on CNBC’s “ETF Edge” on Monday. “Four-thousand dollars is the bull case, $700 is the bear case. It’s rare for us to a have a stock that meets our minimum hurdle rate of return in the bear case, so it’s north of 15 percent compound annual rate of return to get to our bear case target.”

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The Ark Innovation ETF (ARKK) was a recent addition to my Successful Investing growth portfolio, which you can subscribe to here. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

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