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ETF Talk: This Fund Seeks Out Disruptive Stocks

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.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.