Providing Exposure to the Fourth Industrial Revolution

Jim Woods

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

The automation of jobs that formerly were performed by human beings has cast a specter over the developed world and will remain a salient political and economic question for a long time to come.

On the other hand, the disruptive potential driving the creative destruction of the “Fourth Industrial Revolution” also has provided new opportunities for investors. For instance, the ARK Industrial Innovation ETF (ARKQ) provides investors with exposure to companies that likely will benefit from automation and other technological advancements.

Some of this fund’s top holdings include Stratasys Ltd. (NASDAQ:SSYS), NVIDIA Corporation (NASDAQ:NVDA), Tesla Inc. (NASDAQ:TSLA), Baidu, Inc. (NASDAQ:BIDU), Teradyne (NASDAQ:TER), Materialise NV (NASDAQ:MTLS) and Aptiv PLC (NYSE:APTV).

While these companies are mainly in the software and IT services field, accounting for 26.95% of the holdings, this ETF also has shares in companies that produce computers, phones and household electronics (19.11%), semiconductors (17.83%), automobiles and auto parts (14.81%), machinery, equipment and components (6.43%) and aerospace and defense technology (4.79%).

Instead of providing broad exposure to all technology companies, this ETF’s managers are especially interested in technologies such as autonomous electric vehicles, 3D printing, manufacturing automation and nanotechnology — in short, the hot tech of the day.

The fund currently has $172.95 million in assets under management and an average spread of 0.23%. It also has an expense ratio of 0.75%, meaning that it is more expensive to hold in comparison to other exchange-traded funds.

In terms of ARKQ’s MSCI ESG Fund Quality Score of 4.86, it ranks in the 17th percentile within its peer group and in the 27th percentile within the global universe of all funds in the MSCI ESG Fund Metrics coverage.

This fund’s performance varies, based on the time frame that is considered. While the fund has been down 5.40% over the past month, it was up 19.63% over the past three months and remains up 13.50% year to date.

Chart courtesy of StockCharts.com

In short, while ARKQ does have several advantages over some of its peer funds and lets investors profit from some truly cutting-edge technology, this ETF’s risks and costs are far from zero. Thus, interested investors always should do their due diligence and decide whether the fund is suitable for their portfolios.

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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