Innovation Or Tradition? Unpacking The Performance Of ARKF

seekingalpha03-19

ARKF has outperformed its peers and the Nasdaq in the short term, but long-term performance is narrowly overperformed by a Baron's fund.ARK Fintech Innovation ETF focuses on newcomers and disruptors ...

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Unpacking The Performance Of ARKF","media":"seekingalpha","content":"<div>\n<p>ARKF has outperformed its peers and the Nasdaq in the short term, but long-term performance is narrowly overperformed by a Baron's fund.ARK Fintech Innovation ETF focuses on newcomers and disruptors ...</p>\n\n<a href=\"https://seekingalpha.com/article/4679057-innovation-or-tradition-unpacking-the-performance-of-arkf\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Innovation Or Tradition? 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Unpacking The Performance Of ARKF\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-03-19 15:16 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4679057-innovation-or-tradition-unpacking-the-performance-of-arkf><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>ARKF has outperformed its peers and the Nasdaq in the short term, but long-term performance is narrowly overperformed by a Baron's fund.ARK Fintech Innovation ETF focuses on newcomers and disruptors ...</p>\n\n<a href=\"https://seekingalpha.com/article/4679057-innovation-or-tradition-unpacking-the-performance-of-arkf\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"GB00BDT5M118.USD","symbol_name":"天利环球扩展Alpha基金A Acc","start_time":0,"source_url":"https://seekingalpha.com/article/4679057-innovation-or-tradition-unpacking-the-performance-of-arkf","article_id":"2420218380","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1239809391/image_1239809391.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2420218380","pubTimestamp":1710832610,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"ARKF has outperformed its peers and the Nasdaq in the short term, but long-term performance is narrowly overperformed by a Baron's fund.ARK Fintech Innovation ETF focuses on newcomers and disruptors i","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"GB00BDT5M118.USD":"天利环球扩展Alpha基金A Acc","LU0390134368.USD":"FRANKLIN GLOBAL GROWTH \"A\" (USD) ACC","BK4106":"数据处理与外包服务","LU0353189680.USD":"富国美国全盘成长基金Cl A Acc","ARKK":"ARK Innovation ETF","IE00B19Z3B42.SGD":"Legg Mason ClearBridge - Value A Acc SGD","COIN":"Coinbase Global, Inc.","BK4593":"纳斯达克ETF","LU1261432733.SGD":"Fidelity World A-ACC-SGD","LU0234572021.USD":"高盛美国核心股票组合Acc","LU0494093205.USD":"贝莱德ESG灵活多元资产A2 USD-H","BK4534":"瑞士信贷持仓","LU0109392836.USD":"富兰克林科技股A","SHOP":"Shopify Inc","BK4595":"比特币概念","BK4533":"AQR资本管理(全球第二大对冲基金)","LU1363072403.SGD":"Fidelity Global Financial Services A-ACC-SGD","LU0011850046.USD":"贝莱德全球长线股票 A2 USD","SQ":"Block","BK4150":"赌场与赌博","LU0097036916.USD":"贝莱德美国增长A2 USD","BK4535":"淡马锡持仓","LU0158827948.USD":"ALLIANZ GLOBAL SUSTAINABILITY \"A\" (USD) INC","LU1046421795.USD":"富达环球科技A-ACC","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","LU0444971666.USD":"天利全球科技基金","LU0786609619.USD":"高盛全球千禧一代股票组合Acc","LU0971096721.USD":"富达环球金融服务 A","BK4503":"景林资产持仓","DKNG":"DraftKings Inc.","LU0820561818.USD":"安联收益及增长平衡基金Cl AM DIS","V":"Visa","IE00BKVL7J92.USD":"Legg Mason ClearBridge - US Equity Sustainability Leaders A Acc USD","LU0957791311.USD":"THREADNEEDLE (LUX) GLOBAL FOCUS \"ZU\" (USD) ACC","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","LU1316542783.SGD":"Janus Henderson Horizon Global Technology Leaders A2 SGD","LU":"陆金所","LU0289739343.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (SGD) ACC","LU1267930730.SGD":"富兰克林美国机遇基金AS Acc SGD (CPF)","LU0957808578.USD":"THREADNEEDLE (LUX) GLOBAL TECHNOLOGY \"ZU\" (USD) ACC","LU0234570918.USD":"高盛全球核心股票组合Acc Close","LU0238689110.USD":"贝莱德环球动力股票基金","LU0170899867.USD":"EASTSPRING INVESTMENTS WORLD VALUE EQUITY  \"A\" (USD) ACC","QQQ":"纳指100ETF","MA":"万事达","LU0417517546.SGD":"Allianz US Equity Cl AT Acc SGD","LU0642271901.SGD":"Janus Henderson Horizon Global Technology Leaders A2 SGD-H","ARKF":"ARK Fintech Innovation ETF","LU1551013342.USD":"Allianz Income and Growth Cl AMg2 DIS USD"},"translate_title":"创新还是传统？解包ARKF的性能","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ARKF":1,"V":1,"SQ":1,"SHOP":1,"QQQ":1,"MA":1,"DKNG":1,"COIN":1,"NQmain":0.9,"ARKK":0.74,"LU":0.6},"content_text":"ARKF has outperformed its peers and the Nasdaq in the short term, but long-term performance is narrowly overperformed by a Baron's fund.ARK Fintech Innovation ETF focuses on newcomers and disruptors in the fintech industry, while the Baron's fund invests in more established financial companies.ARKF's top holdings show high growth prospects and strong operational performance, while the Baron's fund has slightly inferior growth expectations.Marco Bello Previously, we have reviewed the ARK Fintech Innovation ETF (NYSEARCA:ARKF). That's an active management thematic fund focused on fintech innovation. The first step to review this fund is to select a set of peers and then benchmark it against the top fund. Looking at the 1-year performance, we can see that the fund has outperformed the pack and it has even beaten our benchmark for the technology broad market, the Nasdaq (QQQ). Seeking Alpha However, when we look at the 5-year horizon, we can see that the fund was narrowly overperformed by the Baron FinTech fund Retirement (BFIUX). This is a mutual fund that also invests exclusively in fintech thematic equities, which makes it a good peer for this comparison. Seeking Alpha Portfolio construction Looking at the top 5 holdings composition for both funds, we can see that they are very different. The Baron's fund is more geared towards more established financial companies, betting on established names like Visa (V) and Mastercard (MA). Baron Funds While ARKF is more focused on newcomers and disruptors like Coinbase (COIN) and Shopify (SHOP). ARK Funds Focusing solely on the top 5 composition doesn't cut it if you're trying to get a real sense of these funds' performance. We need to dive deeper to see that ARKF isn't just throwing its weight behind long shots. It's putting a hefty 40% of its portfolio into its top five picks. That's a stark contrast to Baron's fund, which opts for a more balanced approach, distributing its bets more evenly, with the top 5 summing 23.5%. Growth and operating performance Let us now dig deeper into our analysis, and assess if there's a significant difference in the growth prospects and operational metrics for the two funds. When we look at ARKF's top 5 holdings, it's evident that their growth prospects are humming, with each one showing off high double-digit growth. YCharts For the Baron's fund, the prospects are also positive, but the growth expectations are a bit inferior to those of ARKF. That is especially significant because the Baron's fund lacks holdings in the top 5 positions with prospects comparable to Coinbase and DraftKings (DKNG). YCharts For this type of technology thematic funds, the growth prospects alone are capable of moving mountains, and it helps explain why ARKF has outperformed during the past year. Now, moving on to the gross margins, we can see that the evolution for the top 5 holdings in the Baron's fund is okay, though not incredible. YCharts For ARKF there are two companies that clearly stand out and are driving most of the operating performance: Coinbase and Block (SQ). YCharts Balance Sheet Checking out the balance sheet reveals that ARKF's top 5 holdings are mostly in good financial health, sporting low debt levels and reasonable leverage. Coinbase is the outlier here, but that's in part because it is a broker, by nature Coinbase is going to have a high amount of customer assets on the books. It's just the nature of the beast. YCharts Turning our attention to Baron's fund, we notice it's carrying more financial debt. But let's not jump to conclusions, this isn't necessarily a red flag. We're talking about more established companies here, and their debt levels aren't unreasonable. Their leverage is within a sensible range too. However, Fair Isaac stands out with its negative equity, a curiosity that might deserve our attention on a different piece. YCharts Valuation & risks ARKF's approach of doubling down on its top 5 holdings has been a significant factor behind its performance over the past year. That helps to explain the clear outperformance during the last year. The fact that those holdings exhibit higher growth prospects and have been improving their operational performance at a fast pace, has clearly favored the fund. YCharts YCharts Now, it's crucial to shift our focus to valuation and see how both groups fare. When we look at the Price to Sales ratio, it's clear both groups are trading at high multiples. However, it's Baron's group that takes the lead with even higher multiples. The story doesn't change much when we look at the price to book value either. YCharts YCharts These are very interesting conclusions, given that our expectations were that ARK holdings would have the highest valuation stocks. Now, let's not rush and conclude that ARKF is a value fund. In all fairness, the Coinbase and DraftKings performance have been the main drivers for the fund performance, and they might be more linked than thought. It seems that the current monetary landscape is a productive soil for both crypto and gambling. American Gaming Association One significant risk in ARK's portfolio composition is its heavy bias towards two main sub-themes: crypto and gambling. While I'm bullish on crypto, especially Bitcoin, and see Coinbase as potentially becoming a powerhouse in the sector, the gambling theme's success seems more short-lived. It may be riding high on temporary monetary quirks, a performance that might not be sustainable in the long term. Additionally, a concerning factor for these fintech-themed funds emerges when we extend our view to a longer timeframe, let's say 5 years. It becomes evident that only during a brief period around the Covid outbreak did fintech-themed funds outperform the Nasdaq. This suggests that investors might be better off keeping it simple and opting for a broad tech market fund like the Nasdaq, rather than overcomplicating their strategy with specific thematic funds that only outperform periodically (and unpredictably). Seeking Alpha That is a harsh conclusion given all the effort that we have put into this piece, but the truth is that the Nasdaq already includes some fintech names, while also including other technology themes and all that for a smaller fee. For less money, investors have better performance while carrying less risk exposure. YCharts  Editor's Note: This article covers one or more microcap stocks. 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