By Evie Liu
The largest exchange-traded fund at Cathie Wood's ARK Invest couldn't keep up with the broader market last year, but the growth-focused investment firm found success in its other ways as investors gravitated toward certain innovations more than others.
Many so-called disruptive companies that Wood invests in saw their stocks rally in 2020 on hopes that innovative technologies could lead to exponential growth and profits. The flagship fund, the ARK Innovation ETF, jumped more than 150% that year.
That success attracted many investors to ARK's funds. But inflation and high interest rates have made bonds more attractive and hurt growth stocks' earnings prospects, leading to losses for ARK funds in much of 2021 and 2022.
During those downturns, Wood kept buying stocks that she had a strong conviction about. Some of those stocks have bounced back more than others over the past two years.
The ARK Innovation ETF, the company's flagship fund with the most assets under management, rose by 12% last year, trailing the S&P 500's 24% gain. That came after the fund's 68% gain in 2023, which easily beat the S&P 500's 25%.
ARK's top-performing fund in 2024 was the ARK Next Generation Internet ETF, which invests in companies that drive the evolution of the internet and digital innovation. It soared 97% in 2023 and another 48% last year. The fund's top stock holdings include Tesla, Roku, and Coinbase Global. Its significant holding in Bitcoin through the ARK Bitcoin ETF also helped lift the fund.
The ARK Innovation ETF and ARK Next Generation Internet ETF invest in many of the same stocks. But ARK Innovation's holdings in genomic stocks and lack of a Bitcoin holding dragged on its performance.
The underperformance of genomic stocks slammed the ARK Genomic Revolution ETF, the only ARK fund to end 2024 in the red. Investors are worried about the significant funding needed and the lack of near-term profitability at genomic firms. After tumbling 16% in 2023, the fund lost another 28% last year. Its top holdings include Twist Bioscience, Recursion Pharmaceuticals, and Crispr Therapeutics.
The ARK Fintech Innovation ETF saw similar returns as the Next Generation Internet ETF. It was up 93% in 2023 and 41% last year. The fund mostly invests in companies transforming financial services through technological innovation, with top holdings in Shopify, Coinbase, and Block. Those three stocks were up 45%, 58%, and 18%, respectively, in 2024. The fund also has some holdings in the ARK Bitcoin ETF.
The ARK Autonomous Technology & Robotics ETF rose 41% in 2023 and 37% in 2024. Much of the gains was driven by Tesla, whose stock has rallied last year buoyed by hopes for potential interest rate cuts by the Federal Reserve. Wood, a big Tesla bull, has posited that stock in the electric car maker would hit $2,600 by 2029. Shares are currently trading around $406.
The ARK Space Exploration & Innovation ETF gained 24% in 2023 and another 30% last year. Rocket Lab is its top holding. The company designs, builds, launches, and operates rockets and spacecraft and its shares surged 380% in 2024. Other major holdings of the fund include Kratos Defense & Security Solutions, Iridium Communications, and Archer Aviation.
Write to Evie Liu at evie.liu@barrons.com
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(END) Dow Jones Newswires
January 07, 2025 01:30 ET (06:30 GMT)
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