Cathie Wood's ARK Invest just launched its eighth ETF. And it's easy to understand the enthusiasm for it: Only a handful of funds would have made you more than her firm's marquee fund.
Just eight funds classified as exchange-trade funds, including Grayscale Bitcoin Trust, Direxion Daily Semiconductor Bull 3X and ProShares Ultra Technology, posted higher total returns over the past five years than ARK Innovation, according to an Investor's Business Daily analysis of data from Morningstar Direct through March 30. ARK Innovation is Ark Invest's oldest and largest ETF, with more than $20 billion in assets.
There are thousands of ETFs, but ARK Invest is in a class of its own. Only a single ETF in the same broad equity category, ARK Invest's own ARK Next Generation Internet, topped ARK Innovation's return in that time. ARK Innovation is up 45.3% annually over the past five years. The fund launched on Oct. 31, 2014. The SPDR S&P 500 ETF Trust is only up 16.1% annually in that time.
"ARK Innovation's diverse thematic focus on industrial innovation, fintech, genomics, next generation Internet and more has helped it to generate a strong record and should help it to outperform in the years ahead," said Todd Rosenbluth, head of ETF and mutual fund research at CFRA.
All Eyes On ARK Invest's Next ETF
ARK Invest is best known for its ARK Innovation ETF. But it's expanding its role in the ETF universe. The company debuted its Space Exploration & Innovation fund on March 30.
The fund is designed to invest in the products and services poised to benefit from the development of new business models beyond Earth. The company's top holdings include aerospace pioneers like Lockheed Martin plus IBD Leaderboard member Boeing. Lockheed Martin is a 4.3% weighting in the new ETF. And Boeing is a roughly 4% position.
The largest position in the new ARK Space Exploration ETF, at 8.5%, is Trimble. The Sunnyvale, Calif.-based company makes technology used to monitor and track building and transportation equipment. Shares of Trimble are up more than 138% in the past 12 months.
But the new ARK Invest fund also holds some unexpected stocks for a space ETF. Other top holdings include online streaming company Netflix and farming equipment company Deere. If anyone gets the benefit of the doubt, though, it's ARK Invest. That's due to its track record.
ARK Invest Contends With Tough 2021
ARK Invest is off to a tough start of 2021. But fans think it's just a blip.
The ARK Innovation ETF posted a total net loss of 8.2% this year so far. That puts it behind the SPDR S&P 500 Trust's 5.8% return. Much of that's due to a lagging showing of top holding Tesla, which accounts for a tenth of the portfolio — more than any other holding.
Tesla is down more than 12% this year, although ARK Invest still thinks it will drive market share gains with a self-driving car.
Looking To The Future For ARK Invest
Longer term, ARK Invest is in a class of its own. Grayscale Bitcoin is up more, 163% annually in the past five years. But it's a unique structure that's capitalizing on soaring prices of cybercurrency.
Meanwhile, five of the eight ETFs outperforming ARK Innovation are all "leveraged," such as Direxion Daily Semiconductor Bull 3X. That fund returned 81.4% annually by using margin instruments to amplify short term movements in underlying semiconductor stocks.
"The top of every leader board in any time frame will always be a 3x levered or inverse fund," said Dave Nadig, director of research at ETFTrends.com.
And Barclay's iPath Global Carbon ETN returned an impressive 58% annually the past five years. The ETN tracks the Barclays Global Carbon Index, which rises and falls along with carbon credit plans aiming to slow global warming. But the ETN is tiny, with just $6.6 million in assets. Additionally, it rarely trades, Nadig said.
"If you eliminate these false comparisons, ARK has the one, two and three spots here," Nadig said. On top of ARK Innovation, that includes ARK Next Generation with a five-year annualized return of 51.9% and ARK Genomic Revolution, up 39.5% annually.
That's definitely a track record for the new ARK Invest ETF to shoot for.
All Aboard The ARK
Ark Invest's ETFs dominated over the past five years, despite a rocky 2021 so far
| Name | Ticker | YTD Total Return % | Five-Year Annualized Total Return % | Expense Ratio | Assets ($ Billions) |
|---|---|---|---|---|---|
| Grayscale Bitcoin Trust | 101.5% | 163.8% | 2.0% | $38.2 | |
| Direxion Daily Semicondct Bull 3X* | 13.8 | 81.4 | 0.99 | 4.2 | |
| ProShares UltraPro* | -4.3 | 59.0 | 0.95 | 10.8 | |
| Direxion Daily Technology Bull 3X* | -3.0 | 58.9 | 1.01 | 1.8 | |
| iPath Global Carbon | 29.6 | 58.1 | 0.75 | 0.01 | |
| ProShares Ultra Semiconductors* | 9.9 | 53.0 | 0.95 | 0.2 | |
| ARK Next Generation Internet | -2.5 | 51.9 | 0.79 | 6.7 | |
| ProShares Ultra Technology* | 1.0 | 48.8 | 0.95 | 0.7 | |
| ARK Innovation | -8.2 | 45.3 | 0.75 | 21.1 | |
| ProShares Ultra QQQ* | -1.4 | 43.9 | 0.95 | 3.8 | |
| ARK Genomic Revolution | -9.6 | 39.5 | 0.75 | 9 |
Sources: IBD, Morningstar Direct, * — leveraged ETF
Follow Matt Krantz on Twitter @mattkrantz
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