ARKK vs Berkshire Hathaway: The 2020 market crash didn’t discriminate. It leveled stocks in every sector, geography, and market cap. Many investors panicked, and they didn’t breathe a sigh of relief until the government took bold measures to stabilize the economy. Even then, recovery was slow for certain sectors.
Of course, some companies made the most of the opportunities presented by the pandemic. That group recovered first and then saw impressive new highs. Tech stocks were particularly well-represented among the 2020 and 2021 success stories because they stepped up to provide the tools and resources necessary to keep people connected to work, school, and each other during an otherwise isolated time.
Warren Buffett’s holding company, Berkshire Hathaway, wasn’t among the pandemic success stories. Though its considerable investment in Apple stock kept the company’s portfolio stable, recovery was slow, and gains weren’t especially exciting.
Meanwhile, Cathie Wood’s ARK Innovation ETF soared in value. Its portfolio of tech innovators and disruptors enjoyed significant gains as consumers and businesses turned to virtual meetings, e-commerce, cryptocurrency, telehealth, and similar. Analysts started to suggest aloud that Cathie Wood was the new face of investing – and more quietly, they wondered whether Warren Buffett’s time had passed.
Buffett didn’t dignify this speculation with a pointed response or defense. He simply went on managing his company with the same strategy that helped him build a multi-billion dollar fortune.
Today, with the pandemic under control, Berkshire Hathaway is up, and ARKK is down. Like the fable about the tortoise and the hare, Buffett’s steady progress outpaced Wood’s blazing heights and drastic fall.
Will that trend continue? From a long-term perspective, in a matchup between ARKK vs. Berkshire Hathaway, which is best?
What Stocks Are In The ARKK Innovation Fund?
Cathie Wood’s ARK Invest has a singular goal: to encourage the development of and participate in the technologies of the future. The firm’s flagship fund, the ARK Innovation ETF (ARKK), has a robust portfolio of cutting-edge advances, including cloud computing, digital media, gene therapy, e-commerce, and the Internet of Things (IoT).
ARKK’s top ten holdings make up roughly 57 percent of its portfolio and include the following (as of September 30, 2022):
Tesla – 10.2 percent
Zoom – 8.4 percent
Roku – 6.8 percent
Intellia Therapeutics – 4.9 percent
CRISPR Therapeutics – 4.9 percent
Exact Sciences – 4.8 percent
UiPath – 4.5 percent
Block – 4.3 percent
Teladoc Health – 4.2 percent
Coinbase – 4.1 percent
The fund launched in October 2014, and its first two years weren’t especially impressive. However, investors started to take notice when ARKK delivered a total annual return of 87.38 percent in 2017. ARKK’s price ticked steadily upward in 2018 and 2019, and Wood made headlines when share prices increased by 152.52 in 2020.
That stunning rise prompted comparisons between Cathie Wood and Warren Buffett, and in many cases, Buffett endured unflattering remarks that implied his methods were obsolete. That changed in 2021 when ARKK lost 23.35 percent of its value, and the naysayers went silent as 2022 brought further declines.
Year to date, ARKK is down more than 64 percent, and there is no sign that it will reclaim its former glory. Yes, Cathie Wood has a solid understanding of the future of technology. Still, her choice of faddish, unproven growth companies doesn’t appear to command the same power as Buffett’s strategy of steady long-term growth.
Is Berkshire Hathaway Worth Buying?
Berkshire Hathaway’s portfolio lacks the glamor of autonomous cars and robotics, but it delivers results year after year. Berkshire Hathaway shares gained a little over 60 percent in the past five years (and 63,972 percent since inception), while ARKK is up less than one percent in the past five years – and just 71 percent since the fund’s launch.
Warren Buffett isn’t a fan of fads and doesn’t buy stocks because they are trending. Until he participated in Snowflake’s 2020 IPO, he hadn’t been involved in an initial public offering at all. He is far more comfortable waiting for performance data to come in before committing funds to any company.
Warren Buffett’s strategy comes down to a few key factors – the strength of the business, the depth and breadth of its moat, and its share price versus its intrinsic value. He won’t overpay just because a stock is hot. In fact, he seldom buys a company that is trading at its fair market value. He prefers undervalued stocks that the larger market has overlooked.
Berkshire Hathaway doesn’t have dramatic returns every year – it has its ups and downs like any other investment. However, over time, Berkshire Hathaway stock outperforms the S&P 500 by a large margin. That’s great news for investors with an eye on long-term financial goals.
It is worth noting that while Berkshire Hathaway’s portfolio contains plenty of recession-proof stocks like consumer staples, food and beverage, energy, and healthcare, Warren Buffett doesn’t avoid technology. He is just careful about the technology he selects. Berkshire Hathaway’s largest holding is Apple, at nearly 40 percent of the portfolio. Other top five Warren Buffett stocks include:
- Bank of America (11.5 percent),
- Chevron (9.1 percent),
- Coca-Cola (7.2 percent), and
- American Express (6.9 percent).
Berkshire Hathaway vs. ARKK: Which Is Best?
Choosing between Berkshire Hathaway stock and the ARK Innovation ETF comes down to investment strategy. Berkshire Hathaway is ideal for value investors who prefer less risk and a slower, more reliable journey to wealth.
ARKK is a fund made up almost entirely of growth stocks – the sort that could suddenly rocket up or crash and burn overnight. ARKK investors could see tremendous gains in a very short period, but they are just as likely to see their portfolio decline.
Will ARKK go up? Probably. The question is when. Cathie Wood’s expert research team has done impressive work in identifying the technologies most likely to shape the future. However, whether those returns will come in a given timeframe is anyone’s guess.
Berkshire Hathaway stock is better for those unwilling to gamble with their financial goals. Though there are no guarantees, share prices are far more likely to realize gains over any set period because of the steady, value-oriented strategy that defines Warren Buffett.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.