ARK Genomic Revolution ETF (BATS:ARKG) is an actively managed exchange-traded fund that looks for growth opportunities in disruptive companies. It seeks foreign and domestic opportunities across healthcare, information technology, energy, and more.
It’s also managed by the famous Catherine Wood, so is ARKG a good ETF to buy?
The fund has a heavy exposure to biotechnology – a good spot during a pandemic. In fact, it started 2021 with over 96.6 percent of its holdings in healthcare. It also holds minimal positions in technology and consumer defensive stocks.
It experienced exponential growth in 2020, and that’s because emerging genetic therapy, gene-editing, and other medical technologies advanced with the societal attention on the pandemic.
It’s just one of many ETFs managed by the ARK investment management firm. The firm chooses to set up thematic funds that focus on specific industries. Its investment strategy is to aim for disruptive tech that’s revolutionizing its industry.
Is ARK’s Genomic Revolution ETF is a good Buy for investor portfolios?
Ark Invest Nailed Tesla Price Target
In 2018, Tesla was on the verge of bankruptcy. It had issues with liquidity, quality control, production scaling, and more. It was the company’s darkest hour and a time when CEO Elon Musk says he considered selling the fabled car company to Apple (AAPL).
ARK Invest’s CEO Cathie Wood made a prediction at the time that Tesla shares would hit $4,000.00. It seemed ludicrous at the time, and would represent a 1,200 percent increase. The prediction turned a lot of heads.
But that price target did come true in 2021 when you account for the 5-for-1 split Tesla executed last summer. The stock eclipsed $800 per share, a price that would be $4,000 if adjusted for the split.
Not only did it hit the price target, but it did so two years early, prompting the firm to adjust its price target to $7,000 per share, an increase of 72 percent from that target.
This highlights the key strategy of ARK’s investment portfolio.
Ark Focuses on Disruptive Innovation
ARK is known for investing in disruptive technologies, just like Tesla (TSLA). The firm’s flagship fund is the ARK Disruptive Innovation Fund. This fund gained over 101.8 percent in 2020, prompting Wood to announce the global society is undergoing a technological evolution.
The group has a wide investment footprint, but what’s even more notable is the company’s list of “bad ideas” to invest in. The list includes linear TV, brick-and-mortar retail, freight rail, and physical bank branches.
Instead, they are laser focused on the technologies disrupting these legacy industries. And that move paid off in a big way in the 2020s. Wells Fargo (WFC), for example, struggled to recover to pre-pandemic trading levels while PayPal (PYPL), Square (SQ), and Bitcoin all experienced more than 2x gains through the year.
Emerging technologies reached a tipping point in the coronavirus pandemic. Moving forward, ARK believes it’s backing the next wave of disruptive technologies.
That investment strategy leaks into its Genomic Revolution ETF.
Ark Genomic Revolution ETF: What Is It?
ARK’s Genomic Revolution ETF is focused on companies and technologies positioned to contribute to the Human Genome Project. This international research project aims to map the DNA sequence of the entire human genome. It was completed in 2003, but the real work just started into how to use this information for society’s benefit.
The bulk of its investments are in healthcare and biotech companies, but it also invests in auxiliary companies in energy, automation, manufacturing, and materials.
The portfolio’s holdings include companies involved in stem cell research, gene editing, molecular diagnostics, and genetic therapy. These sciences are at the core of the next revolution in healthcare, which we saw the beginnings of during the COVID-19 pandemic.
In fact, many associate this fund with the pandemic, but there’s more to it. While coronavirus vaccine makers and other immunotherapy companies are certainly included, it’s not limited to that.
Companies are hard at work finding genetic treatments for Down syndrome, cystic fibrosis, sickle cell anemia, Duchenne muscular dystrophy, and more.
As these companies make progress in their lanes, ARK Genomic Revolution ETF investors gain. So, let’s examine which companies are included in the fund.
ARKG Holdings
Like all of ARK’s major ETFs, ARKG is managed by ARK CEO Wood. It looks for companies enhancing and extending human quality of life. Some of its biggest holdings are CRISPR Therapeutics (CRSP), Arcturus Therapeutics, Invitae (ARCT), and Pacific Biosciences (PACB) of California.
Each is a cutting-edge biotechnology company focused on a new, innovative market segment. CRISPR, for example, is a revolutionary gene editing technology platform. Arcturus focuses heavily on RNA therapeutics, and Invitae is a genetic information company that provides a series of diagnostics.
On top of this, the fund also supports healthcare technologies, like Teladoc Health (TDOC). This company helped usher in the age of telemedicine during the social distancing age.
Other companies with notable holdings in ARKG include Twist Bioscience, Caredx (CDNA), Iovance Biotherapeutics (IOVA), Exact Sciences, and Cellectis (CLLS).
This non-diversified fund is actively managed, so the holdings can change at any given moment. However, its biggest holdings remain in the companies listed above as of January 2021.
ARKG Expense Ratio
The ARKG portfolio typically holds between 30 and 50 positions, and it has an expense ratio of 0.75 percent.
It’s focused on providing long-term capital growth through healthcare, but its cost is relatively high for an ETF. You can find similar funds with expense ratios that are much lower – however these are usually passively managed.
Is ARKG ETF A Good Buy?
ARKG is the genomics-focused disruptive technology fund from ARK Invest. The firm is known for high performing thematic ETFs that aim for innovative technologies in a variety of industries. This specific fund focuses on disruptive companies in the genomic market, which includes COVI-19 vaccine makers.
It experienced big gains (more than doubling) in 2020, but it’s unclear what gains are left in the 2020s. We’ll soon enter a recovery economy, and these companies will need to take big steps to keep up with changing perceptions.
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