Is ARKQ A Good ETF To Buy?

Is ARKQ A Good ETF To Buy? It’s common for conservative investors to choose a portfolio of reliable blue chip stocks – particularly those stocks that have a long history of increasing dividends. Companies like Coca-Cola (KO), Lowe’s (LOW), Clorox (CLX), and McDonald’s (MCD) offer minimal risk and consistent returns, which is an appealing combination. However, from ARK Invest’s perspective, such companies are missing a key ingredient for growth: disruptive innovation. 

ARK Invest and its founder Cathie Wood believe the companies that will drive the global economy in coming years aren’t established organizations with long traditions of gradual, stable growth.

The future belongs to entrepreneurs and innovators who are ready to disrupt the status quo and shake up outdated methods in favor of embracing advanced technologies. 

ARK Invest: Investing Thesis

ARK Investoperates under the philosophy that five innovation platforms will transform how consumers interact with each other, the businesses they patronize, and the world at large. These include:

• DNA sequencing,
• energy storage,
• blockchain technology,
• robotics, and
• artificial intelligence. 

As these five platforms continue to develop, ARK Invest projects significant changes in the global economy.

Disruptive innovation brought about by related technology, such as gene therapies, 3D printing, cloud computing, big data analytics, cryptocurrency, and autonomous vehicles, will drive growth in companies that bring resulting products and services to market.

It will also prompt growth and change among businesses that benefit from or rely on those technologies. 

With her team’s help, ARK Invest Founder, Chief Executive Officer, and Chief Investment Officer Cathie Wood works to identify the companies most likely to emerge as leaders when industry disruption occurs.

In many cases, ARK Invest can open positions at value pricing, because other investment professionals are stuck in traditional patterns and fail to recognize opportunities presented by disruptive technologies. Wood points out: 

Disruptive innovation is often not priced correctly by traditional investment strategies because people may not understand how big the ultimate opportunities are going to be. They aren’t sizing the opportunity and they aren’t analyzing the disruption.

Through the ARK Invest family of funds, Wood analyzes, identifies, and invests in disruption in an effort to harness the growth and subsequent returns on behalf of her clients. 

Cathie Wood: ARKQ Innovation ETF (ARK Autonomous Technology & Robotics ETF)

ARK Invest offers five distinct innovation ETFs, each fine-tuned to capture growth in specific areas of innovation. ARKQ, the ARK Autonomous Technology & Robotics ETF, is focused on robotics and artificial intelligence – two of the five innovation platforms. 

Specifically, ARKQ explores companies creating disruption through robotics and automation, electric vehicles, autonomous mobility, space exploration, aerial drones, and 3D printing.

Within that collection of technologies, ARKQ looks at opportunities for Mobility-as-a-Service (MaaS), which is expected to reduce the need for individually-owned transportation.

Instead of personal vehicles, mobility will be provided as a service, and MaaS companies will make it possible for consumers to plan, book, and pay for transportation through digital channels.

The concept is that as a whole, these technologies are driving enhancements in productivity while simultaneously bringing costs down. They will impact everything from infrastructure to manufacturing and production, which in turn will deliver strong returns for those who invest in them. 

ARKQ Track Record

Cathie Wood launched ARKQ in September of 2014. While the fund hasn’t generated the unexpectedly high returns of other ETFs in the ARK Invest collection, it is still delivering solid gains for shareholders, as follows: 

• 3 months ending 12/31/2020 – 34.11 percent 
• 12 months ending 12/31/2020 – 107.23 percent 
• 3 years ending 12/31/2020 – 33.96 percent 
• 5 years ending 12/31/2020 – 33.46 percent 
• Since inception – 25.11 percent 

Compare this to the S&P 500’s returns in 2020 – a total of 18.4 percent. The Dow Jones Industrial Average grew even more slowly, ending the year with a low 9.70 percent gain. As of late March 2021, ARKQ had $1.70 billion in net assets. 

ARKQ Investment Thesis

ARKQ is an actively-managed ETF that invests in companies leading disruptive innovation in the field of robotics and autonomous technology.

Through careful research and analysis, fund manager Cathie Wood and her team of analysts identify those businesses that are poised to deliver breakthrough technology in automation and manufacturing, energy storage, and related materials. 

In addition, ARKQ invests in organizations that stand to gain from breakthroughs in these areas, whether by developing related products and services, leading implementation of technological advancements, or otherwise benefitting from improvements in this space. 

Specifically, ARK holdings include companies that are developing, producing, or enabling the following technologies: 

• 3D Printing
• Autonomous Transportation
• Energy Storage
• Robotics and Automation
• Space Exploration 

All of ARKQ’s holdings are traded on US exchanges, but they may include both domestic and international businesses involved in these industries. 

ARKQ Holdings

There is a long list of companies making waves in the autonomous technology and robotics space. At any given moment, ARKQ holds between 30 and 50 of the most promising.

As of March 2021, ARKQ’s top ten holdings and their relative weight within the portfolio include the following: 

• Tesla Inc (TSLA) – 10.34 percent 
• Baidu Inc. (BIDU) – 5.36 percent 
• Trimble Inc (TRMB) – 5.35 percent 
• JD.com (JD) – 4.82 percent 
• Deere & Co. (DE) – 4.38 percent 
• Kratos Defense & Security (KTOS) – 3.92 percent 
• Teradyne Inc. (TER) – 3.87 percent
• Alphabet (GOOG) – 3.84 percent
• NXP Semiconductors (NXPI) – 3.79 percent
• Komatsu (KMTUF) – 3.23 percent

Each of these organizations is making large inroads in the field of automation and robotics. ARKQ believes that innovations out of these companies will position them as leaders in their respective industries long-term. 

ARKQ Fees

ETFs offer many of the same benefits as mutual funds, but in a head-to-head comparison, ETFs have a few additional advantages. One of the most popular among investors is the fact that ETF fees are quite a bit lower than those of mutual funds. 

For example, passively-managed ETFs are designed to track a particular index, such as the S&P 500. Portfolios are built to mirror the index, and the ETF’s returns tend to match those of the index.

This type of ETF carries average fees of roughly 0.23 percent. Actively-managed ETFs cost a bit more, but they still tend to present substantial savings as compared to actively-managed mutual funds. 

On the opposite end of the spectrum, actively-managed mutual funds average fees of 1.40 percent or more. ARKQ fees come in at 0.75 percent – far lower than comparable mutual funds, though investors get the same level of attention from fund managers.

Over decades of investing, the difference in fees can impact investors’ total returns by tens of thousands of dollars. 

ARKQ: The Bottom Line

The bottom line is that Cathie Wood has demonstrated that she has her finger on the pulse of disruptive technologies. She has shown unmatched skill in identifying the technologies that will drive the world’s economic future, as well as pinpointing the companies most likely to create, benefit from, and utilize those technologies. 

ARKQ offers investors an opportunity to grow their capital as major players in the fields of robotics and artificial intelligence increase efficiency and reduce costs. These companies are on a mission to deliver large-scale process improvements that will impact many aspects of daily life, including basic functions like transporting people and products from one place to another.

Through ARKQ, investors can participate in the growth of these emerging technologies while keeping a relatively diverse portfolio. That reduces the sort of risk associated with investing in any one of ARKQ’s current holdings. 

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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.