The Ark Innovation (ARKK) ETF is a fund created and managed by Ark Invest CEO Cathie Wood. Ark Invest is a futurist fund that manages billions of dollars in assets with the goal of investing in the technologies and innovators that will shape our future. These technologies include robotics & AI, genomics, the future of the internet and fintech, each with their own specific ETF assigned to specialize in those topics, with the Ark Innovation fund built on the best investments from each fund.
I recently wrote about the top three holdings of Ark Innovation, and if you look at the names it’s not hard to see why the ETF has been performing so well as of late. With its top three holdings of Tesla, Invitae Corp and Square all up more than 100% year-to-date (Tesla is actually up nearly 400% and now comprises around 10% of the ETF), it’s clear that Cathie Wood’s vision of the future is one shared by Wall Street. Other notable stocks in the fund which have more than doubled this year include Zillow and Teladoc.
Just take a look at the returns from ARKK as of 6/30/2020:
- 26.73% annualized return since its inception in 2014.
- 29.09% annualized return for the past five years.
- 37.23% annualized return for the past three years.
And for those newer investors who may feel they’ve missed the boat on the gains shared by ARKK’s early backers, the ETF has returned 80% year-to-date, while it weathered the largest market downturn in over a decade to boot.
Ark Invest’s Tesla Projections
For many, the first they would have heard of Ark and Cathie Wood would be as Tesla’s biggest bull on CNBC. In an interview back in February she outlined her lofty price targets for the electric vehicle maker that raised quite a few eyebrows. With a base case of $7,000, or $1,400 after the stock split, and a bull case of $15,000 ($3,000) for Tesla, Wood and Ark became identifiable by these types of severely bullish, long-term projections. Considering the historic run Tesla has been on, Wall Street was forced to sit up and take notice of Ark.
In fitting with Ark’s vision of the technology of the future, its Tesla price target is influenced heavily by when Tesla will be able to achieve full autonomous driving and launch its much talked about robo-taxi service. Whether its time line for such a launch will be found to be too ambitious is yet to be seen, however the regulatory minefield which has formed around the autonomous driving industry would make it hard to see Ark’s projections come to fruition as early as it has laid out. However, I always say it’s best to take a look at the numbers for yourself.
Tesla projections aside, Ark is a really exciting fund that is garnering the attention it deserves after posting such astounding results. It’s interesting to see an ETF like this with such a long-term and future relevant vision, two qualities which encapsulate our investing ethos here at MyWallSt. The one caveat that must be taken into consideration is that ARKK is a relatively young ETF and its returns are based on a much smaller timeframe than many of the benchmarks it will be compared to. It will be sure to find itself in less favorable circumstances in the future, and whether it can continue to provide similar returns will be the true test to Wood’s investing mettle.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.
Financial Analyst at MyWallSt
Michael's first and favorite stock is Square, which he sees becoming a massive player in the payments industry and a leader in the war on cash.