Cathie Wood's ARK Innovation ETF is back — and back big. It's the top diversified ETF again this year so far, largely due to some stellar winners.
Nine of ARK Innovation's stock holdings, including Coinbase Global, Pacific Biosciences and Exact Sciences, are up 17% or more this year so far, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. And on average, the nearly 30 stocks in the ETF are up more than 10%.
And that's good news for the popular $6.8 billion-in-assets fund. It's now up more than 15% this year. That easily tops the S&P 500's 2.4% year-to-date return. And it also makes the ARK Innovation the No. 1 actively traded diversified ETF, says Morningstar Direct.
It's a much needed bounce. The ETF lost more than 60% of its value last year, making it the worst-performing diversified ETF. ARK Innovation is capitalizing on what appears to be investors' willingness to buy speculative investments after 2022's beatdown.
"Despite a likely slight earnings decline in 2023 — at least that's our view in LPL Research — we expect a solidly positive year for stocks," said Jeff Buchbinder, Chief Equity Strategist for LPL Financial.
ARK Invest Having A Heck Of A 2023 So Far
It's been awhile since ARK Innovation has been on the top. But it's back with a vengeance.
Not only is the ETF tops for 2023 so far, it's miles ahead of the rest. The No. 2 actively traded diversified ETF this year is Invesco S&P 500 High Beta, which is loaded up with some of the market's most volatile large-cap stocks. But it's only up a fraction that ARK Innovation is this year: 9.4%.
Much of the gains, though, are due to stellar performances by a few stocks.
Cathie Woods' Top Stock Pick
An examination of Woods' ARK Innovation portfolio shows three investments to beat all others.
Cryptocurrency play Coinbase is the ETF's top-performing stock. It's up more than 39% this year, capitalizing on an uptick in cryptocurrency prices. The price of Bitcoin alone is up more than 25% in the past month. It's a roughly 4% position in the ARK Innovation portfolio.
Of course, it goes without saying this year's Coinbase rally is a drop in the bucket relative to how much it dropped in 2022. Even after the early 2023 rally, shares of Coinbase are still down more than 80% from where they were in 2021, due to a 86% plunge in 2022. And it's also important to note analysts think the company will lose money on an adjusted per-share basis in 2023, 2024, 2025 and 2026.
Other Winners For Cathie Wood
ARK Innovation's No. 2 top stock, Pacific Biosciences, is equally speculative. Analysts see the human genetics testing company losing money as far as the eye can see: At least out to 2026. But that doesn't seem to matter to investors this year. Shares are up more than 38% this year, helping it to crawl out of its 60% drop in 2022.
Interestingly, four of ARK Innovations' top five stocks this year including Pacific Biosciences are from the health care sector. Another example is Exact Sciences, a company best-known for Cologuard, a less invasive screening tool for colorectal cancer. Exact is a weighty position for ARK Innovation, at 9.5% of the portfolio. And that's a good thing this year, with shares up more than 33%. And of all ARK's positions, Exact is down the least from 2021: just 16.6%. Shares only fell 36% in 2022, which is much less than many others.
Ark Innovation's bounce this year is impressive. But it's only making a small dent in the massive damage inflicted in 2022. ARK Innovation is down nearly 12% annualized in the past three years, Morningstar Direct says. That's well behind the 7.4% total annualized return of the S&P 500 during that time.
But hey, at least it's a start.
A Heck Of A Year So Far For ARK
Top stocks in the ARK Innovation ETF year-to-date
| Company | Ticker | YTD % ch. | Sector |
|---|---|---|---|
| Coinbase Global | 39.6% | Financials | |
| Pacific Biosciences of California | 38.0 | Health Care | |
| Exact Sciences | 33.7 | Health Care | |
| Invitae | 30.1 | Health Care | |
| 10x Genomics | 23.4 | Health Care | |
| Roku | 22.7 | Communication Services | |
| DraftKings | 18.0 | Consumer Discretionary | |
| Roblox | 17.4 | Communication Services | |
| CRISPR Therapeutics | 17.3 | Health Care |
Sources: S&P Global Market Intelligence, IBD, ARK Invest
Follow Matt Krantz on Twitter @mattkrantz
