ARK Invest's Cathie Wood is the one to beat when it comes to growth stocks. But it looks like Fidelity found a way to do it with S&P 500 stocks — at least this year so far.
The Fidelity Blue Chip Growth ETF returned 38.1% this year, says Morningstar Direct going into June 22. That makes it the top-performing actively traded diversified ETF this year. Fidelity's fund also edges out, albeit only slightly, the year-to-date 36.6% return of Wood's flagship ARK Innovation.
But check this out: the Fidelity ETF is tiny compared to ARK Innovation. It only has assets of $564 million, making it roughly 90% smaller than ARK Innovation's whopping $8.1 billion-in-assets size. And Fidelity's ETF is only three years old, while ARK Invest has been around for nearly a decade.
Why is the Fidelity ETF beating ARK? It's singularly focused on investors' favorite stocks this year: The biggest of the Big Tech giants. The Fidelity fund's top 10 holdings only overlap with ARK Innovation with one stock, Tesla (also a favorite with the world's richest men).
But it's working for now.
The Little Fidelity ETF That Could
Seeing Fidelity Blue Chip pull ahead of ARK Innovation is a head-turner for S&P 500 investors.
Why? ARK Innovation is chock full of mostly smaller growth stocks, which usually race ahead of traditional blue chips, especially when growth is in favor as it is now. Fidelity's fund, on the other hand, is doubling down on the big growth stocks — aka modern Blue Chips — like Apple and Microsoft.
But that's proving to be a smart bet. The top 10 holdings of Fidelity Blue Chip Growth as of the latest disclosure at the end of March are up an average of nearly 80%. That outstrips the roughly 50% gain this year of ARK Invest's top 10 positions.
And investors are betting big on the tech stocks in the second half, too. Forty percent of investors think technology stocks will outperform in the second half, says a poll by DataTrek Research.
But not just any tech stocks. Large-cap tech in the S&P 500 is by far the favorite, says DataTrek's Nicholas Colas. Investors' favorite stocks for the second half are Microsoft, Alphabet and Nvidia, in that order.
Fidelity Blue Chip Growth plunks nearly a third of its portfolio on just those three stocks, says ETF.com. Wood, on the other hand, puts a third of its portfolio in Tesla plus three lesser-known stocks Roku, Zoom Video Communications and UiPath.
Time Will Tell On Fidelity's ETF Vs. S&P 500
You might think Fidelity Blue Chip Growth is just having a hot year. But the data tell another story.
The fund's three-year annualized return of 11.7% also tops ARK Innovation's at a negative 13.7%. Keep in mind, though, both ETFs lag the Invesco QQQ Trust's 14.8% annualized three-year return. And that ETF simply owns the 100 most valuable nonfinancial stocks on the Nasdaq. And both, too, lag the S&P 500's 14.1% annualized return in the past three year.
Much hinges on the remaining life of the S&P 500's bull market — and whether of not big-cap tech continues to drive. It's also important to note Fidelity Blue Chip Growth only reveals is positions at month end vs. daily for ARK Invest.
"Megacap tech stocks have been the prime beneficiaries of the recent positive momentum regarding artificial intelligence," said Charlie LaRosa of Gabelli Funds."We continue to seek franchise businesses with barriers to entry, pricing power, recurring revenue, and large free cash flow generation that are trading below private market value (the value of a company if all its divisions were split up and sold for market prices)."
Fidelity Blue Chip Growth's S&P 500 Favorites
| Company | Symbol | Year-to-date % ch. | ETF weight | Sector |
|---|---|---|---|---|
| Apple | 43.9% | 10.95% | Information Technology | |
| Microsoft | 39.1 | 10.15 | Information Technology | |
| Nvidia | 194.4 | 8.12 | Information Technology | |
| Amazon.com | 54.9 | 7.37 | Consumer Discretionary | |
| Alphabet | 39.6 | 5.63 | Communication Services | |
| Meta Platforms | 136.7 | 4.32 | Communication Services | |
| Tesla | 114.8 | 2.51 | Consumer Discretionary | |
| Marvell Technology | 59.6 | 2.39 | Information Technology | |
| Uber Technologies | 73.1 | 2.00 | Industrials | |
| Netflix | 43.3 | 1.97 | Communication Services |
Sources: ETF.com, IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
