ARK Innovation Gained 10% in October. Thank Tesla and Coinbase. | Barron’s
Cathie Wood
The $21.4 billion
ARK Innovation
exchange-traded fund (ticker: ARKK), managed by outspoken stock picker Cathie Wood, gained 10% in October, marking its best monthly return since June. The fund jumped another 3% on the first day of November, continuing the strong momentum from last month.
Tesla
(TSLA), ARK Innovation’s top holding with more than 11% weight, contributed the most to the fund’s gains. The stock in the electric carmaker soared 44% in October, lifting the ARK fund by 4 percentage points alone. Cryptocurrency exchange
Coinbase Global
(COIN), currently making up nearly 7% of ARK Innovation’s portfolio, also drove the fund’s gains after rising more than 40% in October.
Other major contributors include digital healthcare leader
Teladoc Health
(TDOC), music-streaming platform
Spotify Technology
(SPOT), and videogame software developer
Unity Software
(U).
Tesla stock’s latest gains, which made Tesla the sixth company in U.S. history to be worth more than $1 trillion, came after
Hertz Global Holdings
(HTZZ) ordered 100,000 of its electric vehicles for the rental car company’s fleet. Other members of the trillion-dollar club include
Apple
(AAPL),
Microsoft
(MSFT), Google parent
Alphabet
(GOOGL), and
Amazon.com
(AMZN).
Coinbase
shares have been rising, on the other hand, as U.S. regulators recently greenlighted two Bitcoin-linked ETFs for the first time, a move that allows the digital asset to delve deeper into brokerage accounts and signals the crypto market going mainstream. Coinbase would benefit from a broad shift toward Bitcoin and other cryptocurrencies, which are integrating into the payment system used by millions of Americans.
Besides ARK Innovation, all other actively managed funds from Wood’s ARK Invest also finished the month with gains. The $5.5 billion
ARK Next Generation Internet
ETF (ARKW) rose the most, by 13%, while the $7.2 billion
ARK Genomic Revolution
ETF (ARKG) saw the smallest increase of 0.6%.
The
ARK Innovation ETF
,
along with other ARK funds, were some of the best-performing funds in 2020 as the Covid-19 pandemic led to significant gains in the innovation-driven stocks in their portfolios. A few of the ARK funds returned more than 100% last year and attracted billions of dollars in new assets from fervent followers of Wood, an unwavered believer in a future redefined by disruptive innovations and the exponential growth they’ll bring.
The ARK funds have been struggling to maintain their momentum this year, however. Many of their stockholdings are trading at lofty valuations that are betting on huge expected growth in the future. As inflation flares up and interest rates rise, the current value of these growth companies’ future cash flow is being diminished.
After peaking in February, the ARK funds have since declined and have traded range bound throughout the year. The latest rebound came in June, when ARK Innovation jumped 17% in that month, but the fund has since been pulling back again. Even after October’s gains, the fund is still largely flat for the year.
ARK Innovation is now trading around $125 per share, heading toward the ceiling of $131 it’s approached multiple times since February. If the fund can break above that level, it would mark a major bullish turn for the growth and innovation stocks.
Most of ARK’s other funds have performed better this year, with the $2.6 billion
ARK Autonomous Technology & Robotics
ETF (ARKQ) leading the pack, up by 11% in the first 10 months of the year.
Write to Evie Liu at [email protected]