S&P 500   5,011.18 (+0.88%)
DOW   38,245.95 (+0.68%)
QQQ   419.50 (+1.17%)
AAPL   166.59 (+0.96%)
MSFT   401.22 (+0.53%)
META   484.02 (+0.61%)
GOOGL   156.83 (+1.78%)
AMZN   177.36 (+1.56%)
TSLA   142.42 (-3.15%)
NVDA   794.45 (+4.26%)
AMD   148.69 (+1.40%)
NIO   4.01 (+5.53%)
BABA   70.86 (+2.59%)
T   16.31 (-1.21%)
F   12.83 (+5.68%)
MU   109.46 (+2.52%)
GE   150.45 (+1.61%)
CGC   7.84 (-1.13%)
DIS   112.35 (-0.23%)
AMC   3.43 (+8.54%)
PFE   26.35 (+1.35%)
PYPL   63.36 (+1.69%)
XOM   120.72 (+0.70%)
S&P 500   5,011.18 (+0.88%)
DOW   38,245.95 (+0.68%)
QQQ   419.50 (+1.17%)
AAPL   166.59 (+0.96%)
MSFT   401.22 (+0.53%)
META   484.02 (+0.61%)
GOOGL   156.83 (+1.78%)
AMZN   177.36 (+1.56%)
TSLA   142.42 (-3.15%)
NVDA   794.45 (+4.26%)
AMD   148.69 (+1.40%)
NIO   4.01 (+5.53%)
BABA   70.86 (+2.59%)
T   16.31 (-1.21%)
F   12.83 (+5.68%)
MU   109.46 (+2.52%)
GE   150.45 (+1.61%)
CGC   7.84 (-1.13%)
DIS   112.35 (-0.23%)
AMC   3.43 (+8.54%)
PFE   26.35 (+1.35%)
PYPL   63.36 (+1.69%)
XOM   120.72 (+0.70%)
S&P 500   5,011.18 (+0.88%)
DOW   38,245.95 (+0.68%)
QQQ   419.50 (+1.17%)
AAPL   166.59 (+0.96%)
MSFT   401.22 (+0.53%)
META   484.02 (+0.61%)
GOOGL   156.83 (+1.78%)
AMZN   177.36 (+1.56%)
TSLA   142.42 (-3.15%)
NVDA   794.45 (+4.26%)
AMD   148.69 (+1.40%)
NIO   4.01 (+5.53%)
BABA   70.86 (+2.59%)
T   16.31 (-1.21%)
F   12.83 (+5.68%)
MU   109.46 (+2.52%)
GE   150.45 (+1.61%)
CGC   7.84 (-1.13%)
DIS   112.35 (-0.23%)
AMC   3.43 (+8.54%)
PFE   26.35 (+1.35%)
PYPL   63.36 (+1.69%)
XOM   120.72 (+0.70%)
S&P 500   5,011.18 (+0.88%)
DOW   38,245.95 (+0.68%)
QQQ   419.50 (+1.17%)
AAPL   166.59 (+0.96%)
MSFT   401.22 (+0.53%)
META   484.02 (+0.61%)
GOOGL   156.83 (+1.78%)
AMZN   177.36 (+1.56%)
TSLA   142.42 (-3.15%)
NVDA   794.45 (+4.26%)
AMD   148.69 (+1.40%)
NIO   4.01 (+5.53%)
BABA   70.86 (+2.59%)
T   16.31 (-1.21%)
F   12.83 (+5.68%)
MU   109.46 (+2.52%)
GE   150.45 (+1.61%)
CGC   7.84 (-1.13%)
DIS   112.35 (-0.23%)
AMC   3.43 (+8.54%)
PFE   26.35 (+1.35%)
PYPL   63.36 (+1.69%)
XOM   120.72 (+0.70%)

Cathie Woods' Ark Innovation ETF Set To Rebound in 2023?

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Cathie Woods Ark Innovation ETF Set To Rebound in 2023?

Key Points

  • Gains in the top three holdings, including Tesla, propelled the ETF 27.82% higher in January, and it's adding to those gains as February gets underway.
  • Sharp declines in the fund's newer, unprofitable companies send the fund spiraling down in 2021 and 2022.
  • Its 2021 decline came a full year ahead of the drop in the Nasdaq 100.
  • If better economic conditions, such as lower interest rates, give investors optimism, the fund has a chance of continuing its nascent rally this year. 
  • 5 stocks we like better than ARK Innovation ETF

Gains in Tesla Inc. NASDAQ: TSLA, Zoom Video Communications Inc. NASDAQ: ZM and Exact Sciences Corp. NASDAQ: EXAS are propelling the Ark Innovation ETF NYSEARCA: ARKK to better-than-ever monthly gains.

Does that mean the Ark Innovation ETF, which notched one of the best performances among all ETFs in 2020, is ripe for a rebound?

The ARKK ETF returned 27.82% in January, its best monthly return since launching in 2016. It’s had other months with gains above 20%, such as April 2020 and November 2020, but none this big. 

Managed by chief investment officer Cathie Woods, the Ark Innovation ETF was one of the brightest lights in the pandemic-era tech rally. The fund returned 152% in 2020, which would be astounding for a single stock, let alone a basket of stocks such as this. 

It kicked off February with a gain of another 12%, due in no small part to recent gains in the top three holdings Tesla, Zoom, and Exact Sciences, as you can see on their respective charts. 

The Ark Innovation fund’s objective is long-term growth by investing at least 65% of its assets in U.S. and foreign stocks that adhere to an investment theme of disruptive innovation. Ark considers disruption ‘‘disruptive innovation’’ as a technologically-enabled product or service with the potential to change how the world works. 


Companies within the ETF fall under the following categories:

  • DNA Technologies and the “Genomic Revolution”
  • Automation, Robotics, and Energy Storage
  • Artificial Intelligence and the “Next Generation Internet”
  • Fintech Innovation

While Woods’ stock-picking abilities were widely lauded during the fund’s stunning uptrend, which peaked in January 2021, she and her find were widely panned as its value continued to drop. 

Growth Hit Hard In Market Correction

However, it’s worth taking those criticisms with a grain of salt, as this fund falls squarely into the growth category, which was hit especially hard as the broad market corrected. 

While the wider tech-centric Invesco QQQ Trust ETF NASDAQ: QQQ didn’t begin correcting until a year after the Ark Innovation ETF, there wasn’t much Woods and Ark could have done differently and still adhere to the fund’s investment objective. For example, the fund couldn’t suddenly make a change to overweight energy stocks in 2022, as that wouldn’t line up with its objective. 

Zoom is the second-most heavily weighted stock in the portfolio, which constitutes 8.26% of the fund allocation. As employees began returning to in-person work in 2020 and the well-known “Zoom fatigue” set in, sales and income began declining and the stock fell along with it. 

The stock dropped 46% in 2021, partially explaining why the ARKK ETF fell sharply. Things didn’t get any better in 2022, with Zoom declining another 63%

Meanwhile, another large holding, Exact Sciences, fell 41% in 2021 as the wider biotech industry crumbled. Exact develops cancer screening and diagnostics tools for early detection. The stock in 2021 partly because of company-specific developments about the end of a co-promotion deal with Pfizer Inc. NYSE: PFE for Exact’s Cologuard screening product.  

Unprofitable Companies Out Of Favor

Nonetheless, with investors seeking higher quality stocks over the past two years, an unprofitable company like Exact wasn’t the kind of thing institutions were piling into.  

To be accurate, while the fund was in the midst of its steep declines in 2021 and 2022, other stocks were more heavily weighted. For example, Roku Inc. NASDAQ: ROKU, Block Inc. NYSE: SQ and Teladoc Health Inc. NYSE: TDOC were all among the top holdings in the past couple of years, and all three posted significant declines during that time.

While other growth-oriented ETFs, such as the more staid Vanguard Growth ETF NYSEARCA: VUG posted declines last year, ARKK has more reliance on unprofitable, young companies that haven’t yet attracted the kind of institutional support to buoy stocks during bouts of high-interest rates and economic uncertainty, as occurred in 2022. 

More Established Large Caps Fared Better

For example, the Vanguard Growth ETF’s top holdings are pretty reliable stalwarts: Apple Inc. NASDAQ: AAPLMicrosoft Corporation NASDAQ: MSFT, Amazon.com, Inc. NASDAQ: AMZN and Alphabet Inc. NASDAQ: GOOGL, none of which saw the meltdowns that some of the smaller, less proven ARKK holdings did. 

Woods is playing a game with more risk in opting for newer, unprofitable stocks over more established names like you’ll find in the Vanguard fund. However, as shown in 2020, when the market favors that category of stocks, there’s potential for a huge upside. 

It’s unlikely that 2023 will result in the same sky-high returns that growth investors saw in 2020. However, if more favorable conditions, such as lower interest rates, can boost growth stocks, it’s not impossible that the ARKK ETF could stage something of a comeback.

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Should you invest $1,000 in ARK Innovation ETF right now?

Before you consider ARK Innovation ETF, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and ARK Innovation ETF wasn't on the list.

While ARK Innovation ETF currently has a "hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
ARK Innovation ETF (ARKK)N/A$42.62+1.5%N/AN/AN/AN/A
Tesla (TSLA)
4.844 of 5 stars
$141.91-3.5%N/A32.93Hold$194.70
Zoom Video Communications (ZM)
4.7819 of 5 stars
$59.58+0.2%N/A29.21Hold$77.56
Exact Sciences (EXAS)
4.4521 of 5 stars
$62.45+2.4%N/A-54.78Moderate Buy$97.44
Invesco QQQ (QQQ)N/A$418.57+0.9%0.58%N/AN/AN/A
Pfizer (PFE)
4.99 of 5 stars
$26.35+1.3%6.38%73.19Hold$36.33
Roku (ROKU)
3.1504 of 5 stars
$58.26+2.4%N/A-11.61Hold$84.76
Block (SQ)
3.5616 of 5 stars
$71.71+1.8%N/A414.23Moderate Buy$85.22
Teladoc Health (TDOC)
3.1843 of 5 stars
$13.33+2.7%N/A-9.95Hold$22.23
Apple (AAPL)
4.8589 of 5 stars
$166.25+0.8%0.58%25.90Moderate Buy$203.34
Microsoft (MSFT)
4.5992 of 5 stars
$400.13+0.3%0.75%36.18Moderate Buy$434.05
Amazon.com (AMZN)
4.8248 of 5 stars
$176.89+1.3%N/A61.00Buy$202.80
Alphabet (GOOGL)
2.6834 of 5 stars
$156.35+1.5%N/A26.96Moderate Buy$158.41
Vanguard Growth ETF (VUG)N/A$325.46+0.9%0.46%40.31N/AN/A
Compare These Stocks  Add These Stocks to My Watchlist 

Kate Stalter

About Kate Stalter

  • stalterkate@gmail.com

Contributing Author

Retirement, Asset Allocation, and Tax Strategies

Experience

Kate Stalter has been a contributing writer for MarketBeat since 2021.

Additional Experience

Series 65-licensed investment advisor, financial advisor, Blue Marlin Advisors; investment columnist for Forbes, U.S. News & World Report

Areas of Expertise

Asset allocation, technical and fundamental analysis, retirement strategies, income generation, risk management, sector and industry analysis

Education

Bachelor of Arts, Saint Mary’s College, Notre Dame, Indiana; Master of Business Adminstration, Kellogg School of Management at Northwestern University

Past Experience

Founder, financial advisor for Better Money Decisions; editor, stock trading instructor for Investor’s Business Daily; columnist, podcast host, video host for MoneyShow.com; contributor for Morningstar magazine


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