ARK Innovation ETF Is on the Move: What Does This Mean for Sectoral Themes

30th Dec 2023: The year is about to end. And with the ETF space buzzing in anticipation of much-hyped Bitcoin players, it’s time to shift focus to the more legacy investment options in ARK Innovation ETF (ARKK) — a fund overseen by Cathie Wood and managed by ARK Invest. ARKK, as of December 22, 2023, is up 67.7% year-to-date, following it with an 82.20% one-year daily total return. Despite the power-packed 2023, going blind into ARKK might not be the best option. Notably, the fund boasts a negative — -25.44% daily total return across the three years.

According to Trading.biz analyst Rahul Nambiampurath, ARKK’s move to glory is led by the rebound in Growth and Tech stocks.

“Positive developments in the portfolio companies and a changing market sentiment favoring innovation-driven investing have propelled the ARKK valuations,” mentions Rahul.

ARKK has bested the S&P 500 Index, up 22.4% year-on-year. At press time, ARKK was trading at $54.26, already up to $53.99 in Thursday’s pre-market session. Also, the 1-day chart of the ARK Innovation ETF reveals several interesting elements.

Pattern-wise, ARKK is trading inside an ascending triangle, which works as a bullish continuation pattern, provided the volume’s support. If ARKK breaches the upper trendline and continues the surge, the $58.69 level could be a target in the short-to-mid-term.

And while the pattern is supportive, the dipping RSI, courtesy of the bearish divergence, hints at a sell action.

As for the portfolio holdings, the ARKK basket comprises the following critical players as of December 26, 2023, post the last rebalancing act:

Coinbase Global (COIN): 11.43%

Tesla, Inc. (TSLA): 7.56%

UiPath Inc. (PATH): 7.14%

Roku, Inc. (ROKU): 6.88%

Zoom Video Communications, Inc. (ZM): 6.77%

Block, Inc. (SQ): 6.48%

And more.

What Does ARKK’s Growth Mean for the Investors?

Interestingly, as highlighted by analyst Rahul Nambiampurath, ARKK’s success in 2023 could be a prospective amplification of sectoral themes. For instance, with investments in Biotechnology firms like CRISPR Therapeutics AG (CRSP), Exact Sciences Corporation (EXAS), and more, followed by Tech and AI investment in Palantir, UiPath, COIN, and more — 2024 could be the year for the more celebrated sectors.

ARKK or FBCG?

ARKK’s lead, in terms of YTD growth, over other ETFs like the Fidelity Blue Chip Growth (FBCG) — which is up 57.3% YTD at press time, shows how the markets are leaning more towards disruptive technologies as compared to the blue-chip bias for stocks like NVIDIA, Apple, Microsoft, and more.

Yet, as an investor, the expense ratio comes into focus, which is a tad higher for ARKK at 0.75% compared to FBCG, which is set to 0.59%. While short-term investors couldn’t tell the difference, this factor can tilt in favor of FBCG for long-term investments. Therefore, sectoral themes with a disruptive focus might have to do much more to stay on par with the large-cap players.