Ark Innovation ETF: High Hopes, Low Performance
Ark Investment’s brainchild, the Ark Innovation ETF, has made waves with its focus on companies pioneering “disruptive innovation” in fields like genomics, robotics, AI, and fintech. Initially touted as the new Nasdaq darling, the Ark ETF basked in the limelight during the 2021 bull market. However, the subsequent 2022 bear market exposed its flaws, leading to significant underperformance. With an annual expense ratio of 0.75%, investors watched their actively managed fund plummet by 11% over the past five years. In contrast, the passively managed Invesco QQQ Trust, tracking the tech-heavy Nasdaq-100 index, emerged as the star performer, boasting just a 0.2% expense ratio and a remarkable 30% growth over the last 12 months.
Ark’s struggles continued in 2023 as it failed to capitalize on the AI stock upswing. While the Invesco QQQ thrived, returning approximately 30%, the Ark Innovation ETF lagged, delivering a meager 8% return. Only in fleeting instances over the past year did Ark Innovation manage to match up to its competition, showcasing a pattern of consistent underperformance.
Ark’s portfolio includes heavyweights like Tesla and Bitcoin. The fund correctly predicted Tesla’s rise to $267 per share in 2018, a feat that now fuels forecast optimism for a $2,000 price tag by 2027. While Bitcoin’s value soared from an initial investment of $250, Ark Investment’s bullish vision of $1 million per coin has yet to materialize, though current prices around $66,000 still yield substantial returns.
Ark’s Hits and Misses
While Ark’s success stories are compelling, its shortcomings are equally stark. Bold projections for companies like Roku, Zoom Video Communications, and Teladoc Health have mostly fallen flat. Ark’s over-optimistic expectations for Roku to reach $605 per share by 2026 seem a distant dream, considering its current valuation. Zoom’s anticipated price of $1,500 per share appears overly ambitious from its current value of about $60. As for Teladoc Health, a former top holding, its substantial fall from grace – dropping from over $300 to $13 per share – further highlights Ark’s miscalculations and misjudgments.
Despite notable wins, Ark’s missed opportunities cast a shadow over its overall track record, illustrating the unpredictability and volatility inherent in investment decisions.
The Better Bet: Invesco QQQ Trust
While Ark Innovation’s potential for redemption remains a looming possibility, the safer choice for investors seeking tech exposure lies with the Invesco QQQ Trust. Ark’s accurate prognostications and current ‘missed calls’ could potentially reverse course, but until then, the Invesco QQQ’s consistent outperformance and lower fees make it a more attractive investment option. The landscape may shift, and Ark’s current underdogs might yet become top performers, but until that day comes, the Invesco QQQ Trust maintains its lead.
Final Verdict: Caution Reigns
Before diving into the Ark Innovation ETF, investors should pause and ponder. While the Motley Fool Stock Advisor team may have overlooked the Ark ETF Trust in favor of other top picks, it doesn’t discount the possibility of a future turnaround for Ark’s investments. While the allure of the next big thing might be tempting, pragmatic investors may find solace in the proven track record and stability of the Invesco QQQ Trust. In the volatile world of investments, caution often proves to be the wiser strategy.
Are the Ark Innovation ETF’s glory days ahead or behind? Only time will reveal the elusive answer.