Recent record highs in the S&P 500 and Dow Jones industrials have been very bullish for the equities in general. While the tech sector was beat up over the course of September, October has been a lot more favorable, especially with the start of the most recent earnings season. The worst may be over for tech now, with the rotation trade from growth to value in play currently. The short term may be unclear, but the mid to long term looks bullish.
ARK Invest funds have been selectively tech-heavy, which explains recent movement relative to interest rates. Taking into account recent moves by the Federal Reserve, these funds are headed for boom or bust. Year-over-year comparisons on a few of these funds suggest weakness. Right now, the question is where ARK Invest is going and if it can back it up.
Here, we are looking at ARK Next Generation Internet ETF (NASDAQ: ARKW). As it stands now, this fund underperformed the broad-based market indexes during the quarter. Some of its top detractors were Skillz Inc. (NYSE: SKLZ) and Roku Inc. (NASDAQ: ROKU).
According to the report:
While competition in the mobile gaming space hurt its earnings, we believe Skillz’s revenue growth has been impressive, highlighting its potential as a primary gaming ecosystem in which pro eSports players and enthusiasts engage with casual players in 1v1 competitions. Roku declined after reporting second quarter earnings because the reopening of the economy caused slower than expected user growth. ARK maintains high conviction that Roku is well-positioned to capitalize on the shift from linear TV to connected TVs and streaming.
Among the top contributors were Tesla Inc. (NASDAQ: TSLA) and Unity Software Inc. (NYSE: U).
Here’s the portfolio composition for ARKW:
| Element | Exposure |
|---|---|
| Digital Media | 18.0% |
| E-Commerce | 16.1% |
| Cloud Computing | 13.7% |
| Big Data & Machine Learning | 12.1% |
| Blockchain & P2P | 12.1% |
| Internet of Things | 11.3% |
| Social Platforms | 8.6% |
| Mobile | 8.1% |
Here are the top 10 holdings of the fund:
| Company | Weight |
|---|---|
| TESLA | 10.4% |
| GRAYSCALE BITCOIN TRUST BTC | 5.5% |
| 5.4% | |
| COINBASE GLOBAL – CLASS A | 5.2% |
| TELADOC HEALTH | 4.9% |
| ROKU | 4.4% |
| UNITY SOFTWARE | 4.3% |
| SHOPIFY – CLASS A | 4.0% |
| SQUARE – A | 4.0% |
| SPOTIFY TECHNOLOGY | 3.8% |
| Total | 51.8% |
The ETF recently closed at $155.54, within a 52-week range of $109.56 to $191.13. Over the past quarter, net asset value for the ETF dropped 9.9%, and the market price tracked practically the same. Year to date, the ETF is down 5.1%, and over the past year, it is up about 29.6%.
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