1 ETF that may not be able to reverse course in 2022

ARK Innovation ETF (ARKK) is an actively managed fund aiming for long-term capital growth by investing at least 65% of its assets in domestic and foreign equity securities of companies that correspond to the fund’s investment theme of disruptive innovation .

“Disruptive innovation” is defined as the introduction of a new, technologically enabled product or service that potentially changes the way the world works.

ARKK, the flagship fund of Cathie Wood’s ARK Investment Management, has has fallen in recent months on weak earnings from its tech stock holdings as high inflation numbers and subsequent rate hikes weighed on the tech industry. In August, the fund suffered a net outflow of $835 million, the fund’s largest outflow since last September.

The ETF is down 68% over the past year and 57.6% year-to-date to close its last trading session at $40.09. It is down 19.9% ​​over the past month. It has a five-year monthly beta of 1.62.

Here are the factors that could affect ARKK’s performance in the short term:

Fund statistics

As of July 31, the fund had $9.34 billion in net assets. He has a net asset value of $40.09. ARKK’s spend rate of 0.75% is significantly higher than the industry average of 0.50%. Its net outflows were $306.09 million over the past year and $706.71 million over the past month. As of June 30, the fund’s portfolio had 18.8% cloud computing investments, followed by 11.4% in digital media and 9.4% in gene therapy.

Main titles

Since September 7, ARKK main holdings include Tesla, Inc. (TSLA) with a weighting of 9.95%, Zoom Video Communications, Inc. (ZM) with a weight of 8.34%, Roku, Inc. (ROKU) with a weight of 7.02%, Exact Sciences Corporation (EXA) with a weight of 4.90%, and Block, Inc. (SQ) with a weight of 4.70%.

POWR ratings reflect bleak outlook

the ARKKs POWR Rankings reflect these bleak outlooks. The stock has an overall F rating, which equates to a strong sell in our proprietary rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

ARKK has a Trade and Buy & Hold rating of F and a Peer rating of D. In the 118-ETF Tech Stock ETFs group, he is ranked #69. The band is rated D.

Click here to learn more about ARKK’s POWR ratings.

See all the best ETFs from the ETF group Technology stocks here.

Conclusion

ARKK is having a tough year due to the onslaught of rate hikes and the effect on the tech sector. Additionally, Cleveland Federal Reserve Chair Loretta Mester expects interest rates will rise further in the coming months to bring inflation under control. This could make it difficult for the ETF to reverse course this year. Therefore, I think it is better to avoid the fund now.

How does ARK Innovation ETF (ARKK) compare to its peers?

Although ARKK has an overall POWR rating of F, one might consider looking at its industry peers, iShares North American Tech-Multimedia Networking ETF (IGN) and Innovator Growth-100 Power Buffer ETF – October (NOCT), which have an overall rating of B (buy).


ARKK shares were trading at $41.31 per share on Wednesday afternoon, up $1.22 (+3.04%). Year-to-date, the ARKK is down -56.33%, compared to a -15.59% rise in the benchmark S&P 500 over the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. After…

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