ARK InvestSummary List Placement
By all indications, Cathie Wood's $29 billion asset management firm Ark Invest has turned in another great quarter.
The firm's $10.5 billion Ark Innovation ETF (ARKK), $3 billion ARK Next Generation Internet ETF (ARKW), and $3 billion ARK Genomic Revolution ETF (ARKG) have returned 29.01%, 27.99%, and 22.14%, respectively, during the June-to-September period, according to Bloomberg data.
In a quarterly webinar on Thursday, Wood, the CEO and CIO of Ark, attributed the outperformance of the funds in part to the coronavirus crisis, which "turbocharged the shift towards innovation that we're underway anyway."
Since its launch, Ark Invest has put its money behind five innovation platforms — DNA sequencing, robotics, energy storage, artificial intelligence, and blockchain technology.
In normal times, some of these innovations might have taken longer to materialize, but the pandemic has accelerated that process by creating a lot of problems that these innovation platforms seek to solve, according to Wood.
"Really we've hit escape velocity, there's no turning back," she said. "So we're enjoying certainly that turn of events."
Behind Ark's stellar quarter are Wood and its analysts' deep-dive research and analysis of each portfolio company. They shared the 8 winning stocks that have contributed to the active funds' outperformance during the quarter.The EV stocks
Electric vehicle-maker Tesla (TLSA)'s stock, which has gone up 440% so far this year, is a big contributor to ARKQ.
Tesla's record earnings last quarter are part of the reason why the stock surged but the real catalyst is "Battery Day," when Tesla announced its plans to reduce battery costs by over 50%, increase range by 50%, and reduce capital costs by nearly 70%, according to analyst Tasha Keeney.
"So these are extremely dramatic reductions and they are going to allow Tesla to produce a car that only costs $25,000 in the next three years," Keeney said.
She added: "As we look at the electric vehicle market, Tesla's sort of running away from competitors and as they're able to drop costs, it will only become even more difficult for competitors in the electric vehicle space to offer cars that are equivalent on a price and performance and range characteristic."
Another top contributor to the fund is EV-maker Workhorse (WKHS), whose stock has jump 456% this year.
"Workhorse got a bit of attention this quarter because of Lordstown Motors, which they have a 10% stake in," said Keeney, noting that the stock benefitted from Lordstown Motors going public via a SPAC merger.
She continued: "And Workhorse also received an order from the California Air Resources Board for its all-electric delivery trucks."The internet stocks
"Their seller business recovered much more quickly than expected from the COVID-19 crisis," said analyst Max Friedrich of the factors driving Square's 200% rise year-to-date.
He added that Square's mobile payment app — Cash App — also delivered stronger than expected growth during the second quarter.
"During the lockdown in March and April, investors were forced in some way to focus on the Cash App and really try to understand what's going on in Square's consumer ecosystem and the Cash App ecosystem," he explained.
"And by doing that, they discovered that the Cash App could be the key growth driver going ahead for Square. And we think that especially has helped the stock in recent months."
What's propelling Roku's 70% jump this year is a new deal that they signed with Comcast, which allows Roku to carry Peacock streaming, according to analyst Nick Grous.
"This is major news that they're able to get this deal done because it helps Roku's ad business," he said. "Every ad-supported streaming service that signs on, the standard deal and cut they usually take is about 30% of the ad load. So getting one of these top-tier ad-supported services is a win for them."The biotech stocks
"They appreciated mainly because of the announcement of positive top-line data for the SER-109 trial," said analyst Ali Urman of Seres Therapeutics, a late-clinical stage biotechnology company in Massachusettes.
Meanwhile, Invitae's stock rose on its investments in telemedicine, according to Urman.
"They also make investments in artificial intelligence, genetic counseling, world-class germline variant interpretation, pharmacogenomics, and clinical workflows," she said. "And we believe that gives Invitae an advantage over its competition."The fintech stocks
"Zillow will continue to benefit from mortgage rates that have dropped to really 50-year lows and from the premium that is now placed on personal space as a result of COVID-19," said analyst Friedrich.
He added: "We think that the whole real estate space — the process of buying and selling real estate is really ripe for disruption. And we expect that there will be a lot of value created by simplifying that process and taking friction out of that process."
Another industry disruptor is Sea, which is primarily known for its e-commerce business and gaming unit.
"What a lot of people don't know about this company is it also has a digital banking services arm called SeaMoney," said analyst Grous. "Their mobile wallet has seen tremendous growth ... so total payment volumes for the last quarter exceeded $1.6 billion and surpassed 15 million paying users."
He continued: "The reason that Sea has seen such success is because it doesn't operate each individual unit separately. It tries to combine and find synergies between its e-commerce, gaming, and now digital banking services."
NOW WATCH: How the suicide hotline saved my life
- The founder of an ETF trouncing 99% of competitors explains how industry pioneer Burton Malkiel taught him how to invest in emerging markets — and shares 5 stock picks he loves right now
- GOLDMAN SACHS: Buy these 21 high-growth stocks that have huge upside potential as future index leaders
- The investment chief at a $750 million firm explains why the bull market will forge on regardless of election outcome — and shares the 12 highest-conviction stock picks that make up her market-beating strategy