IStandard growth stocks aren’t the only ones hampered by the growth-to-value rotation this year. The disruptive growth counterparts are, well, disrupted by the sudden adoption of value by investors.
Keeping in mind that factor leadership is fluid and that many emerging technologies are only scratching the surface of their long-term growth potential, investors should therefore not be frustrated by this year’s gloom in the market. ETF ARK Innovation (NYSEArca: ARKK). While strength in value does not support ARKK’s success, the fund paints a compelling picture of how disruptive growth investments can be alluring.
ARKK “is possibly the most publicized example of disruptive technology investing,” said Morning Star David Sekera. “Even after slipping from its February highs, the stock is still almost double its level of a year ago and triple its level two years ago.”
Diversification has enabled ARKK to step onto its podium today. While many thematic funds isolate a single concept or market segment, ARKK looks at multiple disruptive industries including automation, fintech, genomics and the next generation internet.
A new kind of disturbance?
Although more than two decades have passed since the tech bubble burst, memories of 2000 tend to resurface when it comes to declining growth stocks. However, innovative growth investing evolves, and it is in the best interests of investors.
“Today, instead of being confined to a narrow perimeter on the internet, disruptive technology companies are spread across the economy and targeting new ways to revolutionize many industries and sectors,” Sekera said. “While many of these companies are still in their early stages of product development and monetization, they typically focus more on short-term profitability than dot-com stocks. “
Obviously, strong stock selection is an integral part of any actively managed fund and this is something that has made ARKK a winner in this category. The ETF typically only owns 35 to 55 shares. He holds 52 today.
While ARKK has long been praised for its early adoption of Tesla (NASDAQ: TSLA) and, later, Roku (NASDAQ: ROKU) and Square (NYSE: SQ), it has other components that could generate a significant increase in the long term.
“Teladoc Health (TDOC) is a virtual healthcare provider serving patients across all communication media; Palantir (PLTR) enables clients to manage and analyze large and disparate data sets; and in support of the home work environment, DocuSign (DOCU) enables users to automate and deliver legally binding contracts from any device, ”concludes Sekera.
Teladoc is ARKK’s second holding company behind Tesla.
To learn more about disruptive technologies, visit our Breakthrough technology channel.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.