This week’s soft CPI print has sent the stock market into a flurry of positivity, hitting multi-year highs on Thursday as investor optimism leaped forward. With riskier plays back on the table, investors may want to try a biotech ETF like the ARK Genomic Revolution ETF (ARKG) which holds some notable small biotech firms that reported positive news themselves this week.
The demand for risk-on assets sets the stage for forward-thinking, innovation-minded strategies like ARKG to benefit, boosting a trend in risk-oriented investing in ETFs that spiked back in September. With ARKG’s sibling strategy, the ARK Innovation ETF (ARKK), having a remarkable day on Thursday in the risk assets surge, ARKG is primed for a sector-specific jump itself.
ARKG’s largest holding, Exact Sciences Corp. (EXAS) weighted at 8.8%, reported solid Q3 revenue numbers last Friday and is up 26.4% over the last five days and 8.7% Friday at press time for the day. While the stock is still down -41.4% YTD, it and other biotech stocks may be primed to rise even further should the still uncertain picture surrounding the U.S. midterm elections produce a split government.
ARKG’s second-largest holding at 5.8%, Ionis Pharmaceuticals (IONS) beat its earnings and sales estimates for Q3, with the stock up 2.8% over the last five days and 30.5% over the last six months. Finally, the ETF’s third-largest holding at 4.5%, Pacific Biosciences of California, Inc. (PACB), also beat estimates for Q3 and is up 29% over the last five days.
With markets expecting that the Fed will soften its rate hike agenda given the softer CPI print, investors may return to the mindset that saw ARKG return 20% over three years. The ETF has seen its performance pick up over the last month, returning 4.1% compared to its returns of -11.2% over the last three months.
ARKG charges 75 basis points for its active approach, investing in companies set to benefit from advances in biotech areas including stem cell research, molecular diagnostics, and gene editing. As flu season approaches and the market becomes more optimistic, investors looking for a solid biotech ETF should follow ARKG.
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