One of the primary advantages of the ARK Web x.0 ETF (NYSEArca: ARKW) is that it reaches multiple internet-relevant themes, retail disruption among them.
ARKW components “are focused on and expected to benefit from shifting the bases of technology infrastructure to the cloud, enabling mobile, new and local services, such as companies that rely on or benefit from the increased use of shared technology, infrastructure and services, internet-based products and services, new payment methods, big data, the internet of things, and social distribution and media,” according to ARK Invest.
ARKW is all the more important today as online retailers continue swiping market share from old guard brick-and-mortar rivals.
“While in-store retail sales in the US peaked in 2015, the coronavirus pandemic has accelerated the shift to e-commerce,” writes ARK Invest analyst Tasha Keeney. “Last mile autonomous delivery could provide another boost, making e-commerce much more cost-effective and convenient. In our view, companies with large retail real estate footprints will continue to suffer from a decline in foot traffic.”
ARKW: Poised for Industry Changes
ARKW aims to capture long-term growth with low correlation of relative returns to traditional growth strategies and negative correlation to value strategies. It serves as a tool for diversification due to little overlap with traditional indices. The actively managed strategy combines top-down and bottom-up research in its portfolio management to identify innovative companies and convergence across markets, and this active strategy comes in the low-cost and efficient ETF wrapper.
By 2020, an estimated 2 billion people are expected to be digital shoppers or a 19% jump from 2018 levels, as more people, notably from emerging economies where barely half the population is online, gain access to the internet. Almost one-third of consumers are already shopping online at least weekly and 75% at least once a month.
With the holiday shopping season essentially here, ARKW has another catalyst. Some holiday shoppers may just be late in getting to it. Given how spending is highest in November and December, with estimates at three-quarters of a trillion dollars, the prevalence of online shopping means a lot of companies can profit.
Data confirm ARKW is at the right place at the right time when it comes to retail disruption.
“In our view, as a percent of retail, global e-commerce will quadruple from 16% in 2019 to 60% in 2030 as drones add to its convenience,” notes Keeney. “As a result, retail real estate values are likely to suffer. ARK estimates that US e-commerce will grow from $820 billion in 2019 to $2.7 trillion in 2025, pushing non-e-commerce retail down from $4.6 trillion to $3.9 trillion, a level last seen in the late 90s.”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.