Perhaps overshadowed by some of its stablemates, the ARK Web x.0 ETF (NYSEArca: ARKW) is quietly becoming a force among internet ETFs this year.
The actively managed ARKW has $1.3 billion in assets under management and is higher by almost 77% year-to-date due in large part to the fact that it’s far from a basis internet ETF.
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.
While standard internet ETFs rely on Amazon (NASDAQ: AMZN) and Facebook (NASDAQ: FB), among others to drive returns, ARKW allocates almost 18% of its combined weight to Tesla (NASDAQ: TSLA) and Square (NYSE: SQ), two of this year’s best-performing names regardless of sector or industry.
ARKW: Another ARK Winner
What makes ARKW a more compelling option than passively managed funds is that with the benefit of active management, the fund goes beyond prosaic fares, such as Alphabet, Amazon, and Facebook. For example, Tesla is ARKW’s top holding, and the fund features exposure to the likes of Square and Roku, stocks not often found for size in traditional internet ETFs. Roku is another streaming name as the leader in the OTT space. Roku is ARKW’s third largest holding at a weight of 7.13%.
Said another way, ARKW is very much a growth fund at a time when growth stocks are extending a lengthy run of dominance over value fare.
Growth stocks are often associated with high-quality, prosperous companies whose earnings are expected to continue increasing at an above-average rate relative to the market. Growth stocks generally have high price-to-earnings (P/E) ratios and high price-to-book ratios. Still, data suggest the growth/value premium isn’t overly elevated relative to historical norms.
ARKW centers its investments on long-term growth of capital where 80 percent of its assets in domestic and foreign equity securities of companies coincide with the ETF’s investment theme of Web x.0. This includes companies in the forefront of web technology, such as cloud computing, cybersecurity, big data, and machine learning. The fund also features blockchain, bitcoin and e-commerce exposure, among other allocations to hyper-growth segments.
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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.