It’s been a rough year for disruptive growth stocks, but there could be a silver lining emerging from the struggles of this beloved investing style.
A “blood in the streets” mentality could develop, meaning that some prescient investors could buy the dips — of which there are plenty to be had — in innovative growth equities and the related exchange traded funds, including the ARK Innovation ETF (NYSEArca: ARKK).
ARKK is off 13.43% year-to-date. Obviously, that’s not an inspiring performance, but it could also spell opportunity, particularly for patient, long-term investors because the long-ranging outlook for disruptive growth equities is exceedingly compelling.
“According to our research, emerging innovation platforms will transform our lives and the global economy radically, scaling their equity market capitalizations potentially from roughly $14 trillion today to more than $200 trillion in 2030,” writes ARK Investment Management portfolio manager Renato Leggi.
Leggi highlights five areas of future innovation — artificial intelligence, DNA sequencing, robotics, energy storage, and blockchain technology — that could power disruptive tech investments higher in the years ahead. The actively managed ARKK pioneered combining those themes under one umbrella as the ETF features exposure to fintech companies, energy storage firms, genomics revolution enterprises, and purveyors of artificial intelligence and robotics technologies, among others.
With the coronavirus still lingering, it’s worth noting that while the pandemic actually fostered increased adoption of many disruptive technologies, the runway for the those technologies is compelling with or without the health crisis.
“Spurred by the coronavirus crisis, these platforms converged to solve many problems during the last 18 months. As a result, the enterprise value associated with their companies doubled from roughly $7 trillion in 2019 to $14 trillion in 2020,” adds Leggi.
What’s alluring about the artificial intelligence, DNA sequencing, robotics, energy storage, and blockchain technology themes from an investment perspective is that they’re still in their infancy. Combined, those platforms had an enterprise value of $14 trillion last year, but ARK believes that this figure could swell to $210 trillion in 2030. Even if that estimate comes in a few trillion dollars short, it implies that ARKK could reward investors over the long term.
“In our view, the coronavirus crisis changed many behaviors profoundly and permanently,” notes Leggi. “We believe that these five innovation platforms will add dramatically to investment opportunities in the future. They will displace old technologies and enable humans to achieve feats that seem unimaginable today.”
Bottom line: ARKK is down, but it’s not out. The ETF’s 2021 decline could prove to be an interesting buying opportunity.
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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.