The ARK Autonomous Technology & Robotics ETF (CBOE: ARKQ) is ascending the ranks of actively managed exchange traded funds in terms of performance. Exposure to Tesla (NASDAQ: TSLA) is a big reason why.
ARKQ captures the converging industrial and technology sectors, capitalizing from autonomous vehicles, robotics, 3D printing, and energy storage technologies. That wide mandate helps lever the ARK fund much more than just self-driving cars, an important trait at a time of rapid robotics advancements.
ARKQ is up more than 71% year-to-date, putting it in rare air among active funds, a performance that’s been in large part due to the fund’s status as one of the largest ETF holders of Tesla stock. Importantly, analysts see more upside ahead for the electric vehicle maker.
“We expect Tesla will continue to innovate and remain ahead of both startup and established competitors,” according to Morningstar. “Plus, if Tesla can in fact slash battery cell costs as it has suggested, its cost advantage versus its competitors may be hard to beat.”
Tesla Stock Matters for ARKQ
Adding to the Tesla case, the company said earlier this year the battery range on the popular Model 3 S is now 402 miles. Increased range is crucial in driving higher adoption of electric vehicles because simply put, fears of running out of charge have kept some buyers out of the market. As for near-term catalysts for Tesla stock, there are those, too.
Morningstar analyst David Whiston “points out that the firm’s production capacity, while growing, is still somewhat limited. Tesla’s mission to make electric vehicles increasingly more affordable will require more assembly plants, which we think will cost billions a year in capital spending and research and development.”
Many signs point to more long-term upside for Tesla, which would pave the way for ARKQ to continue delivering for investors.
Currently, electric vehicles represent a small percentage of new automobiles sold around the world and cars on the road, but that percentage is expected to increase in a big way over the next several years. Increasing battery life and power is essential to converting more drivers to electric vehicles
Additionally, electric vehicles are viewed as the next frontier in ride-hailing because companies want to reduce emissions and drivers want to lower fuel costs.
For more on disruptive technologies, visit our Disruptive Technology Channel.
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.