Ready for the new year? It wouldn’t be surprising for most ETF investors to be excited to put 2022 in the rear view. With the vast majority of equity ETFs down this year, investors face the added issue of looming uncertainty and a possible recession in 2023. That may create an opportunity to buy low on ETFs that aren’t expecting cap gains, with a number of big name, no cap gain ARK strats among them.
The flagship ETF from Cathie Wood’s shop, the ARK Innovation Fund (ARKK), is still up $1.2 billion in YTD net inflows and is one of those funds that doesn’t expect to issue a dividend or cap gains for 2022. It may not have been the right time to get into the no cap gain ARK ETF at the start of the year when it cost investors more than $90, but closing the year at $30.8, it presents a very different equation, especially floating at or around oversold territory.
ARKK enters the new year with a recent update to its holdings, with Exact Sciences Corporation (EXAS), the maker of colon cancer screening kit Cologuard, supplanting Tesla, Inc. (TSLA) as the second largest-weighted holding. EXAS is up 10.3% over the past month following news that Cologuard performed better in detecting colorectal cancer.
Other ARK strats to consider include another biotech-related strategy, the ARK Genomic Revolution ETF (ARKG), which also does not anticipate cap gains or dividends this year. The strategy holds EXAS as its largest weight at 11.7%, and while it has dropped from $62 in January, it has touched but not broken below $27, its current price, on two occasions earlier this year.
Looking ahead to the new year, it may be hard to believe that the tech space could have much to offer to investors. But long-term disruptive innovation has its ups and downs and may have a role to play in investors’ portfolios even in the next year. While the low interest rate regime may seemingly be a thing of the past, rates could settle around the Fed’s 5% range and allow markets to reset expectations for tech, presenting an opportunity in ARK’s ETFs.
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