Cathie Wood of ARK Invest was 2020’s biggest winner on markets. Last year, all five of ARK’s actively managed ETFs more than doubled. The meteoric rise attracted nearly $7 billion of investor inflows this past December, which made it the seventh biggest issuer of ETFs in the U.S.
At the center of ARK Invest’s newfound fame is a fleet of trending, industry-defying stocks. They’re the stocks that Reddit finance warriors and hedge fund kids dream about. And as ARK gets bigger, it has become a majority shareholder in a dozen high-powered innovators.
Behind ARK’s moves, a new clan of “copy traders” are following the money. We took a closer look at the top combined holdings across ARK’s five core funds to see what we can learn from their financial prognosis. The top five, $ARKK, $ARKQ, $ARKF, $ARKG and $ARKW, comprise 22% of ARK’s entire fund and include some familiar names (and others more obscure).
1. Tesla ($TSLA)
Anybody who knows Cathie Wood or ARK Invest shouldn’t be surprised that Tesla is ARK’s biggest holding. In 2018, Cathie Wood predicted Tesla’s meteoric rise by setting an aggressive $4,000 price target. This prediction was considered extremely outlandish, considering that Tesla’s debt was subprime at the time and the company was struggling to produce its new Model 3 flagship sedan.
For context, Tesla overcame the factory crunch and debt troubles to become the most valuable automaker in the history of the world. In August 2020, the company undertook a 5-for-1 stock split, which means Wood’s aggressive $4,000 price target became $800. After the split, Tesla soared past $800 on Jan. 7 and Wood hit her target. She set a new aggressive pre-split price target of $7,000, which would be $1,400 under the current split. The core reason for the target was the belief that Tesla would maximize their spend, cut costs and generate returns from the launch of a robotaxi system.
As of Jan. 24, $TSLA represents 6.5% of the weight in ARK’s portfolio.
2. Teladoc Health ($TDOC)
Over the last few years, the number of walk-in clinics in the U.S. have doubled and challenged the traditional hierarchy of hospital systems and healthcare. ARK’s second biggest holding, Teladoc Holding, is now challenging w$alk-ins and established medicine through the burgeoning field of telemedicine and “virtual healthcare.”
$TDOC offers an online platform which makes it easy and cheap to see a doctor online for non-emergency conditions and schedule an appointment with a primary care physician, therapist,psychiatrist, dietitian or specialist. The company nearly doubled its total revenue from 2019 to 2020, energized in part by the COVID-19 pandemic. In 2021, $TDOC is looking to maintain impressive growth.
Whether Teladoc’s impressive 190% return will continue in a post-COVID world is hard to know. But as of Jan. 24, $TDOC represents nearly 5% of the weight in ARK’s portfolio.
3. Roku ($ROKU)
Millions of people are cutting the cord and abandoning cable because of high costs and little added value. A Sept. 2020 eMarketer research survey indicates traditional cable will have lost over 6 million subscribers in 2020. Many of these subscribers are pivoting to streaming video platforms like Roku.
Roku is a cheaper alternative to something like an Apple TV or Google Chromecast. The company doesn’t have a strong competitive moat, but its low cost, high value offering for cord cutters has made it a massive success. On Jan. 6, Roku passed 50 million active users. Now, the company’s future looks toward integrating Roku into TVs, building new consumer products for home theatre and streaming and creating their own streaming service.
As of Jan. 24, $ROKU represents 4.4% of the weight in ARK’s portfolio.
4. Square ($SQ)
The rise of new payment processors and merchant platforms has made accepting credit and debit cards radically easy. However, if not for the trouble it caused one glassblower over a decade ago, we might not have one of America’s fastest growing fintech and lifestyle companies.
Jim McKelvey is a St. Louis-based glassblower who lost a $2,000 sale because he couldn’t accept credit cards. When Jack Dorsey, co-founder of Twitter, realized they could fix the problem, the duo began building Square.
Square is the fourth largest component of ARK’s portfolio. It has unparalleled reach in the business-to-business payment processing space. Their cheap, low fee payment processing units have revolutionized business for small and large businesses alike. They’ve also expanded upon their business-to-business footprint by launching services to help businesses access capital and build an online presence.
Square has the makings of a lifestyle company. In 2020, the company grew its consumer footprint with expansion of its Cash App business-to-consumer service. Cash App added features allowing users to invest in stocks or buy bitcoin. This was one of the biggest new sources of revenue according to Square’s Q3 2020 10-Q filing. The company also made a bid for Jay Z’s music streaming service TIDAL.
Revenues for FY 2020 are projected to represent a 313% jump from FY 2019. As of Jan. 24, $SQ represents 3.4% of the weight in ARK’s portfolio.
5. CRISPR Therapeutics ($CRSP)
This past November, we published an article on CRISPR companies. These include a small basket of highly innovative gene therapy companies rising on the promise of treating genetic diseases, curing patients with diseases for which there are few treatments and curing cancer. One of the critical members of that list was CRISPR Therapeutics ($CRSP).
CRISPR Therapeutics is a Swiss pharmaceutical company focused on therapies for blood disorders and cancer (immuno-oncology). The company boasts major strategic partnerships with Vertex, ViaCyte and Bayer. They’re still years from wrapping their pivotal clinical trials, but if CRISPR’s clinical trial programs are successful, they might revolutionize medicine as we know it. They’ll also be one of only a handful of companies which can exploit the powerful CRISPR system, which we dive into in our article on CRISPR.
As of Jan. 24, $CRSP represents 3.2% of the weight in ARK’s portfolio.
Some of the players above are frequent members on our Bullish Rippers list, which we publish every Sunday, Tuesday and Thursday. If you’re looking for the reasons behind some of the market’s biggest surging stocks, check out Rippers.