Learn more about exchange traded funds, the pros and cons of ETFs and how to create your own SUPER ETF from the ARK Invest funds.
So in just these 20 companies, we’ve got the biggest bets from ARK Invest, a super ETF representing almost half the assets managed by Cathie Wood and her team…the only question is, how will it do?
You all know I love ETF investing. Investing in a fund of stocks, there’s not better way to make investing your money as stress-free as possible.
But two things I don’t like, the fees and the fact that there isn’t ONE ETF with all my favorite stocks and themes. Now the fees aren’t usually that big of a deal. Most Vanguard ETFs charge less than a quarter of a percent annually which works out to just $25 for every $10,000 invested. Even the higher fees in the popular ARK Invest funds are less than one percent a year.
But there’s still the problem that you have to buy several funds to get all the stocks and themes you want. There’s no super ETF that has all your dividend stocks, growth stocks from different industries and all the strategies you want in a fund.
So in this video, I’ll show you how to create one!
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In this video, I’ll explain exchange traded funds, show you the pros and cons of ETFs. Then using a new tool online, I’ll reveal how to create your own SUPER ETF from the ARK Invest funds.
I’ve added chapters to the video if you want to skip over the basic stuff on ETFs, straight to creating your own all-in-one fund!
I’ll be using the new ETF feature on Stockcard with some great details into ETF investing, breaking down different ways to look at funds and giving you insight into the best stocks in each.
I’ll leave a link to Stockcard in the video description above. Click through and then go to Portfolios in the top menu, you’ll find the Bow Tie Nation portfolio in this Stock Picks section. It’s free to follow and you’ll get email notifications whenever I buy or sell from the portfolio.
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What are Exchange Traded Funds?
Now exchange traded funds are just groups of stocks around a theme or investing strategy, with a professional manager that either picks the stocks or rebalances them around a set of rules.
So you get index funds that just follow a group of stocks like all those in the S&P 500, anytime a stock is added to that index, the portfolio manager adds it to the SPDR S&P 500 ETF, the SPY. The dividend aristocrats are those stocks that have grown their payouts for at least 25 consecutive years, so anytime a company is added or falls from the list on that rule, it’s added or sold from the ProShares Dividend Aristocrats ETF, ticker NOBL.
Other ETFs give the manager more decision-making in what’s added, like in the iShares Multi-Asset Income ETF, ticker IYLD, the manager can add stocks, bonds and even alternative investments to produce the 4% dividend yield.
Pros of ETF Investing
So pros of ETFs are you get a one-stop for an investing strategy whether it’s dividends, growth stocks, bonds or whatever you’re looking for…there’s an ETF for it. You buy one stock that gives you exposure to hundreds and even thousands of individual investments, immediately diversifying your money across the theme.
Now for that layer of management, the fund charges an annual fee which is usually from about a tenth of a percent and higher. This money comes out of the fund’s assets regularly so you won’t actually see it taken out of your account but it does decrease the value of the fund and your investment.
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Cons of ETF Investing
Besides this drawback, there are two other disadvantages to ETF investing. One, like we saw earlier, there’s no one super-fund. No single fund that is going to give you all the strategies like dividends, growth and safety. Also though, most funds have too many stocks to really produce the highest return possible. Portfolio managers are investing in hundreds or thousands of stocks rather than just their top five or ten ideas. That means even the runaway performance in a few is limited by the so-so performance from hundreds of others and the overall return…not usually that great.
For example, the ARK Invest ETFs run by Cathie Wood and her team offer some great ideas in disruptive technology but there are six funds here, each one focused on a specific topic and with 50 stocks in each. There’s some overlap between the funds but it’s still hundreds of stocks and hugely different convictions with some stocks like the $3.2 billion investment in Tesla across several funds all the way to less than $30,000 in shares of Snowflake.
In fact, ARK holds more in shares of the top 16 companies than it does in the remaining 157 stocks it holds. That’s over $21 billion held in just 16 stocks versus an average of just $133 million in each stock in the rest of the portfolio.
These are the companies that could change the world over the next ten years but the portfolio managers so obviously don’t feel the same level of confidence across all of them. What I want to do, I’m going to take this information, use it to find the highest conviction plays across all six ETFs to build a SUPER ARK Fund on Stockcard! Using the Stock Picks section, we’ll be able to track how this fund does against the S&P 500 and ARK itself!
How to Create Your Own Super ETF Stocks
We can start typing in the name of the ETF here in the search bar and it’s going to populate with all ETFs we want to look at.
Looking at the ARK Fintech Innovation ETF, ticker ARKF, we see all the key information here including expense ratio, returns and the top 25 in the portfolio. The fund invest in companies driving the revolution in financial technologies including blockchain, transaction innovations and funding platforms.
There’s some great information here but I want to scroll down to the top 25 holdings, it shows me the company, its market cap and the weight that stock is in the fund.
Here we see Square Inc, ticker SQ, is nearly 11% of the fund and we know that Square touches a lot of those innovative Fintech ideas like the blockchain, digital wallets and transactions.
So this fund has $3.6 billion in assets and almost 11% of that is in Square alone for an investment of $388 million in the payment platform. But if we scroll down all the way to the bottom, we see it only has 1.37% in ZhongAn Online P&C Insurance or an investment of about $49 million.
And that’s not even the smallest investment in the fund. We see here in Stockcard the top 25 investments of the 52 in the fund and already, we see a huge difference in conviction. Cathie Wood is betting almost eight-times more on Square as she is on ZhongAn.
So I want to take that bet on Square and drop the side bet on the Chinese insurance company. We’ll also scroll back up to the top and look at the next two or three stocks.
Now I like Shopify more as an ecommerce play but I guess that qualifies as fintech and it’s over 6% of the fund so we’ll add that to our list as well.
Real estate is hot this year and Zillow has come down from its peak so we’ll add that one to the list and while I like to invest directly in cryptocurrencies rather than the platforms, I think Coinbase can do well also.
So that’s four of the five largest investments in the fund, just those four stocks make up 27% of the total assets or an investment of $992 million of the total $3.6 billion fund assets.
We’re going to do the same thing with all six funds, pull out the highest conviction stocks in each to create our SUPER ETF with all the best stocks.
Now if you want to see all the stocks in a fund, you can always go directly to the home page and every ETF shows you its holdings. We can go here to the ARK Invest website and to the Fintech fund. We’ll scroll down to holdings and click on View All Holdings.
And looking at the remaining 20 stocks in the fund, we’re really not missing much. In fact, the last 10 of these don’t even make up 1% of the fund. Some of these, it’s kind of questionable their importance in fintech anyway. I mean, the fund has money in the South African Rand, the currency of South Africa…and ETSY, which is an OK company but I would put it more in traditional ecommerce than fintech innovation.
Anyway, the point is, with this super ETF, we want to farm the very best from the ARK funds, the biggest investments and the companies most likely to change the world.
Now on to the ARK Innovation fund, ticker ARKK, the flagship fund with almost $22 billion in assets across 51 companies. This fund produced a 164% return last year and while it’s come down this year, it could be the best time to buy because these are still the most innovative and disruptive companies on the list.
Scrolling down to the top holdings, we first see Tesla for more than 10.5% of the fund or an investment of $2.3 billion just in this fund.
A lot of Cathie Wood’s thesis on Tesla is not only dominance in electric vehicles which is expected to benefit from the 20-fold increase in EV sales to 2025, but also its ride-sharing future with autonomous vehicles, a market that could be worth $3.8 trillion over the next few years.
And while it’s had problems lately with the system, Tesla is closer than anyone else on developing that level 5 autonomous driving that could enable a robo-taxi business.
The fund holds more than $1.2 billion in shares of Teledoc, ticker TDOC, and while this stock is down 54% from its peak…I like it for a long-term investment.
Teladoc is the global leader in virtual healthcare with a provider network that covers 70 million U.S. patients and a billion member data points from traditional telehealth to remote monitoring and next generation primary care.
Membership growth has grown 40% annually since 2016 and 10.6 million patient visits last year.
Revenue doubled last year and 80% of that is from recurring services so I like it for the stability even if growth for telehealth slows from last year’s faster pace. Longer-term, telehealth and virtual care is the future but I think the data is really the undiscovered value here, processing all that patient data for analysis and research.
I’m going to piss a lot of people off here and skip over Roku. The streaming platform is popular with a lot of investors but I think it’s still overvalued and with reopening, streaming stocks may not do that well for the rest of the year so we’re skipping it here.
Hey, in your own portfolio, feel free to go wild.
Next on the list though is Coinbase, and this is something you see a lot in the ARK ETFs, that duplication where a company is in several funds but since we already added it we’ll move on to Unity Software, ticker U, the $35 billion leader in creating and operating interactive, 3D content for game developers as well as business applications in automotive, construction and film.
I really like Unity because it’s not just in the gaming space but helping companies design applications in every sector, it’s benefiting from that shift to virtual worlds. The company reported 53% revenue growth last quarter, representing three consecutive quarters of increasing sales growth, and 2.5 billion in monthly active users.
With that previous addition of Coinbase and these other three stocks, we have what amounts to 25% of the ARK Innovation fund holdings, so just these four stocks are nearly $5.6 billion of the $22 billion fund.
Next here we see the ARKQ, investing in companies driving that revolution in autonomous technology and robotics holding 44 stocks for total assets of $2.72 billion.
And scrolling down we see the top 25 stocks and…Tesla is the first one at 11.7% of the fund…so big shocker there but we’ve already got that one.
Trimble, ticker TRMB, is a $24 billion leader in instruments and controls that help companies manage processes and productivity by analyzing geospatial and other data.
Kratos Defense and Security, ticker KTOS, is I recommended late last year and we’ll see it again when we look at the ARK Space ETF. The company has its hand in a lot of disruptive technologies from unmanned drone systems to space management, defense and microwave devices. The company’s satellite and space segment already supports 90% of U.S. space missions and hundreds of commercial and government satellite missions.
We’ve already got Unity Software but we’ll add UiPath, ticker PATH, and Iridium Communications, ticker IRDM, to the list as well. These four stocks plus the two we already added from other funds, make up 42% of the autonomous and robotics ETF, just six stocks is nearly half the entire fund of 44 companies.
So far, after reviewing three of the six ARK ETFs, we’ve added 11 stocks to our super ETF list. ARK holds over $14.3 billion in shares of just these 11 stocks, more than 33% of all assets managed at the firm.
Next here is one of the most disruptive in my opinion, the ARK Next Generation Internet ETF, ticker ARKW, with 48 stocks and $5.8 billion across cloud computing, ecommerce, artificial intelligence…really the biggest disruptive trends we’re seeing right now.
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And surprise, surprise, surprise Tesla is the top holding with 10% of the fund.
And if you recognized that reference, you’re my kind of people!
Anyway, the fund also holds $332 million in shares of the Grayscale Bitcoin Trust, ticker BTC, and again while I prefer to invest directly in bitcoin and Ethereum, there’s a discount on the shares right now versus asset value so I think this is a good investment ahead of an eventual conversion of the trust into a true ETF.
This next one though, Twitter…now I know there’s a love affair going on between Jack Dorsey and Cathie Wood because they both love bitcoin so much but…Twitter, a next generation internet play…I’m not buying it.
And we’ve already added the next five stocks from other ARK funds so we’ll add Twilio, ticker TWLO, and DraftKings, ticker DKNG, to our list.
This next ETF, the ARK Genomic Revolution or ARKG, has been hit hard this year, down 26% from its peak but for investors willing to wait out the discoveries here, this could be one to watch.
The fund holds shares of 65 companies within biotech and information technology disrupting the healthcare space for nearly $8.3 billion in assets.
And this is where we see the least overlap among the funds. Other than top holding Teledoc, which is 6.7% of the fund, we don’t see a lot of these other stocks in other ARK ETFs so it’s a great place to add some of the unique bets.
From here, I’ll add Exact Sciences, ticker EXAS, Pacific Biosciences, ticker PACB, and Vertex Pharmaceuticals, ticker VRTX. ARK holds more than $1.7 billion in just these four stocks for 21% of the total fund assets.
The newest ARK ETF, the ARK Space Exploration & Innovation ETF, ticker ARKX, is by far the smallest with just $596 million in assets across 41 companies in that space race and satellite communications theme.
And when the fund was launched…
Yes, that is a space pun…because I’m funny like that.
But when the fund was launched, there was a lot of pushback on how the connection between the space theme and a lot of these stocks was really kind of weak. You’ve got some solid companies here but I’ve yet to talk to anyone that can explain to me how Amazon, Netflix and Deere are involved in space exploration.
So we’re only adding three from the list here; shares of the 3D Printing ETF, ticker PRNT, L3Harris Technologies, ticker LHX, and drone maker AeroVironment, ticker AVAV.
So in just these 20 companies, we’ve got the biggest bets from ARK Invest. In fact just these 20 stocks represents 44% of all assets managed across the six ARK ETFs, an investment of more than $18.9 billion in these disruptive companies. The big question is…how will it do?