S&P 500: Cathie Wood Is Crushing It This Year Thanks To 9 Stocks

Cathie Wood’s ARK Innovation ETF (ARKK) is back — and back big. It’s the top diversified ETF again this year so far, largely due to some stellar winners.

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Nine of ARK Innovation’s stock holdings, including Coinbase Global (COIN), Pacific Biosciences (PACB) and Exact Sciences (EXAS), are up 17% or more this year so far, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. And on average, the nearly 30 stocks in the ETF are up more than 10%.

And that’s good news for the popular $6.8 billion-in-assets fund. It’s now up more than 15% this year. That easily tops the S&P 500’s 2.4% year-to-date return. And it also makes the ARK Innovation the No. 1 actively traded diversified ETF, says Morningstar Direct.

It’s a much needed bounce. The ETF lost more than 60% of its value last year, making it the worst-performing diversified ETF. ARK Innovation is capitalizing on what appears to be investors’ willingness to buy speculative investments after 2022’s beatdown.

“Despite a likely slight earnings decline in 2023 — at least that’s our view in LPL Research — we expect a solidly positive year for stocks,” said Jeff Buchbinder, Chief Equity Strategist for LPL Financial.

ARK Invest Having A Heck Of A 2023 So Far

It’s been awhile since ARK Innovation has been on the top. But it’s back with a vengeance.

Not only is the ETF tops for 2023 so far, it’s miles ahead of the rest. The No. 2 actively traded diversified ETF this year is Invesco S&P 500 High Beta (SPHB), which is loaded up with some of the market’s most volatile large-cap stocks. But it’s only up a fraction that ARK Innovation is this year: 9.4%.

Much of the gains, though, are due to stellar performances by a few stocks.

Cathie Woods’ Top Stock Pick

An examination of Woods’ ARK Innovation portfolio shows three investments to beat all others.

Cryptocurrency play Coinbase is the ETF’s top-performing stock. It’s up more than 39% this year, capitalizing on an uptick in cryptocurrency prices. The price of Bitcoin alone is up more than 25% in the past month. It’s a roughly 4% position in the ARK Innovation portfolio.

Of course, it goes without saying this year’s Coinbase rally is a drop in the bucket relative to how much it dropped in 2022. Even after the early 2023 rally, shares of Coinbase are still down more than 80% from where they were in 2021, due to a 86% plunge in 2022. And it’s also important to note analysts think the company will lose money on an adjusted per-share basis in 2023, 2024, 2025 and 2026.

Other Winners For Cathie Wood

ARK Innovation’s No. 2 top stock, Pacific Biosciences, is equally speculative. Analysts see the human genetics testing company losing money as far as the eye can see: At least out to 2026. But that doesn’t seem to matter to investors this year. Shares are up more than 38% this year, helping it to crawl out of its 60% drop in 2022.

Interestingly, four of ARK Innovations’ top five stocks this year including Pacific Biosciences are from the health care sector. Another example is Exact Sciences, a company best-known for Cologuard, a less invasive screening tool for colorectal cancer. Exact is a weighty position for ARK Innovation, at 9.5% of the portfolio. And that’s a good thing this year, with shares up more than 33%. And of all ARK’s positions, Exact is down the least from 2021: just 16.6%. Shares only fell 36% in 2022, which is much less than many others.

Ark Innovation’s bounce this year is impressive. But it’s only making a small dent in the massive damage inflicted in 2022. ARK Innovation is down nearly 12% annualized in the past three years, Morningstar Direct says. That’s well behind the 7.4% total annualized return of the S&P 500 during that time.

But hey, at least it’s a start.

A Heck Of A Year So Far For ARK

Top stocks in the ARK Innovation ETF year-to-date

Sources: S&P Global Market Intelligence, IBD, ARK Invest