ARK Innovation ETF (NYSEARCA:ARKK)

What Is the ARKK ETF’s Strategy? 

ARKK invests in companies that are driving “disruptive innovation.” ARK describes disruptive innovation as “the introduction of a technologically enabled new product or service that potentially changes the way the world works.” ARK says that these investments can include companies involved in DNA technologies and “the genomic revolution,” artificial intelligence and “the next generation internet,” automation, robotics, energy storage, and fintech.

Portfolio Comparison 

These funds aren’t particularly diversified, as that isn’t their goal, but ARKK is a bit more diversified than SPRX. ARKK holds 37 stocks, and its top 10 holdings make up 60.8% of the fund.

As you can see, the holdings are different, but both funds target stocks of cutting-edge businesses with high growth potential.

Both funds have benefited from the large, concentrated bets in their respective top holdings, which have generated stellar returns over the past year. For example, ARKK’s largest holding, crypto exchange Coinbase Global (NASDAQ:COIN), has an 11.8% weighting within the fund and has gained 265.1% over the past year. Meanwhile, SPRX has a 12.8% weighting in its top holding, semiconductor giant Nvidia (NASDAQ:NVDA), which has returned 280% over the past year.

A key reason for SPRX’s outperformance versus ARKK over the past year is that while their top holdings put up similarly impressive results, ARKK has a few top 10 holdings that detracted from its performance last year, like Unity Software (NYSE:U), which fell 10.7% over the past year, and several stocks that are down slightly or treaded water like Zoom Video (NASDAQ:ZM), Tesla (NASDAQ:TSLA), Block (NYSE:SQ), and Roku (NASDAQ:ROKU).

On the other hand, all of SPRX’s top 10 holdings have generated gains of 25% or higher, leading to a better overall performance.

SPRX has four top 10 holdings with Outperform-equivalent Smart Scores of 8 or better, while ARKK has just two. The Smart Score is a proprietary quantitative stock scoring system created by TipRanks. It gives stocks a score from 1 to 10 based on eight market key factors. A score of 8 or above is equivalent to an Outperform rating.

Based on these Smart Scores, SPRX seems to have a slight edge over ARKK when it comes to their respective portfolios. SPRX has a 7 out of 10 Smart Score, while ARKK scores a 6 out of 10.

f the ETFs generate the types of returns they did last year, few investors will mind paying the expense ratio, but if the funds struggle like they did in 2022, this steep expense ratio can sting.

Is ARKK Stock a Buy, According to Analysts?

Turning to Wall Street, ARKK earns a Moderate Buy consensus rating based on 27 Buys, 10 Holds, and zero Sell ratings assigned in the past three months. The average ARKK stock price target of $60.07 implies 19.45% upside potential from current levels.