Megaphone icon ETF Database is now VettaFi. Read More >
ETFdb Logo
ETFdb Logo
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • Entrepreneur ETF
    • Equity ETF
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Future ETFs
    • Gold & Silver Investing
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Modern Alpha
    • Multi-Asset
    • Multi-Factor
    • Nasdaq Investment Intelligence
    • Portfolio Strategies
    • Retirement Income
    • Smart Beta
    • Thematic Investing
    • Volatility Resource
  • Database
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
    • ETFs Future-Forward 2021: An iShares Investing Symposium
    • Three Themes for 2021: An iShares & MSCI Investing Symposium
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Videos & Podcasts
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Disruptive Technology Channel
  2. Innovation Investigation Warranted After Swoon
Disruptive Technology Channel
Share

Innovation Investigation Warranted After Swoon

Tom LydonApr 28, 2022
2022-04-28

Innovative growth strategies are easy to cast aside at the moment because they’re languishing as interest rates rise.

However, bailing on exchange traded funds such as the ARK Innovation Fund (ARKK ) today could amount to selling low and turning a temporary mistake into a permanent one. That is to say, the long-term case for disruptive growth equities remains intact, but investors should realize — and the lesson is being taught in real time in 2022 —  that innovative or not, stocks don’t move up in linear fashion.

“Innovation stocks have become a popular investment theme but are facing scrutiny,” notes Kai Wu of Sparkline Capital. “Innovation has delivered positive long-term returns distinct from growth and other traditional factors. While innovation is prone to speculative bubbles, this can be mitigated using valuation and other intangible pillars.”

Regarding value, there are two things for investors to consider over the near term. One is that, amid obvious weakness in the disruptive growth space this year, some of these names, including several ARKK components, are trading at rarely seen discounts. However, that doesn’t mean these are value stocks in the traditional sense.

Second, to the above point, investors looking for value to offset some of the volatility associated with disruptive growth fare are likely to be better served by pairing a traditional value fund with an ETF such as ARKK.

It also pays to have a keen sense for what exactly disruption consists of, and while that definition is evolving, ARK Invest has a history of being out in front of changes in this arena.

“Over the past few years, investors have developed a growing appetite for so-called ‘innovation stocks.’ This has drawn a wave of disruptive startups, such as Coinbase and Zoom, to the public markets. It has also catapulted innovative firms, such as Tesla, to dominate news cycles and trading volumes,” adds Sparkline’s Wu. “Furthermore, this demand had led fund managers to launch dozens of thematic products focused on innovation. These funds package innovative stocks with compelling narratives, such as artificial intelligence, blockchain, and metaverse.”

Tesla, Zoom, and Coinbase are three of ARKK’s top five holdings, and some analysts are saying that the latter two are currently undervalued. The trio combines for over 22% of the actively managed fund’s weight.

Investors should also remember that dedicated disruptive investing is still a fairly new phenomenon, and it’s not yet as thoroughly examined as, say, growth or value.

“The debate rages in the financial media, taking on an almost religious fervor. However, despite the commotion, not a single rigorous empirical study exists on the long-term performance of innovation investing,” concludes Wu.

For more news, information, and strategy, visit our Disruptive Technology Channel.

Loading Articles...
Help & Info
  • Contact Us
  • Mission Statement
  • Press
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © ETF Flows LLC
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

Equity ETF Channel

Retirement Portfolio Redux: Is the 60%-40% Portfolio Dead?

Debbie CarlsonOct 22, 2020
2020-10-22

With the 10-year U.S. Treasury yield hovering below 1% and Federal Reserve Chairman Jerome Powell...

Equity ETF Channel

Portfolio Diversification Isn't Dead, It Was Just Sleeping

Debbie CarlsonOct 15, 2020
2020-10-15

Investors could be forgiven to think there was no reason to invest outside of the U.S. for the...

}
X