ARK looks ‘Beyond Earth’ for the next ‘concept’ stocks

This week we reviewed the ARK Invest Space Exploration and Innovation ETF. Despite only being in operation for a short time in financial market terms, ARK Invest may well be one of the most well known names in the ETF sector today. Run by the incredible Dr Cathie Wood, the group is reported to have around US$50bn under management. Their philosophy is simple, to do what no one else is willing to, take career risk and back future focused companies. Wood says “We’re all about finding the next big thing. Those hewing to the benchmarks, which are backwards looking, are not about the future. They are about what has worked. We’re all about what is going to work.”

Their investment approach is focused solely on finding and backing ‘disruptive innovation. The latest offering from the group is ARKX, which listed on the 30^th of March. In days gone by it would have been near impossible to invest in these products as an Australia, but today there are many options, including investment platforms that can support this process.

The objective is simple, long-term capital growth. The focus in on investing 80% of the actively managed ETFs assets into companies involved in space exploration of innovation. The underlying sectors include: orbital and sub-orbital aerospace, enabling technologies and most importantly beneficiaries of aerospace activities. Breaking this down further, the types of companies include:

• Those that make, service or operate platforms in orbital space like satellites and launch vehicles;
• Those that don’t reach the same level of velocity and operate closer to earth;
• Those developing technologies used in space exploration including artificial intelligence, robotic, 3D printing and energy storage;
• Those beneficiaries ranging from internet access, agriculture, GPS, construction, imaging, drones and electric aviation vehicles.

As you can expect the portfolio is full of interesting names, including Trimble which provides connectivity and data via a network of satellites, and Kratos Defense and Security, which focused on satellite communications, defense systems and cybersecurity. Other key names include JD.com, Lockheed Martin, Boeing and Komatsu.

Given the popularity of the fund, many of these holdings actually moved higher before it was even launched. Reports suggested that the fund garnered over US$500m in inflows in its first five days of trading, five times more than the average. The average market cap of the 40 holding portfolio is around US$176 billion with no yield to speak of.

Drew Meredith

Drew is publisher of the Inside Network's mastheads and a principal adviser at Wattle Partners.