Financial stocks are crumbling under the pressure of the banking crisis. So how has Cathy Wood found a way to gain 20% on financial stocks this year?
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Simple: by investing outside the mainstream financial sector. ARK Fintech Innovation ETF by ARK Invest (arkf) is big this year. It is the best-performing actively traded sector ETF this year, behind only the Woods ARK Next Generation Internet ETF (ARKW), which is up 27.7%.
And ARK Fintech Innovation is also outperforming as a Financial Select Sector SPDR (xlf) is down 8% and some bank stocks are in free fall. The failures of Silicon Valley Bank and Signature Bank are spooking investors who are worried about problems looming throughout the financial sector.
“ARKF is a fintech innovation ETF and has a large allocation to technology and crypto-related stocks, which have actually become more attractive given the recent pullback in yields,” said Roxanna Islam of Wettafy. “There are none of the traditional banking stocks that received the bulk of the negative sentiment.”
How Wood Is Scoring Amid Financial Crisis
The amazing growth of Ark fintech innovation this year is not limited to just a few lucky winners. More than 75% of the ETF’s 27 holdings are up.
coinbase global ,coin), a cryptocurrency marketplace, is by far the biggest driver of ARK fintech innovation outperformance this year.
1 position in the ETF, accounting for about 12% of the portfolio. And that big bet is paying off handsomely this year. Shares are up nearly 83% this year. It is also the top percentage gainer of any stock in the ARK Fintech portfolio.
Many of 2022’s worst-performing stocks have been bullish on Coinbase shares, thanks to this year’s surge. Additionally, the company is aggressively cutting costs and seeking new revenue-generating subscription-based services and offerings for professional investors, David Holt of CFRA said in a report.
The Next Best Percentage Gainer of the ETF NVIDIA ,NVDA), a computer chipmaker not associated with financial stocks. This year it is up 66%. Why is Nvidia in Wood’s Financials ETFs? The company’s semiconductors typically process cryptocurrency transactions.
Cryptocurrency exposure is unlikely to move Nvidia stock. bitcoin priceFor example, is down more than 40% in the last 12 months. But it turns out that the company’s chip designs are also used in artificial intelligence. and he is hottest tech trend going on After the rise of ChatGPT.
What about traditional financial ETFs?
But while Wood’s financial ETFs are leading the way, what to do with more traditional approaches to the sector?
All eyes on the SPDR S&P Regional Banking ETF (kre) and the iShares US Regional Banks ETF (I A T), says Islam. They are down 24% and 26.7%, respectively, this year.
“Many are looking for an entry point amid low prices,” she said. “But there is still a lot of volatility in this space, especially as more news emerges,” said Islam of VettaFi.
Right now, Islam says bank investors would do best to wait. Trying to call the bottom now is dangerous because regulators’ reactions could either help or hurt bank ETFs.
“There may be value in regional banking ETFs at lower prices,” she said. But “with the ongoing volatility it is difficult to predict the entry point…we could see the price going either way.”
Top Stocks in Cathy Wood’s ARK Fintech Innovation
| company | anchor | weight in etf | YTD CH. |
|---|---|---|---|
| coinbase global | ,coin, | 11.6% | 82.2% |
| NVIDIA | ,NVDA, | 1.3 | 65.8% |
| draft kings | ,dkng, | 5.7 | 57.9% |
| stop | ,stop, | 3.4 | 53.2% |
| roblox | ,rblx, | 1.6 | 50.1% |
| MercadoLibre | ,Melee, | 6.0 | 40.5% |
| Global-e Online | ,glbe, | 4.2 | 33.3% |
| twilio | ,Two, | 6.1 | 29.5% |
| Zillow Group | ,Jade, | 0.5 | 26.1% |
| Shopify | ,Shop, | 10.5 | 25.4% |
Source: IBD, ARK Invest, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
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