Defense & Aerospace

Providing Exposure to the Fourth Industrial Revolution

The automation of jobs that formerly were performed by human beings has cast a specter over the developed world and will remain a salient political and economic question for a long time to come.

On the other hand, the disruptive potential driving the creative destruction of the “Fourth Industrial Revolution” also has provided new opportunities for investors. For instance, the ARK Industrial Innovation ETF (ARKQ) provides investors with exposure to companies that likely will benefit from automation and other technological advancements.

Some of this fund’s top holdings include Stratasys Ltd. (NASDAQ:SSYS), NVIDIA Corporation (NASDAQ:NVDA), Tesla Inc. (NASDAQ:TSLA), Baidu, Inc. (NASDAQ:BIDU), Teradyne (NASDAQ:TER), Materialise NV (NASDAQ:MTLS) and Aptiv PLC (NYSE:APTV).

While these companies are mainly in the software and IT services field, accounting for 26.95% of the holdings, this ETF also has shares in companies that produce computers, phones and household electronics (19.11%), semiconductors (17.83%), automobiles and auto parts (14.81%), machinery, equipment and components (6.43%) and aerospace and defense technology (4.79%).

Instead of providing broad exposure to all technology companies, this ETF’s managers are especially interested in technologies such as autonomous electric vehicles, 3D printing, manufacturing automation and nanotechnology — in short, the hot tech of the day.

The fund currently has $172.95 million in assets under management and an average spread of 0.23%. It also has an expense ratio of 0.75%, meaning that it is more expensive to hold in comparison to other exchange-traded funds.

In terms of ARKQ’s MSCI ESG Fund Quality Score of 4.86, it ranks in the 17th percentile within its peer group and in the 27th percentile within the global universe of all funds in the MSCI ESG Fund Metrics coverage.

This fund’s performance varies, based on the time frame that is considered. While the fund has been down 5.40% over the past month, it was up 19.63% over the past three months and remains up 13.50% year to date.

Chart courtesy of StockCharts.com

In short, while ARKQ does have several advantages over some of its peer funds and lets investors profit from some truly cutting-edge technology, this ETF’s risks and costs are far from zero. Thus, interested investors always should do their due diligence and decide whether the fund is suitable for their portfolios.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.