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  • Fund Watch

Can Ark’s Genomic Revolution ETF stay upbeat?

Can Ark’s Genomic Revolution ETF stay upbeat?

The ARK Genomic Revolution ETF [ARKG] has kept up its high growth DNA in the early days of trading in 2021, as investors look to bet on exciting new medicines and medical technology amid the coronavirus pandemic.

The ARK Genomic Revolution ETF opened the year at $94.20 on 4 January and continued to climb 16% over the following days, before hitting a new 52-week high of $109.28 on 8 January.

The fund is now worth more than three times the $33.57 it reached at the close of 8 January 2020. Despite hitting a low of $24.49 on 16 March last year, the ARKG ETF ended the year up 180.3%.

As of 11 January, the ARK Genomic Revolution ETF had a year-to-date total daily return, according to Yahoo Finance, of 13.3% and total net assets of $7.67bn. In comparison, its underperforming peers — the Global X Genomics & Biotechnology ETF [GNOM] and Franklin Genomic Advancements ETF [HELX] — had assets of $114m and $8m.


Ground-breaking genomics

The ARKG, launched on 30 October 2014, is actively managed and invests at least 80% of its assets in companies focused on extending and enhancing the quality of life through technological, scientific development and advancements in genomics.

It has holdings across multiple sectors, including healthcare, information technology, materials and energy. All of the companies involved develop, produce or enable CRISPR, targeted therapeutics, bioinformatics, molecular diagnostics, stem cells and agricultural biology.

The ARKG fund typically has between 30 and 50 holdings. As of 11 January, its top weighting is biotechnology company Pacific Biosciences of California [PACB] at 7.7%, followed by telemedicine group Teladoc Health [TDOC] at 6.4%, synthetic biology company Twist Bioscience [TWST] at 5.7%, gene editing firm CRISPR Therapeutics [CRSP] at 5.6%, biopharmaceutical company FATE Therapeutics [FATE] at 3.8% and precision medicine solutions company CAREDX [CDNA] at 3.7%.

Pacific Biosciences had rocketed 404.6% last year, helped by its DNA sequencing machines contributing to COVID-19 research. The stock was up a further 41.4% since the turn of the year to 8 January.

Teladoc Health’s share price had also grown by 138.8% in 2020, as people increasingly booked online medical appointments instead of visiting doctors’ practices during the pandemic. The stock was up 13.9% in the first five trading days of 2021.

Shares in Twist Bioscience jumped a massive 572.8% last year, boosted by its part in the fight against COVID-19. Meanwhile, CRISPR Therapeutics’ share price climbed 151.4% in the same period, helped by growing excitement around potential sickle cell disease and cancer treatments.



Twist Bioscience's share prince rise 2020


The ARK Genomic Revolution ETF benefited from having such a large focus on the healthcare sector, which flourished as governments and corporations looked to innovative science to help curb the pandemic.


Innovation takes off

But it is not just COVID-19 that’s accelerating the fund’s growth. The global genomic sector — long hailed as the future of medicine — will rise in value from $16.4bn in 2018 to $41.2bn by 2025, according to Zion Market Research.

Analysts are certainly bullish. According to Market Screener, a consensus of analysts have an outperform rating on Pacific Biosciences, Teladoc Health, Twist and CRISPR.

“Innovation takes off during tough times,” Catherine Wood, ARK founder and portfolio manager, told Yahoo Finance. “That’s when consumers and businesses are willing to think about doing things differently.”


"Innovation takes off during tough times" - Catherine Wood, ARK founder


Tom Lydon, president of Global Trend Investments, doesn’t believe the fund needs more catalysts. “But in the rapidly evolving genomics spaces, they keep on coming. Looking ahead, CRISPR-based innovations will accelerate given the technology’s ease of use, cost-efficacy and growing body of research surrounding safety. CRISPR can address some of the most prominent healthcare problems, opening up a significant investment opportunity,” he wrote in ETF Trends.

Michael Dolen, however, cautioned that the “hype” surrounding ARK’s ETFs, including the AKRG, “has led to some irrational pricing”. “Many of the companies in the fund generate little to no revenue. For those developing therapies, many do not have any approved treatments on the market. Their share prices are winning lately largely because of ARK’s influence on them. On the flip side, many of the holdings are mature companies generating plenty of revenue such as Regeneron and Roche. I am a fan of many of their holdings [but] you may have better opportunities buying ARKG in the coming months,” he wrote in Seeking Alpha.

Despite revenue generation concerns, the genomic revolution is expected to keep thriving. After all, a world battered by a pandemic needs all the innovations it can get.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

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