Exchange-traded funds (ETFs) led by Cathie Wood, CEO and chief investment officer of ARK Investment Management, have been in the spotlight thanks to their stellar performance over the past year. The company currently has six actively-managed funds and two index funds. They each focus on a theme that is likely to be part of the growth story in equities in the new decade.
The actively-managed funds include:
- ARK Autonomous Technology & Robotics ETF (BATS:ARKQ) — up 89% in 12 months and down less than 1% year-to-date (YTD);
- ARK Fintech Innovation ETF (NYSEARCA:ARKF) — up 74% in 12 months and down 8% YTD;
- ARK Genomic Revolution ETF (BATS:ARKG) — up 68% in 12 months but down 19% YTD;
- ARK Innovation ETF (NYSEARCA:ARKK) — up 75% in 12 months but down 18% YTD;
- ARK Next Generation Internet ETF (NYSEARCA:ARKW) — up 76% in 12 months but down 14% YTD;
- ARK Space Exploration & Innovation ETF (BATS:ARKX) — down about 3.6% since late March 2021 when it started trading.
And the two index funds are:
- ARK Israel Innovative Technology ETF (BATS:IZRL) — up 34% in 12 months and down 2% YTD.
- The 3D Printing ETF (BATS:PRNT) — up 97% in 12 months and up 15% YTD.
The numbers show that these ETFs have come under pressure in recent weeks. As the Street debates what might be next for ARK ETFs , investors are looking for other funds that might have high returns in the days the rest of the year.
Against this backdrop, here are seven ETFs to research if you want to try to outperform Cathie Wood:
- Blackrock Future Innovators ETF (NYSEARCA:BFTR)
- Fidelity Small-Mid Cap Opportunities ETF (BATS:FSMO)
- Ecofin Digital Payments Infrastructure Fund (NYSEARCA:TPAY)
- First Trust Multi-Asset Diversified Income Index Fund (NASDAQ:MDIV)
- Invesco Golden Dragon China ETF (NASDAQ:PGJ)
- ProShares MSCI Transformational Changes ETF (NYSEARCA:ANEW)
- VanEck Vectors Low Carbon Energy ETF (NYSEARCA:SMOG)
These ETFs provide a diversified and cost-effective exposure to different sectors and investment themes.
ETFs To Buy: BlackRock Future Innovators ETF (BFTR)
52-Week Range: $35.22 – 57.75
Expense Ratio: 0.8% per year
The Blackrock Future Innovators ETF is an actively managed fund, that focuses on innovative businesses from industries that could impact the future of the global economy. BFTR has 63 holdings.
Since its inception in September 2020, net assets have grown to more than $20 million. Information technology (IT) and healthcare sectors have the highest weighting, each with around 30%. Next in line are consumer discretionary stocks (17%), industrials (12.55%) and consumer staples (6.92%).
Among the leading names are online car-buying platform Vroom (NASDAQ:VRM), Freshpet (NASDAQ:FRPT), which manufactures fresh pet food, and industrial biotechnology group Amyris (NASDAQ:AMRS). The top 10 names comprise around 30% of BFTR.
YTD, the fund is down more than 6%. For investors looking for growth, disruptive trends come with both opportunities and risks. Interested readers could also regard any dip below $40 as an opportunity to buy into the fund.
Ecofin Digital Payments Infrastructure Fund (TPAY)
52-Week Range: $29.94 – $48.79
Expense Ratio: 0.40% per year
The Ecofin Digital Payments Infrastructure Fund could appeal to investors who believe we will continue to rely on digital transactions to pay for our shopping. This ETF provides exposure to companies that are part of the digital payment value chain worldwide. Such firms include credit card networks, electronic transaction processors, merchant payment services and real-time record keeping firms.
TPAY currently has 55 holdings, and the top 10 stocks comprise close 40% of net assets of $13 million. The fund was launched in January 2019. Put another way, it is a small and relatively young ETF. Among the leading firms in the fund are Worldline (OTCMKTS:WRDLY), PayPal (NASDAQ:PYPL), Adyen (OTCMKTS:ADYEY), Square (NYSE:SQ) and DocuSign (NASDAQ:DOCU).
YTD, the ETF is down about 2.6%. If you believe believe the secular trend regarding digitalization worldwide should continue in the quarters ahead, you could possibly invest around $40.
ETFs To Buy: Fidelity Small-Mid Cap Opportunities ETF (FSMO)
52-Week Range: $20.29 – $23.25
Expense Ratio: 0.64% per year
The Fidelity Small-Mid Cap Opportunities ETF is an actively managed ETF. It began trading in early February 2021. It invests in global firms with small to medium market capitalizations (caps). Many investors allocate a portion of their portfolios to such companies due to their potential for growth.
As a non-transparent fund, FSMO announces its investments once a month. Its benchmark index is the Russell 2500 Index. According to the most recent disclosure, the top 10 stocks make up close to 15% of net assets of about $17 million. In terms of sectoral breakdown, industrials have the largest slice (18.51%). Next in line are consumer cyclicals (16.8%) and financial services (17.72%).
Among the leading names are Generac (NYSE:GNRC), which manufactures power generation equipment; designer of luxury accessories Tapestry (NYSE:TPR); flooring manufacturer Mohawk Industries (NYSE:MHK); and Signature Bank (NASDAQ:SBNY).
FSMO could appeal to readers wanting to add several non-U.S. businesses to their portfolios. Around 10% of the holdings come from outside the U.S. Since its inception three months ago, FSMO has returned about 7%. The ETF deserves to your attention.
First Trust Multi-Asset Diversified Income Index Fund (MDIV)
52-Week Range: 12.96-17.07
Expense Ratio: 0.68% per year
Markets have become increasingly volatile in recent days. Therefore, individuals who want to decrease exposure to equities, could consider buying an ETF that provides exposure to several asset classes within a single fund.
In such ETFs, asset classes typically include bonds (government and/or corporate), stocks (mostly dividend-paying shares), preferred securities (or “hybrids” that share the characteristics of both stocks and bonds), master limited partnerships (MLPs ,which typically distribute over 70% of their cash flow to investors) and real estate investment trusts (REITs) that focus on income-producing real estate.
The First Trust Multi-Asset Diversified Income Index Fund is an ETF that follows such a multi-asset strategy. MDIV started trading in August 2012, and net assets are about $489 million. The fund, which has 125 holdings, tracks the returns of the NASDAQ US Multi-Asset Diversified Income Index. MDIV’s composition is as follows: Dividend-Paying Equities (22.69%), REITs (20.94%), MLPs (19.18%), High Yield Corporate Bond ETFs (18.86), and Preferred Securities (17.48%).
InvestorPlace.com readers should note that the First Trust Tactical High Yield ETF (NASDAQ:HYLS) makes up 18.70% of MDIV. HYLS, which has $2.3 billion in assets, invests over 80% of its net assets in high-yield junk bonds that come with credit risk. The main objective of HYLS is to provide current income.
In an environment where interest rates are at record lows, junk bond ETFs get significant attention. YTD, HYLS is flat. But its current yield is 5.3%.
Returning to MDIV, no other security in the fund has more than 1.75% in weighting. Other holdings include Starwood Property Trust (NYSE:STWD), Annaly Capital Management (NYSE:NLY), REIT National Health Investors (NYSE:NHI).
So far in 2021, MDIV has returned more than 12% and hit a 52-week high in May. Interested investors could buy the dips, especially if there is a decline toward $15 or below. The ETF’s diversification and the current dividend yield offered by HYLS would likely appeal to a range of individuals, such as retirees.
ETFs To Buy: Invesco Golden Dragon China ETF (PGJ)
52-Week Range: $40.66-$85.90
Expense Ratio: 0.70% per year
Our next fund comes from China. The Invesco Golden Dragon China ETF invests in companies deriving a majority of their revenues from China. They are typically headquartered or incorporated in the country, but are listed on U.S. stock exchanges. The fund started trading in December 2004 and net assets stand at $270 million.
PGJ, which has 85 holdings, is based on the NASDAQ Golden Dragon China index. In terms of sectors, consumer discretionary has the highest slice with 48.14%. Next in line are communication services at 26.64%, information technology at 9.96% and industrials account for 4.81%.
Among the leading names are Alibaba (NYSE:BABA), NetEase (NASDAQ:NTES), JD.com (NASDAQ:JD), Baidu (NASDAQ:BIDU), Pinduoduo (NASDAQ:PDD), and TAL Education (NYSE:TAL). The top companies make up around 60% of PGJ.
So far in 2021, PGJ is down almost 11%. However, over the past year, the fund has returned 37%, hitting a record-high in mid-February. Although a further decline toward $50 would improve the margin of safety.
ProShares MSCI Transformational Changes ETF (ANEW)52-Week Range: $36.84 – $47.47
Expense Ratio: 0.45% per year
The ProShares MSCI Transformational Changes ETF gives access to firms that could benefit from trends that gather pace after the pandemic. Funds are currently allocated almost equally into four themes: the future of work, genomics and tele-health, digital consumer and food revolution.
ANEW, which has 150 holdings, tracks the MSCI Global Transformational Changes Index. U.S. businesses comprise around 78% of net assets of $42 million. The rest come from China (8.84%), Switzerland (3.86%), Germany (2.42%) and Japan (1.79%), among others.
In terms of sector allocation, health care (29.02%) leads, followed by information technology (26.27%), communication services (16.65%) and materials (11.45%). No stock has a weighting larger than 2.6%. In other words, price changes in a given company would not be enough to make a significant difference in the price of the fund.
Among the leading names in the fund are Activision Blizzard (NASDAQ:ATVI), Google’s Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), Corteva (NYSE:CTVA), Deere (NYSE:DE), Johnson & Johnson (NYSE:JNJ), Medtronic (NYSE:MDT), Microsoft (NASDAQ:MSFT) and Netflix (NASDAQ:NFLX).
Since the start of the year, ANEW is flat. It is a young and small ETF without much trading history. However, I like the diversity of industries and companies in the fund. Potential investors could consider investing around $40 or below.
ETFs To Buy: VanEck Vectors Low Carbon Energy ETF (SMOG)
52-Week Range: $71.34 – $195.55
Expense Ratio: 0.62% per year
2020 was a momentous year for shares of electric vehicles (EVs) and renewable energy firms. One of the ETFs that did well was the VanEck Vectors Low Carbon Energy ETF. In the past 12 months, it returned 97% and hit a record-high in late January. However, since then, profit-taking has kicked in, and it has lost about 30% of its value. Year-to-date, the fund is down almost 18%.
SMOG is a bet on the low-carbon theme. It gives exposure to firms that focus on alternative energy, including biofuels (such as ethanol), solar, solar, hydro and geothermal sources. It also invests in firms that focus on EVs, lithium-ion batteries, smart grid technologies, as well as waste-to-energy production.
SMOG has 64 holdings. It started trading in May 2007, and net assets have reached $431 million. IT has the highest weighting with 35.4%. Next in line are industrials (27.8%), consumer discretionary (20.1) and utilities (9.2%). The top 10 names make up almost 65% of the fund.
Given the recent decline in the price of SMOG, it now offers a better risk-return profile for buy-and-hold investors. Any further slide toward the $125 level would make the fund even more attractive.
On the date of publication, Tezcan Gecgil held both LONG/SHORT positions in GOOG and TSLA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.