A small innovation ETF inspired by Cathie Wood is returning 10 times Ark Invest’s flagship fund this year

NYSE trader
  • The Direxion Moonshot Innovators ETF (MOON) has returned 39% year-to-date, beating Cathie Wood’s flagship fund, the Ark Innovation ETF (ARKK), by roughly 10-fold.
  • ARKK has gained 3.5% over the same period.
  • The Direxion fund is much smaller than Ark, and is more heavily concentrated in biotechnology stocks.
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A small ETF that aims to give investors exposure to the most innovative companies in the US has outperformed the flagship fund of Cathie Wood’s Ark Invest by 10-fold this year.

The Direxion Moonshot Innovators ETF (MOON) tracks 50 US companies that pursue innovative technologies, similar to the stated goal of the Ark Innovation ETF (ARKK). But MOON has gained roughly 39% in 2021, far outpacing ARKK’s 3.5% rise. Bloomberg first reported on the fund’s outperformance.

After a stellar 2020, this year has been shaky for Wood’s ETF as investors take profits from highly valued technology stocks and bet on cyclical names against the backdrop of rising yields and an economic reopening.

Yet Direxion’s technology stocks have fared well so far. Moon’s top stock holding by percentage is Vuzix, a $1 billion market-cap company that supplies wearable display technology and virtual reality devices. That stock has returned nearly 140% year-to-date. Meanwhile ARKK’s top holding, Tesla, has remained relatively flat in 2021.

According to the Direxion website, the ETF’s top sub themes consist of genetic engineering (19.44%), cyber security (16.79%), and clean technology (9.74%).

As of Dec 31, 2020, the ARKK’s largest themes were e-commerce (12%), digital media (9.7%), and cloud computing (9.4%).

The Direxion ETF tracks the S&P Kensho Moonshots Index, an index of 50 US companies that pursue innovative technologies that have the potential to disrupt existing industries and have the highest “early-stage composite innovation scores.”

That innovation score is determined by “a natural language processing review,” of each company’s latest regulatory filing for the use of “words and phrases that are related to innovation,” according to the Direxion website.

The fund has gained 70% since its inception in November 2020, but has under $200 million in assets under management, compared to Ark’s $24 billion.

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Cathie Wood’s Ark ETFs added over 2.6 million shares of Palantir on Wednesday amid falling share prices

Cathie Wood
Cathie Wood is the CEO and chief investment officer of ARK Invest, which runs three of the highest-returning stock ETFs of the last three years.

  • Cathie Wood’s ARK Innovation ETF and ARK Next Generation Internet ETF added 2.6 million shares of Palantir on Wednesday.
  • At Wednesday’s closing price the shares were worth over $62.7 million.
  • The move continues a trend of buying the dip in big tech names for ETFs run by the famed fund manager.
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Cathie Wood’s ARK Innovation ETF (ARKK) and ARK Next Generation Internet ETF (ARKW) picked up a combined 2,658,800 shares of Palantir on Wednesday amid falling share prices.

At Wednesday’s closing price of $23.59, the shares were worth roughly $62.7 million.

The move made Palantir the 37th largest holding of the ARK Innovation ETF and the 20th largest holding of the ARK Next Generation Internet ETF.

Palantir’s stock has slumped in recent week, after a lockup expiration and a surprise quarterly loss led to considerable insider profit taking at the big data firm. Share prices have fallen over 26% in the past month and a recent tech stock pullback hasn’t helped.

The Invesco QQQ Trust Series 1 ETF, which tracks tech names in the Nasdaq, has fallen nearly 10% since the beginning of February. Much of the move down was caused by a bond sell-off that rocked markets last week, something Cathie Wood said she was “very comfortable” with given her funds’ long-term bias.

Wood has been using the recent tech rout to ‘buy the dip’ in many of her favorite names. The fund manager known as ‘money tree’ doubled down on her Tesla bet (1) (2) amid falling share prices at the EV maker, and now she’s taking another bite at Palantir.

Wood’s big Palantir buy follows a trend for the ARK Innovation ETF and ARK Next Generation Internet ETF which acquired a combined 6.8 million shares of Palantir in February.

Despite Palantir’s recent slide, a number of analysts still believe in the company’s prospects. Goldman Sachs analysts last month upgraded Palantir to a buy and placed a $34 price target on the firm after earnings.

Analysts, led by Christopher D. Merwin, CFA, argued Palantir now has a clear path to “sustainable growth” as the company continues to win contracts for their Foundry, Gotham, and Apollo software.

Palantir traded up 4.87% during premarket hours on Thursday.

PLTR chart
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JPMorgan rolls out a supercharged tech trade designed to amplify gains in stocks like Tesla, report says

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  • JPMorgan is selling investment products that allow clients to augment their bets on high-flying tech stocks.
  • The notes track three exchange-traded funds from Ark Investment Management leveraged 1.5 times over a six-year period, Bloomberg reported Monday.
  • The underlying ETFs have all rallied at least 150% in 2020. Two reaped the benefits of Tesla’s 660% year-to-date surge.
  • The product’s rollout comes as investors shift out of tech stocks and into cyclical sectors amid hopes for a vaccine-fueled recovery.
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Tech stocks have already led the stock market to several record highs in 2020. JPMorgan thinks investors want to double down on the sector.

The bank is letting investors in on a new trade that amplifies bets on three tech-focused exchange-traded funds, Bloomberg reported Monday. The product tracks three ETFs from Ark Investment Management leveraged 1.5 times over a six-year period. JPMorgan has already sold $589,000 of the notes.

The funds – Ark’s Innovation, Genomic Revolution, and Next Generation Internet ETFs – are among the year’s best performers. Large stakes in Tesla boosted the Innovation and Next Generation Internet funds in 2020, as the automaker’s shares have rallied more than 660% throughout the year.

The Genomic Revolution ETF is up 194% year-to-date. The Innovation and Next Generation Internet ETFs have rallied 154% and 153%, respectively.

Read more: JPMorgan unveils its 50 ‘most compelling’ stock picks to buy for 2021 – and details why each one will be a top performer

JPMorgan has debuted the product as investors begin to rotate out of tech stocks. The sector’s insulation from the virus fallout led them to outperform through much of the year, but hopes for a vaccine-fueled recovery in 2021 have prompted mass shifts into value stocks and previously neglected sectors. A prolonged rotation could drag tech stocks lower and weigh heavily on the new products’ gains.

The structured products also only track the worst-performing of the three ETFs, meaning one’s plunge would cancel out any gains across the other two funds. Still, those holding the notes are protected against the first 20% decline in any of the ETFs, Bloomberg reported.

Ark’s Innovation, Genomic Revolution, and Next Generation Internet ETFs trade under the tickers ARKK, ARKW, and ARKG, respectively. Though all three broadly track tech themes, the Genomic Revolution fund focuses on innovations in health care including CRISPR, gene editing, and agricultural biology.

Read more: ‘We are very confident that the stupid is currently alive and well in this market’: Jeremy Grantham’s heir apparent Ben Inker breaks down how GMO plans to profit from the growth bubble through a new long/short equity strategy

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