Growth-heavy equities had been beaten down by the fear of rising interest rates in the face of inflationary pressures since mid-February but bottomed out in mid-May (remember, high-growth stocks are much more interest-rate sensitive than any other equity grouping). Investors are predicting what businesses will be running our rapidly digitalizing economy by the end of the Roaring 20s and have been placing their bets this past month.
Relatively discounted growth names are being bought up with vigor as they fall back into market favor. You can see this illustrated in the Ark Innovation ETF (
ARKK Quick Quote ARKK - Free Report) , which was up more than 2% today and has rallied 27% in less than 6 weeks of trading. Cathie Wood Is Back in The Spotlight
Cathie Wood's Ark Innovation ETF (
ARKK Quick Quote ARKK - Free Report) was the most talked-about ETF of 2020, exhibiting a 360% return from its 2020 March lows to its mid-February 2021 highs. These returns were driven by the active ETF's penchant for "disruptive innovation," which is synonymous with extreme-growth stocks that have proven to be high-risk, high-reward. The 10 years of economic digitalization in 10 months amid the global lockdowns combined with ultra-low interest rates propelled Ark's growth-heavy holdings to the moon.
This ETF has become the high-growth tech index in the markets today. Its holdings include innovative market disruptors in numerous tech-powered spaces like the revolutionary EV start-up Tesla (
TSLA Quick Quote TSLA - Free Report) (the most significant holding at 9.5%). Retail digitizers like Shopify ( SHOP Quick Quote SHOP - Free Report) and Square (SQ). AI-powerhouses like Twilio ( TWLO Quick Quote TWLO - Free Report) and UIPath ( PATH Quick Quote PATH - Free Report) . DNA manipulators like CRISPR Therapeutics ( CRSP Quick Quote CRSP - Free Report) , 10x Genomics ( TXG Quick Quote TXG - Free Report) , and Invitae (NVTA), and so many other visionary enterprises that are poised to explode in the 4th Industrial Revolution.
Mid-February marked a narrative shift away from rich multiple growth names as the soaring US 10-Year yield instilled profit-pulling fear in tech. ARKK hit its peak on February 16th and troughed on May 13th for a 39% (nearly) 3-month decline, illustrating the risk of Cathie's high-multiple holdings in her innovative ETF. However, the short-term bottom for next-generation enterprises is in, and high multiple stocks are returning to investors' favor.
It may be prudent to consider either this ETF or some well-positioned growth-heavy tech names for a long-term investment. I believe that stocks of the future like CrowdStrike (
CRWD Quick Quote CRWD - Free Report) , Twilio ( TWLO Quick Quote TWLO - Free Report) , and Splunk ( SPLK Quick Quote SPLK - Free Report) are going to be market drivers through the next decade. Breakout Biotech Stocks with Triple-Digit Profit Potential The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases. Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better. See these 7 breakthrough stocks now>>