A turbulent August ended up with positive returns for U.S. stocks, dodging fears over North Korea tension. In fact, the technology sector continues to be investors’ hot favorite and was the clear winner last month, with ARK Innovation ETF (ARKK - Free Report) topping the list of the best-performing ETF of August with 15.3% gains.
The impressive rally was mainly driven by strong corporate earnings, encouraging industry fundamentals and the emergence of new technology such as cloud computing, big data, Internet of Things, wearables, drones, virtual reality devices and artificial intelligence. Additionally, hopes of new tax reform, which could allow companies to bring back cash being held overseas at lower rates, have added to the strength (read: Bet on These ETFs on New Hopes for Tax Reform).
Further, the continued surge in bitcoin prices is a big boon for this disruptive-companies focused ETF. Bitcoin, also known as a cryptocurrency, is a digital or virtual currency that uses peer-to-peer technology to facilitate instant payments. The digital currency jumped above $4,800 for the first time thanks to geopolitical uncertainty across the globe.
If these weren’t enough, the shift in investors’ sentiment to defensive sectors like healthcare, which generally outperform during periods of low growth and high uncertainty, contributed the most to the strength in the ETF.
Let’s take a closer look at the fundamentals of ARKK.
ARKK in Focus
This is an actively managed fund focusing on companies that are expected to benefit from the development of new products or services, technological improvement and advancements in genomic revolution, Web x.0 and industrial innovation (see: all the Technology ETFs here).
The fund holds 50 stocks in its basket with each holding less than 10% share. From an industrial look, biotechnology makes up for 24% of the portfolio while Internet & mobile applications, software & programming, Internet & direct marketing and pharmaceuticals round off the next four spots. The ETF has amassed $118.5 million in its asset base and trades in a light average daily volume of around 48,000 shares. The expense ratio comes in at 0.75%.
Though most of the stocks in the fund’s portfolio delivered strong returns, a few were the real stars, having gained more than 25%. Below we have highlighted those five best-performing stocks in the ETF with their respective positions in the fund’s basket:
Top Performing Stocks of ARKK
Bitcoin Investment Trust (GBTC - Free Report) : Shares of GBTC soared about 139% last month. GBTC is an open-ended grantor trust based in the U.S., sponsored by Grayscale Investments. It is quoted on the over-the-counter market and derives its value solely from the price of bitcoin. The trust's objective is to track the market price of bitcoin. GBTC occupies the top spot in the fund’s basket with 9.74% of total assets (read: Bitcoin Skyrockets, Race to First Cryptocurrency ETF Heats Up).
Kite Pharma Inc. : The stock has surged nearly 64.2% in August and carries a Zacks Rank #3 (Hold) with a VGM Style Score of F. The stock has seen positive earnings estimate revision from a loss of $8.35 per share to a loss of $8.16 per share for this year over the past month with an expected earnings decline of 49.38%. Kite Pharma has an impressive Zacks Industry Rank in the top 40%. The stock is the 14th firm and accounts for 2.1% share in ARKK (read: Biotech ETFs Soar on Gilead-Kite Deal).
Juno Therapeutics Inc. (JUNO - Free Report) : This stock occupies the eight position in the fund’s basket with 3.48% allocation. It also delivered incredible returns of 45.2% in August. The stock has seen a negative earnings estimate revision from a loss of $3.13 per share to a loss of $3.22 for this year over the past 30 days with an expected earnings decline of 21.38%. Juno Therapeutics has a Zacks Rank #4 (Sell) with a VGM Style Score of D but a top Zacks Industry Rank in the top 40%.
bluebird bio Inc. (BLUE - Free Report) : The stock gained about 32.5% last month. It has seen negative earnings estimate revision from a loss of $6.73 per share to a loss of $6.78 per share over a month for this year, with an expected earnings growth rate of 4.12%. bluebird bio currently has a Zacks Rank #3 with a VGM Style Score of F and a solid Zacks Industry Rank in the top 40%. The stock takes the tenth spot in the fund’s portfolio, making up for 2.86% share.
Hortonworks Inc. (HDP - Free Report) : This stock occupies the 25th position in the fund’s basket with 1.46% of assets and gained 26.8% in August. Though it has seen positive earnings estimate revision from a loss of $1.85 to a loss of $1.74 per share over a month for this year, its earnings are expected to grow 32.69%. However, Hortonworks has a Zacks Rank #4 (Sell) with a VGM Style Score of C but belongs to a solid industry having a Zacks Rank in the top 36%.
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