Cathie Wood expands Hot Streak with ARK Space Exploration ETF

Such a milestone would put the fund in rare company: the fastest ETF to hit $ 1 billion was State Street‘s

SPDR Gold Trust GLD 0.01%

fund, which reached in just three days in 2004.

“That speaks to ARK’s overall strength right now,” said Nate Geraci, president of ETF Store, an investment advisory firm. “At the moment, investors think that anything Cathie Wood touches turns to gold.”

The fund is ARK Investment Management LLC’s first launch in two years and contrasts with the lukewarm receipts its previous products have received. ARK’s flagship innovation fund, started in 2014, has taken more than 3 1/2 years to reach $ 1 billion. The latest launch, the fintech innovation ETF in 2019, lasted approximately 21 months.

However, a lot has changed for ARK. In a year, Ms. Wood’s ARK has transformed from a small, fledgling manager of a handful of ETFs to one of the largest fund managers in the U.S. The share prices of the company’s five other actively managed ETFs doubled or tripled last year. on the back of rising growth stocks such as Tesla Inc.

and Roku Inc., giving Ms. Wood a cult-like following of individual investors who put up every tweet and video to her.

But those growth stocks are now the epicenter of a sell-off, dropping ARK’s legacy funds by at least 14% from their highs earlier this year. Rather than rolling out another fund primarily linked to technology trading, ARK has shifted nearly half of its ETF space to manufacturers, including Lockheed Martin Corp.

, Boeing Co.

and Deere DE -0.28%

& Co., a sector of the stock market that has benefited from rising interest rates and inflation expectations in recent months.

The fund is different enough for investors who say they are fans of Ms. Wood, but are also wary of putting more money into a faltering tech trade.

“Most Cathie ETFs are technically tough,” said Tré Diemer, 20, a college student at William & Mary who said he bought ARKX shares Monday for a few thousand dollars. “When you look at this ETF, you see a lot of names she hasn’t been so involved with.”

He already owns a variety of growth stocks and has kept an eye on Ms. Wood’s other funds as a home for some of the money he earns by working as an emergency medical technician and performing deliveries for DoorDash Inc.

But tech and Ms. Wood’s other funds seemed overvalued, a point reinforced by the recent losses he said he suffered.

“You can almost think of this as a reopening ETF,” said Mr. Diemer, referring to the underlying stocks that will benefit the most from an improving economy.

Not everyone is a fan of the composition of the fund. Some took to social media and created memes to mock ARK’s decision to include Deere and other companies that do not appear to have significant ties to the fund’s theme of investing in space exploration and innovation. One showed a Deere tractor floating through a Mars landscape, another on the moon.

Deere, for his part, responded with several of his own memes, including one featuring a UFO beaming on a tractor. Some analysts said Deere’s inclusion is less cumbersome considering that the company makes satellite-controlled machines.

Other stocks in the fund that appear to be at odds with its mandate include ARK’s passively managed 3D printing ETF and shares of Netflix. Inc.

and Amazon.com Inc.

Meanwhile, some of the few pure-play space supplies, such as the satellite and imaging company Maxar Technologies Inc.

not made. Neither Rocket Lab USA Inc. nor Astra Space Inc., two rocket manufacturers merging with blank check companies to go public.

Ren Leggi, a client portfolio manager at ARK, acknowledged that the stakes cause some confusion, but said they are all in line with the fund’s mandate. “When we talk about space exploration and innovation, we define it as everything above ground,” said Mr. Leggi.

The advancement of drone technology plays a big part in why several companies, including Amazon, are in the fund, said Mr. Leggi. Netflix would benefit from the rollout of satellites that allow for further adoption of broadband internet for streaming, and some rocket parts have been 3D printed, he added. As for the space companies that have been left out, Mr. Leggi said the valuations of some were too rich, especially those of companies engaged in special purpose acquisition businesses, while others failed their initial evaluation of whether the stock could maintain a 15% annualized return. .

“We still continue to monitor many companies in case we get a market environment with a broader sell-off and we can get in at an attractive price,” said Leggi.

Some investors are still not convinced.

“I wasn’t too fond of his stakes,” said Carter Wang, who is 19 and has about $ 3,000 in four of ARK’s previous funds. He is a fan of Ms. Wood and cites her aggressive calls to Tesla as a major reason for his decision to invest in several of the company’s funds. But Mr. Wang, a major in business economics at the University of California, Santa Cruz, called the inclusion of ARK’s 3D printing ETF odd, prompting him to pass the fund.

For several ARK investors, Ms. Wood’s past performance is key. With shares of ARKX trading around $ 21, some investors said they see an opportunity to get into the company’s next success, comparing it to ARK’s innovation fund, whose stock price has been six times higher since it opened. launched in 2014 and continues to attract investors’ attention. (The ETF saw a record daily inflow in one day last week, worth more than $ 700 million.)

“It doesn’t really bother me,” said James Carter, a 31-year-old tech writer in Washington, DC, who bought stock on the space fund’s first day of trading. He said he had planned to invest in the fund since he first learned about it earlier this year, even before any of the underlying stocks were announced. He is considering the possibility that the fund may eventually include shares in Elon Musk’s private rocket company, Space Exploration Technologies Corp.

“I was a little late” with the other funds, Mr. Carter said of his other ARK investments. “That is why I have specifically reserved money for the new ARK fund, just because of my interest in ARK. I wanted to go in early. “

Write to Michael Wursthorn at [email protected]