Cathie Wood’s ARK Innovation ETF has emerged as a top-performing exchange-traded fund, surpassing its competitor from Fidelity. The key difference between the two lies in Wood’s significant investment in Coinbase Global, while Fidelity decided to steer clear.
The victory for Wood can be attributed to her belief in Coinbase and the broader realm of cryptocurrency. Wood has maintained a long-standing investment in Coinbase, which acts as a leveraged bet on Bitcoin. Although this strategy suffered in 2022 when Bitcoin plummeted, it has paid off handsomely this year, with Coinbase experiencing a remarkable 295% surge, surpassing Bitcoin’s 155% gain. In anticipation of the potential approval from regulators for an ETF that directly holds Bitcoin, investors have been driving up the token’s value.
With Coinbase constituting approximately 10% of ARK Innovation, it stands as the ETF’s largest holding. Wood has been gradually reducing her stake in the brokerage, currently owning around 6 million shares in ARK Innovation, compared to 8.3 million shares during the summer. Nonetheless, her firm still retains over 8 million shares of Coinbase through ETFs, establishing itself as one of the brokerage’s major stakeholders.
Tom Staudt, the president and CEO of ARK Invest, expressed their optimism in digital assets, specifically Bitcoin, stating that “Coinbase stands to be a beneficiary.”
Aside from Coinbase, Wood’s other top picks have also performed admirably. This includes Roku, which has surged by 158%, UiPath with a gain of 99%, and Tesla ahead with 101%. However, Wood has noticeably reduced her holdings in Tesla, selling more than 3.5 million shares since June, leaving her with 2.6 million shares as of December 13.
It’s important to note that Wood faced a significant setback in 2022 when ARK Innovation plummeted by 67%, ranking last among mid-cap growth ETFs. This year, however, the fund has made an impressive turnaround, currently ranking in the top 1% according to Morningstar.
Despite the recent success, ARK Innovation’s long-term returns still trail behind the market. With a decline of 58% over the past three years and a mere 31% growth over the past five years, it falls significantly behind the Nasdaq Composite Index’s total return of 122% within the same timeframe.
Fidelity Blue Chip Growth: Riding the Tech Wave
Introduction
Fidelity Blue Chip Growth has been capitalizing on the tech wave, with its top 10 holdings including tech giants Nvidia, Meta Platforms, and Uber Technologies. These stocks have seen significant growth, with Nvidia up 231%, Meta Platforms up 179%, and Uber Technologies up 150%.
Well-Positioned for the AI-Driven Rally
According to Blue Chip Growth primary manager Sonu Kalra, the portfolio was well-positioned for the AI-driven rally. The fund’s strategic positioning in the tech sector, particularly its significant investment in Nvidia, helped it outperform in the third quarter.
No Crypto in the Fidelity ETF
The latest holding report of the Fidelity ETF reveals an absence of any holdings related to cryptocurrencies, including Coinbase. The question of whether crypto belongs in the Fidelity ETF is debatable. The ETF closely tracks the portfolio of its mutual fund counterpart, which prioritizes “blue chip growth” and does not include crypto investments.
Sticking with Quality
While the lack of crypto exposure may have affected the fund’s performance this year, Blue Chip Growth has delivered strong results by sticking with quality investments. Its core holdings consist of highly profitable megacap tech stocks, such as Apple, Microsoft, and Alphabet. Additionally, the fund includes a diversified mix of other sectors and companies that have performed well, such as Eli Lilly, which has seen a 57% increase in value thanks to its weight-loss drugs.
Outperforming with Long-Term Returns
When considering long-term returns, Blue Chip Growth emerges as the superior choice for many investors. Over the past five years, the mutual fund has achieved a cumulative return of 147%, surpassing both Wood’s Bitcoin-juiced ETF and the broader market.
In conclusion, Fidelity Blue Chip Growth has demonstrated its ability to ride the tech wave and deliver strong returns by focusing on quality investments. While the absence of crypto holdings may be a drawback for some, the fund’s performance speaks for itself.