S&P 500: Cathie Wood Is Back On Top Thanks To 7 Stocks Not In The S&P 500

Cathie Wood’s ARK Innovation (ARKK) is back on top. And amazingly, it’s largely due to off-the-beaten path stocks not in the S&P 500.

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ARK Innovation is again the No. 1 actively traded diversified ETF, says an Investor’s Business Daily analysis of data from Morningstar Direct. And that’s thanks mostly to eight stocks — like Roku (ROKU), Twilio (TWLO) and 2U (TWOU) — all up 50% or more this year. Stunningly, seven of the eight stocks driving ARK Innovation aren’t in the S&P 500. Tesla (TSLA) is the only ARK Innovation stock up 50% or more that’s in the S&P 500.

And that’s the big takeaway from ARK Innovation’s return to the top. Wood is outperforming mainly with bets outside the megacap techs that have driven the market higher all year. And finding less obvious stocks could become more important for investors looking to outperform.

“The FOMO trade might be here, but the economy is clearly feeling the effects of the Fed’s tightening cycle, and the consumer is weakening but has no trouble getting a job, so it will be interesting how the stock market’s back gets broken,” said Edward Moya of Oanda.

ARK Innovation’s Return To No. 1

Wood’s juggernaut $7.9-billion-in-assets fund returned 41.4% this year. That means it’s also topping the S&P 500’s 14.95% return this year — including ETFs that cherry-pick the S&P 500’s new “blue chips.”

The fund’s willingness to go after smaller stocks is a gutsy move — amid a megacap rally powered by the “magnificent seven” stocks. But it’s paying off handsomely.

ARK Innovation’s outsize bet on Roku, a maker of video streaming gear, is a case in point. Shares are up 114% just this year. Shares are rallying despite the fact that analysts think the company will lose $5.08 a share on an adjusted basis this year, says S&P Global Market Intelligence. That’s even more than the $3.62 a share it lost in 2022. It’s also not represented in many major indexes, including the S&P 500.

But Wood is betting big on it. The stock counts as 7.3% of the portfolio, making it one of ARK Innovation’s largest positions.

Other ARK Bets That Are Working

ARK Innovation is best known for its Tesla position. And that has helped, too. The stock accounts for 11.6% of the ETF. That’s paying off handsomely, with shares up 85.5% this year.

But S&P 500 member Tesla is just part of the reason ARK Innovation is soaring this year. Just behind Tesla is software firm Twilio. The stock, not in the S&P 500, makes up nearly 4% of ARK Innovation and is up 83% this year.

And then there’s 2U, a tiny online education firm with just $319 million in market value. The stock, not in the S&P 500, is up 74% this year. Wood might hope she owned more: It’s a small slice of ARK Innovation’s portfolio at 0.3%. But Zoom Video (ZM), up 65%, is another giant holding with a 7.2% weight.

It’s unclear if ARK Innovation and Wood’s hot streak will continue. But she’s definitely not piling onto the big-cap tech trade everyone else is.

Top ARK Invest Stocks

Most aren’t in the S&P 500 

Sources: ARK Invest, IBD, S&P Global Market Intelligence, * – in the S&P 500