S&P 500: Cathie Wood is back on top thanks to 8 stocks not included in the S&P 500

Cathie Wood's ARK Innovation (ARKK) is back on top. And amazingly, this is largely due to off-the-beaten-track stocks that aren't included in the S&P 500.




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ARK Innovation is once again the #1 actively traded diversified ETF, according to data analysis from Morningstar Direct. And that's thanks largely to 10 stocks — roughly roku (ROKU), Palantir (PLTR) and DraftKings (DKNG) – all up more than 55% or more this year. Amazingly, eight of the 10 stocks driving ARK innovation aren't in the S&P 500. metaplatforms (META) and Tesla (TSLA) are the only two ARK Innovation stocks on the S&P 500 to be up more than 50%.

And that's the big takeaway from ARK Innovation's return to the top. Holz fares better, especially on bets away from the megacap tech stocks that have propelled the market all year. And finding less obvious stocks could become more important for investors looking to outperform.

“FOMO trading might be there but the economy is clearly feeling the impact of the Fed's tightening cycle and the consumer is weakening but having no trouble finding a job. So it will be interesting to see how the backbone of the stock market is broken,” he told Edward Moya of Oanda.

The return of ARK Innovation at #1

Wood's gargantuan $7.9 billion fund returned 41.4% this year. That means it's also beating the S&P 500's 14.95% return this year — including ETFs picking the new S&P 500 “blue chips.”

The fund's willingness to focus on smaller stocks is a bold move — amid a mega-cap rally fueled by the “Magnificent Seven” stocks. But it's paying off handsomely.

A case in point is ARK Innovation's outsized bet on Roku, a maker of video streaming devices. Shares are up 55% this year alone. Shares are recovering, according to S&P Global Market Intelligence, although analysts expect the company to lose $5.08 a share this year on an adjusted basis. That's even more than the $3.62 per share the company lost in 2022. It's also absent from many major indices, including the S&P 500.

But Wood is betting a lot. The stock accounts for 7.3% of the portfolio, making it one of ARK Innovation's largest holdings.

Other ARK bets that work

ARK Innovation is best known for its Tesla position. And that helped too. The stock accounts for 11.6% of the ETF. It's paying off handsomely, as shares are up 107% this year.

But S&P 500 member Tesla is just one of the reasons ARK Innovation is soaring this year. Just ahead of Tesla is the gaming company DraftKings. The stock, which is not included in the S&P 500, accounts for nearly 4% of ARK Innovation and is up 131% this year.

And then there's Palantir, a data management company. The stock, which is not included in the S&P 500, is up 135% this year. Wood might hope she owned more: At 0.9%, it's a small part of ARK Innovation's portfolio. But Coinbase (COIN) is another huge position up 102% with a 7.1% weight.

It's unclear if ARK Innovation and Wood's winning streak will continue. But it definitely isn't jumping into big-cap tech trading like everyone else.

The best ARK innovation stocks

Most are not included in the S&P 500

Pursue ticker Weight (%) in the ETF YTD %ch.
Palantir Technologies (PLTR) 0.94% 135.0%
metaplatforms* (META) 0.53% 133.8%
DraftKings (DKNG) 3.89% 131.2%
Tesla* (TSLA) 11.59% 107.0%
Coinbase Global (COIN) 7.09% 102.3%
Exact Sciences (EXAS) 4.80% 89.5%
Shopify (BUSINESS) 4.42% 83.5%
Pacific Biosciences of California (PACB) 2.29% 61.4%
10x genomics (TXG) 1.52% 56.8%
roku (ROKU) 7.29% 55.4%
Sources: ARK Invest, IBD, S&P Global Market Intelligence, * – in the S&P 500

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