Fintech
31% of the Ark Fintech Innovation ETF is invested in just 4 stocks
The Ark Fintech Innovation ETF is up 87% since the start of 2023.
These have been difficult years for investors in Innovation Ark ETF. As its value peaked at $158 per share in early 2021, the exchange-traded fund (ETFs) is down 73%. However, this is just one of Cathie Wood’s investment management firm’s ETF offerings. Another produced much better results: the ARK Fintech Innovation ETF (ARKF 0.45%).
Since the start of 2023, the value of the Ark Innovation Fintech ETF has risen 87%, outpacing Wood’s flagship ETF, which is up 36% over the same period. It also surpassed the Nasdaq composite index (+71%) and the S&P500 (up 40%).
The ETF holds several fintech stocks, but there are four that represent the fund’s largest holdings and together they make up nearly a third of the portfolio. I am:
1. Coinbase Global (11.6% of ETF portfolio)
Global Coinbase (CURRENCY 5.54%) manages one of the largest cryptocurrency exchanges in the world. It is positioned to serve as an easy on-ramp for people looking to buy or sell Bitcoin or any of the other 250 cryptocurrencies listed.
The company is heavily involved in the cryptocurrency ecosystem, providing infrastructure for on-chain businesses, including digital wallets, decentralized apps, and other engagement platforms.
Coinbase’s growth is strongly linked to trading activity in the cryptocurrency markets. In 2021, the cryptocurrency market capitalization increased as retail and institutional investors flocked to the asset class and the company reported revenues of $7.8 billion. However, in each of the last two years, its revenue has been less than half that amount.
Things are off to a good start for Coinbase this year. First quarter results were exceptional, as revenue grew 187% year-over-year, driven by solid transaction volume, new user growth, and higher average trade volume per user.
The company will continue to focus on revenue expansion through transaction volume and its stablecoin and will work to achieve further regulatory claritywhich should clarify the uncertainty surrounding the sector.
2. Shopify (7.7% of ETF portfolio)
Shopify (SHOP 1.64%) is a crucial player among retailers (especially those with e-commerce needs), offering a platform and set of services that make it easy for businesses of any size to open and operate stores (especially online stores). Its platform is simple to use and also offers numerous features, including product management, inventory tracking, and payment processing, making store management seamless.
The company’s revenue growth is stellar. Over the past five years, revenues have grown from $1.58 billion to $7 billion, a compound annual growth rate of 35%. The final results, however, were more mixed. Earnings rose in 2021 as e-commerce business has skyrocketed during the pandemic. But in 2022, Shopify reported losses of nearly $3.5 billion. Last year, cost-cutting measures helped him return to profit with a net profit of $132 million.
Shopify is well positioned in an ever-expanding industry. According to a forecast by the Boston Consulting Group, e-commerce sales will grow at a compound annual rate of 9% through 2027, when they are expected to make up 41% of global retail sales, up from 18% in 2017.
3. Block (7.2% of ETF portfolio)
To block‘S (m2 -0.08%) first product, the Square point of sale system, made it easy for small and medium-sized businesses to process digital and card payments and manage sales. Its system replaced bulky hardware and allowed small businesses to easily accept payments using smartphones and tablets.
Its Cash App has streamlined peer-to-peer payments, making it easier to send and receive money. Since then, the app has grown into a full-fledged financial services platform, allowing people to bank, invest, and hold cryptocurrencies in one place. Second., Cash App also has the advantage of being the most used investment app among all generations The Motley Fool Generational Investing Survey.
Block is in the midst of a year of transformation. CEO Jack Dorsey is trying to streamline the business and improve synergies across the company’s offerings: Square, Cash App and Afterpay, its “buy now, pay later” (BNPL) service. The company also plans to invest heavily in Bitcoin, connecting its long-term success to the future of cryptocurrency.
4. Robinhood Markets (4.9% of ETF portfolio)
Robinhood Markets (HOOD -2.35%) aims to democratize investing for everyone, but in its efforts to do so it has generated its share of criticism for the way it has done so (including concerns about the gamification of stock trading). However, there is no denying that it has been one of the most innovative companies in the brokerage industry over the past decade. The company has popularized features such as commission-free trading, fractional share trading, and an intuitive interface.
Robinhood’s initial growth was impressive, but it has slowed in the years since the meme-stock-fueled trading frenzy of 2021. The company is taking steps to reignite growth, including offering high returns on uninvested cash to its Robinhood Gold members and retirement accounts with matching to bring more funds to the platform.
In 2024, the company released its better quarterly results since it became public. This improvement is due to a growing asset base, robust transaction volumes, higher net interest income and growing subscription revenues. Robinhood will continue to focus on its subscription business and retirement accounts to attract more funds to its platform and, like Coinbase, seeks greater clarity on its cryptocurrency business by regulators.