ETF Winner Of 1H17 And Its Top 5 Stocks

Despite the recent turmoil, the technology sector continues to be investors’ hot favorite and is the clear winner so far. That said, ARK Innovation ETF ARKK has topped the list of the best-performing ETFs of the first half of 2017, with impressive returns of about 45.7% (read: Is the Tech Rout Overstated? Buy 3 Stocks & ETFs on the Dip).

The impressive rally was mainly driven by encouraging industry fundamentals and the emergence of new technology such as cloud computing, big data, Internet of Things, wearables, drones, virtual reality devices and artificial intelligence. The dual tailwinds of a rising interest rate scenario and Trump’s proposed corporate tax reform, which could allow companies to bring back cash being held overseas at lower rates, have added to the strength.

Additionally, the surge in bitcoin prices is a big boon for this disruptive-companies focused ETF. Bitcoin, commonly known as a cryptocurrency, is a digital or virtual currency that uses peer-to-peer technology to facilitate instant payments. The digital currency has been benefiting from geopolitical uncertainty across the globe.

Further, the healthcare stocks have made an impressive comeback this year after being badly hit by regulatory and drug pricing issues. In fact, the shift in investors’ sentiment to defensive sectors like healthcare, which generally outperform during periods of low growth and high uncertainty, contributed the most to the strength in the ETF lately.

Let’s take a closer look at the fundamentals of ARKK.

ARKK in Focus

This is an actively managed fund focusing on companies that are expected to benefit from the development of new products or services, technological improvements and advancements in genomic revolution, Web x.0 and industrial innovation (see: all the Technology ETFs here).

The fund holds 50 stocks in its basket with none holding more than 6.12% share. From an industrial look, biotechnology makes up for 27% of the portfolio while Internet & mobile applications, software & programming, Internet & direct marketing and pharmaceuticals round off the next four spots. The ETF has amassed $58.9 million in its asset base and trades in a paltry average daily volume of around 24,000 shares. The expense ratio comes in at 0.75%.

Though most of the stocks in the fund’s portfolio delivered strong returns, a few were the real stars, having gained more than 70%. Below we have highlighted those five best-performing stocks in the ETF with their respective positions in the fund’s basket:

Top Performing Stocks of ARKK

Bitcoin Investment Trust GBTC: Shares of GBTC have soared about 226.1% so far this year. GBTC is an open-ended grantor trust based in the U.S., sponsored by Grayscale Investments. It is quoted on the over-the-counter market and derives its value solely from the price of bitcoin. The trust's objective is to track the market price of bitcoin. GBTC occupies the top spot in the fund’s basket with 6.12% of total assets (read: SEC Reviews Bitcoin ETF: The Skyrocketing Cryptocurrency Explained).

Foundation Medicine Inc. FMI: This stock takes the 21st position in the fund’s basket with 1.93% allocation. It has also delivered incredible returns of 141.2% in first half. The stock has seen a negative earnings estimate revision from a loss of $4.13 per share to a loss of $4.32 for this year over the past 90 days with an expected earnings decline of 32.77%. Foundation Medicine has a Zacks Rank #3 (Hold) with a VGM Style Score of F and a dismal Zacks Industry Rank in the bottom 28%.

Kite Pharma Inc. KITE: The stock has surged nearly 124% in the first half and carries a Zacks Rank #3 with a VGM Style Score of F. The stock has seen positive earnings estimate revision from a loss of $8.05 per share to a loss of $8.01 per share for this year over the past three months with an expected earnings decline of 46.74%. However, Kite Pharma has an ugly Zacks Industry Rank in the bottom 36%. The stock is the 12th firm and accounts for 2.1% share in ARKK.

bluebird bio Inc. BLUE: The stock has gained about 80.1% in the first half. It has seen solid earnings estimate revision from a loss of $7.26 per share to a loss of $6.58 per share over the past three months for this year with an expected earnings growth rate of 6.93%. bluebird bio currently has a Zacks Rank #3 with a VGM Style Score of F and a dismal Zacks Industry Rank in the bottom 36%. The stock occupies the ninth position in the fund’s portfolio, making up for 2.75% share (read: Top-Ranked Health Care ETFs to Buy Now).

Square Inc. SQ: This stock belongs to the bottom top 10 holdings in the fund’s basket with 1% of assets. It has gained 75.6% and has seen positive earnings estimate revision from a loss of 26 cents to a loss of 16 cents per share over the past three months for this year. As a result, its earnings are expected to grow 53.88%. Square Inc currently has a Zacks Rank #2 (Buy) with a VGM Style Score of C and a solid Zacks Industry Rank in the top 43%.

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