After making a call a few years ago, Cathie Woods has gone from “crazy lady” that Tesla would be worth more than $3,000 per share to investing superstar after her prediction came true in just a few years. Now she is entering into a whole new, truly unexplored realm with her newest ARK Invest Fund, the ARK Space Exploration & Innovation ETF (ARKX).
The first time I heard of this ETF, I was super interested in the idea that I could invest in the hot space exploration companies in a nicely bundled package without having to cherry-pick the winners and losers of this industry during its infancy. See, with most new or newer industries, a lot of the early companies don’t make it, while just a few of those first companies in the industry are the ones that go on and dominate the industry for years to come. But, how do you know when things are just getting started which company is going to go bust and which is going to be a big winner?
So, industry-specific Exchange Traded Funds help solve this problem because they allow you to invest in all the companies operating in that industry while spreading out the risk. And since space exploration, from a private business side, is still very young, this is the perfect way to play the Space industry.
Furthermore, Cathie Wood’s new fund is the first actively managed space ETF to be offered. The Procure Space ETF (UFO) and the SPDR S&P Kensho Final Frontier ETF (ROKT) both track indexes. And since Cathie rose into celebrity status due to her bold call and actively managed fund heavily investing in Tesla, it would only make sense that she believes her fund will beat the indexes. But, because the fund is actively managed, her fund is more expensive at a 0.75% expense ratio compared to ROKT at 0.45%, but the same price as UFO.
Furthermore, the two funds that track indexes give investors a little comfort that the fund manager will not go rouge and just buy anything they think is good, just to make the portfolio perform better. And some are already questioning if Cathie is doing just that with the Space ETF.
Jim Cramer, in particular, called Cathie Wood out the first day her fund was trading about why it was holding certain stocks. Cramer questioned Amazon, Alphabet, Netflix, and Chinese stocks, JD.com, Alibaba, and Tencent. Cramer asked point blank, “how these stocks related to space and space exploration?”
Jim Cramer went on to admit that there are not a lot of stocks that are operating in the space industry, so that may make it hard to buy a portfolio of stocks. But I have to agree with Cramer and ask why buy those stocks? What do they have to do with space?
I am interested in this new Space ETF because I want direct exposure to space, not because I want a few stocks that have something to do with outer space and then a bunch of technology giants.
Another big head-scratcher is why the 3D Printing ETF (PRNT), which Cathie Woods also runs, is the second-largest holding in the Space ETF. If I wanted to own 3D printing stocks, I would buy the 3D printing ETF, not the Space ETF.
The good news is that now i9nvestors have a third space ETF, the first actively managed one. The bad news is that as it stands today, the ETF has a lot of stocks and companies in it that don’t have a whole lot to do with space. So, investors should keep an eye on this ETF but hold off on buying it until the portfolio leans a little more towards space, or at the very least, Cathie Woods explains the reasoning as to why she owns what she owns in the Space ETF.
Matt Thalman
INO.com Contributor - ETFs
Follow me on Twitter @mthalman5513
Disclosure: This contributor did not hold a position in any investment mentioned above. at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
