It's been a rough year for Cathie Wood's ARK Genomic Revolution ETF (ARKG +0.33%). The exchange-traded fund has fallen more than 30% so far in 2021. In this Motley Fool Live video recorded on Dec. 1, Motley Fool contributors Keith Speights and Brian Orelli discuss whether or not the ETF is a buy after sinking so much.
Keith Speights: Brian, we also had a question on Monday about Cathie Wood's ARK Genomic Revolution ETF falling significantly this year. This ETF is down more than 30% year to date with roughly half of that drop coming over just the last few weeks. Why is this ETF sliding so much and do you think it's a good pick for investors now?
Brian Orelli: Yeah. The top holdings of the ETF are Teladoc that's TDOC, Exact Sciences, EXAS, Pacific Biosciences of California which is PACB, Fate Therapeutics which is FATE, and Ionis Pharmaceuticals, which is IONIS.
This is an actively managed ETF so it's not easy to track down what was held at the beginning of the year. But of those five only PacBio is up for the year. And it's up big -- 50% -- so perhaps it wasn't even in the top five at the beginning of the year.
Teladoc and Ionis are both down 48% for the year, Exact Sciences is down 27% and then Fate is only down 5%. Then the XBI, which is the SPDR S&P Biotech ETF, which is an index ETF so it doesn't change very often, is down 12% for the year.
It's been a bad year for biotech investors but Cathie Wood's is definitely losing to the broader biotech market for small companies. Should you buy genomics ETF versus investing in individual stocks? I mean, I own three of the top seven, so the sixth and seventh are Vertex Pharmaceuticals and Twist Biosciences.
I'm kicking myself for not investing in PacBio after Illumina wasn't able to acquire it. That seemed like a good investment, and I didn't make it and definitely PacBio's jumped substantially this year.
I think she's a pretty good stock picker. I guess she is just been unlucky and picked the wrong biotechs this year. Personally, I'd rather know what I own rather than having a moving target owning and actively managed ETFs. But if you're looking for exposure to the biotech sector without needing to do research on a bunch of companies, investing in ARK ETFs seems reasonable, I guess.
Speights: Yeah. I think that's a good answer, Brian and you're right. Cathie Wood is a pretty good stock picker. Her ETFs in general have performed really well. I think several of her ETFs are in the top 10 performers over the last five years.
But the other thing is, don't look at just year-to-date performance. You mentioned quite a few biotechs that are the top holdings. Many, if not all of those, probably have great long-term prospects. This just has been a bad year for biotech, right?
Orelli: Yeah. I mean, of course, Teladoc is down just because there were high expectations of the stock and that's actually the largest holding. I think that's probably dropping the overall ETF return substantially. It's probably due to Teladoc's drop. Although I'm not sure if she's been adding Teladoc to that ETF over the year to get it up to being the top holding.
