HEAD-TO-HEAD: ARK Innovation ETF versus Fidelity Blue Chip Growth ETF

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Conclusion

Sonu Kalra, manager of Fidelity Blue Chip Growth ETF, broadly diversifies his bets across a sprawling portfolio of hundreds of stocks and keeps a leash on the portfolio’s sector weights. In contrast, Cathie Wood, ARK Innovation ETF’s portfolio manager, prefers a much more concentrated portfolio that holds only 30-60 stocks and often has huge stakes in specific industries, such as biotech, according to Greengold.

“Both funds embrace aggressive-growth stocks, but ARK Innovation stands out as among the most acutely exposed to them,” he said.

So, the ARK ETF’s relative results are often driven by the market’s treatment of stocks with relatively high price multiples, paltry current earnings, and rapid earnings growth expectations, he explained. “ARK Innovation will likely soar when such stocks are in favor, and vice versa. Fidelity Blue Chip Growth will also likely show similar patterns, but not to same degree as ARK Innovation.”

ARK Innovation’s relatively concentrated portfolio and emphasis on money-losing companies makes it a highly volatile strategy—more so than Fidelity Blue Chip Growth, whose much more diversified portfolio with many profitable firms offers more resilience, said Greengold.

“I prefer Fidelity Blue Chip Growth, which is a medalist, over ARK Innovation, which earns neutral and a below average process rating from Morningstar,” he concluded.

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