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ARK Genomic Revolution Multi-Sector ETF: An Overbought But Promising Niche Play

May 08, 2020 10:10 AM ETARK Genomic Revolution ETF (ARKG)7 Comments


  • I am neutral on ARKG, an exciting, niche biotech ETF that currently looks overbought on the charts.
  • I expect investor interest in this space to stay elevated on account of COVID-related anxiety as well as a greater long-term federal funding thrust into emerging medicinal technologies.
  • This is a volatile and expensive ETF where excess returns tend to come at the cost of excess risk; the ETF does not offer any dividend yield either.
  • I do much more than just articles at The Lead-Lag Report: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

The ARK Genomic Revolution Multi-Sector ETF (BATS:ARKG) offers investors exposure to a very interesting sub-segment within the biotech space - genomics. This niche ETF was created in October 2014 and offers investors access to genomic-based companies dealing with Targeted Therapeutics, Bioinformatics, Molecular Diagnostics, Stem Cells, Agriculture Biology, and CRISPR (a family of DNA sequences). ARK has been one of the best performing risk assets YTD, outperforming both the S&P 500 and the SPDR S&P Biotech ETF (XBI).

Source: Yahoo Finance

The genomic medicine field is an emerging field within the broader biotech sector that studies the genetic makeup of people and its associated effect on health. This is a $19 billion market that is expected to grow at 14% CAGR to reach $36 billion by 2024 based on a MarketsandMarkets report. These figures were being bandied around, long before the coronavirus reached our shores, with government funding being one of the key drivers of this expanding market. In light of the coronavirus, I expect federal funding and research intensity to explode, as I feel it's about time we transitioned away from this dated reactionary model of countering diseases and pandemics to a more proactive stance that gives us every chance of staying ahead of the curve. Going forward, I do feel that political rhetoric and support will be oriented towards emerging medical therapies such as genomics, which should see this sector grow at a CAGR figure in the late teens rather than the 14% mentioned above.

COVID-19-related anxiety should continue to buttress positive sentiment for biotechs and genomics

Subscribers of the Lead-Lag Report will recollect that over the last few weeks, I've been trumpeting the performances and the bearings of biotech stocks, that have significantly outperformed the broader market.

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This article was written by

Michael A. Gayed, CFA profile picture
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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This writing is for informational purposes only and Lead-Lag Publishing, LLC undertakes no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Lead-Lag Publishing, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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