Investing in Disruptive Innovation Part 1


Over the course of two blog posts I will be cover the topic of investing in innovative disruption.  It has been said that the pandemic has drastically sped up the adoption of technology and innovation. This thought could be seen amongst the stocks that many considered to be the “stay at home” stocks. Examples of these stocks include: Zoom, Peloton, Etsy, Netflix and Wayfair. These stocks had tremendous returns over the past 12 months.  Many have stated that they may have just frontloaded the growth for these stocks and have them all in one year as opposed to the growth they would have seen over the next 3-5 years. However, looking beyond just these stay at home names, 2020 has introduced certain trends that will be here to stay. Although many believe these stocks might be overvalued many now have a fear of missing the next best innovative stock or company. One investment company that is tapping right into this innovation trend is Ark Invest. Ark Invest is an investment manager that invests solely in disruptive innovation.  As their website states: “ARK’s thematic investment strategies span market capitalizations, sectors, and geographies to focus on public companies that we expect to be the leaders, enablers, and beneficiaries of disruptive innovation. ARK’s strategies aim to deliver long-term growth with low correlation to traditional investment strategies.” You can visit ARK’s website here:

Ark invests with a long term perspective in mind and since inception in 2016 this approach has paid off handily for investors. Some of Ark’s (symbol ARKK) top holdings are: Tesla, Roku, Spotify, Crispr Therapeutics, Square and Teladoc Health. This fund now has around $22.6 Billion in assets.   One of the ways that ARK helps to educate it’s investors is through the publishing of their “Big Ideas” for the year. They published their “Big Idea’s” insights back in January of 2021. Today I will cover 3 topics that jumped out to me while reading their big ideas for 2021.

1.Electric Vehicles (EV)

ARK forecasts that EV sales should increase roughly 20-fold from 2.2 million in 2020 to 40 million units in 2025.  One of the major reasons for this increase is that the cost of the electric vehicles will start to cost the same as the gas-powered vehicles. This will be driven by the decreasing costs of the battery that is used in EV vehicles. The mass production of these batteries is starting to drive down the cost of the battery. Image of EV costs.

ARK believes that Tesla will still lead in the electric vehicles space in both the United States and China. They also see Baidu playing a significant role in the EV space.

2. Bitcoin

Ark was an early investor in bitcoin and they have been investing in bitcoin through the ETF symbol: GBTC.  Bitcoin has started and continued to gain adoption and credibility throughout 2020. Bitcoin has gain credibility through major institutions starting to invest their cash and also accepting bitcoin as payment.  There are several appeals to bitcoin and one of them is the decentralization of bitcoin as a truly global currency.  Most recently we have seen Tesla make an investment in bitcoin and allow for the use of bitcoin to buy their cars.  Another situation was Mass Mutual adding bitcoin to its balance sheet to the tune of $100M dollars.  Bitcoin is one of the only asset classes that has consistently low correlations to other asset classes. ARK believes that bitcoin has now earned a spot in well diversified portfolio. This chart demonstrates how the incorporation of large institutions using bitcoin can have an effect on the price of bitcoin.

3.Multi Cancer Screenings

According to ARK’s research use of innovative technologies has pushed the cost of multi-cancer screening down by 20-fold from $30,000 in 2015 to $1,500 today and it should drop to $250 by 2025.  The ability to have these multi screened cancer studies can lead to early detection through a more robust testing process. The Big Idea’s template states “Routine blood-based, multi- cancer screening combined with improvements in single-cancer screening could prevent 40% of metastatic diagnoses and increase loco-regional diagnoses by 10%.”  This could also move the recommended age of cancer screenings from 45 down to 40 to help with early detection.

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