Cathie Wood, founder, and CEO of ARK Investment Management LLC (Ark Invest), an investment management firm that manages some of the world’s largest actively managed exchange-traded funds (ETFs) shows an amazingly successful track record.
ARK Invest focuses solely on disruptive innovation, through its ETFs, investors participate in long-term growth in the public markets with low correlation to traditional investment strategies.
Looking at the ARK NEXT GENERATION INTERNET ETF for instance you find positions of high flying and disruptive growth giants like Tesla, Roku, Square, Teladoc, Facebook, Tencent, etc. USD 10’000 invested in this ETF back in 2015 would now have a market value of well above USD 80’000 which is really remarkable.
And here is the catch: disruptive companies, which Ark Invest focuses on (such as Amazon, Cloudflare, Alphabet, etc.) will be long-term winners as well. It is not just amid the COVID-19 pandemic that it became obvious to everyone, that digitalization is a secular trend compared with the Industrial Revolution a few centuries ago.
So, having a look at the positions of Ark Invest’s ETF makes perfect sense not only to get some ideas on how to take some exposure to tech companies but to own pieces of some of these wonderful businesses that will grow literally unstoppable for decades to come.
While Ark Invest clearly has a low correlation to traditional investment strategies such as Dividend Growth Investing, for instance, you can also find some position names you would also assume in a “classic” dividend growth investor portfolio of traditional Value Investors.
For instance, the ARK GENOMIC REVOLUTION MULTI SECTOR ETF has more than 3 % each invested in Swiss pharmaceutical giants Roche and Novartis.
Roche and Novartis are “Swiss Dividend Aristocrats”. Roche has raised its shareholder payout for 32 consecutive years and is committed to continuing so in the future. Novartis’ dividends have been continuously rising since 1996 and given the strength of that company, investors can be looking forward to decades of very nice payouts.
No wonder you find Roche and Novartis in the portfolio of Dividend Growth Investors in particular in Switzerland and Europe.
Roche is a leader in cancer treatment and diagnostics and has an incredibly strong market position in biotechnology. The company sports a market cap of over USD 350 Bn and has annual operating profits of over USD 25 Bn. Novartis market cap is a bit lower at around USD 200 Bn, both companies are more or less comparable in terms of sales but vary in terms of margins.
Both companies have a payout ratio of roughly 60 %, each has a rock-solid balance sheet, and what’s best: you can easily find an entry point where you get a gross dividend yield of 3 %. The stocks of both companies fluctuate with a Price earning Ratio between 15 and 22 and rarely become overvalued.
This is intriguing, given the fact that these are high-quality companies. Roche and Novartis play in a league with wonderful long-term dividend-paying businesses like Coca-Cola and PepsiCo. When it comes to consistency and showing a durable economic moat and superior capabilities for innovation and strong growth for decades ahead, Roche and Novartis are definitively names investors should have a look at.
In fact, when you factor in all the spin-offs, Novartis and Roche have done over the last decades such as Lonza, Givaudan, Basilea, Syngenta, etc. and add their market value gains with all the dividend diplomats received along the way, then it is crystal clear: Novartis and Roche made generations of investors a fortune, they are just terrific wealth accumulation “machines”.
Cathie Wood’s Ark Invest sets the focus on industry disruptors, on companies with massive growth potential, businesses that “are expected to substantially benefit from extending and enhancing the quality of human and other life by incorporating technological and scientific developments and advancements in genomics into their business“.
Well, clearly, Roche and Novartis fit that target. And clearly, these companies combine the best of two worlds, being formidable growth stocks- as well as dividend growth stocks.
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