Weakness in ARK Space Exploration & Innovation ETF's Process and People Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers. The strategy changed its peer group last October, moving from the Technology category to the Mid-Cap Growth Morningstar Category. 

 The strategy gets a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in momentum exposure and liquidity exposure compared with category peers. Momentum is the premise that stocks that have recently outperformed will continue to do so. With low momentum exposure, the portfolio is holding stocks that managers believe to be undervalued. And a low liquidity exposure is rooted in stocks with lower trading volumes, limiting managers' flexibility. The strategy’s management team earns a Below Average People Pillar rating. The strategy's parent organization earns the firm a Below Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Kratos Defense & Security Solutions

AeroVironment

Trimble

Iridium Communications

UiPath

L3Harris

The 3D Printing ETF

Archer Aviation

Teradyne

Amazon

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. ARK Space Exploration & Innovation ETF earns a Below Average Process Pillar rating. 

The process is bolstered by the experience of the management team, which averages 22 years at this fund. However, the rating is held back by the parent firm's five-year risk-adjusted success ratio of 0%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 67% also limits the process.

 This strategy prefers more value-oriented stocks compared with the average fund in its peer group, the Mid-Cap Growth Morningstar Category. But in terms of size exposure, it does not have much of a bias and resembles the typical portfolio. Analyzing additional factors, this strategy has consistently had low exposure to momentum stocks in the past few years. Momentum tends to be a powerful force in asset markets, as stocks that have done well recently usually continue to do so in the short term. As top performers change, this can sometimes be hard to capture without higher trading costs. In the latest month, the strategy was also less exposed to the Momentum factor compared with Morningstar Category peers. This strategy also has held illiquid stocks, evidenced by holdings' lower trading volume in recent years over peers, resulting in high liquidity risk exposure. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. Similarly, in recent months, the strategy also had less exposure to the Liquidity factor than peers. Furthermore, the strategy had more exposure to high-volatility stocks compared with Morningstar Category peers in recent months. This orientation tends to pay off most prominently when markets are hot.  More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in industrials and technology relative to the category average by 36.0 and 7.0 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and financial services, underweight the average by 18.4 and 9.9 percentage points of assets, respectively. The strategy owns 37 securities and is relatively top-heavy. Of the strategy's assets, 58.5% are concentrated within the top 10 holdings, compared to the category’s 25.8% average. And in closing, in terms of portfolio turnover, this portfolio turns over its holdings less quickly than peers, potentially leading to lower costs for investors and eliminating a drag on performance.

Below Average

Process

With only one listed portfolio manager, ARK Space Exploration & Innovation ETF leaves itself vulnerable to key-person risk. The manager has not yet proven themself effective at running the strategy, leading to a Below Average People Pillar rating. This is concerning as a strategy's team size and management stability contribute significantly toward the People Pillar rating.  Catherine D. Wood brings over 22 years of portfolio management experience to the table. However, the risk-adjusted performance of the strategies they manage has been weak, averaging a 1.2-star Morningstar Rating. Isolating the analysis to the fund at hand, Catherine Wood has delivered inferior performance, lagging both the category benchmark and average peer over the past two-year period. Finally, the manager's personal investments are another factor of analysis in the rating. Catherine Wood has invested between $100,000 and $500,000 in the strategy. This effort aligns interests with shareholders by investing alongside them.

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

People

ARK Investment Management is a thematic-investing specialist that has done little to mitigate the significant risks borne by its clients. It earns a downgrade of its Parent rating to Below Average from Average.

ARK's main draw is its founder, chief executive officer, and sole portfolio manager Cathie Wood, who since launching the firm in 2014 has presided over its tremendous growth in recent years while establishing a broad media presence and enthusiastic following. Despite horrendous results across its lineup of six actively managed exchange-traded funds over the past 12 months, the firm has shown remarkable asset retention but little inclination to prevent future implosions. It had roughly $55 billion in assets under management as of March 2022.

The firm's risk-management resources are below industry standards. Its assets are mostly (if not entirely) tied to nondiversified portfolios that make huge industry bets, embrace stocks with high volatility, and are highly correlated to one another. The firm has no risk-management professionals to either define risk tolerance, monitor exposures, or foresee possible downsides.

It has in place a poor succession plan for 66-year-old Wood, the firm's majority owner and lone portfolio manager. Her would-be successor's 15 years of industry experience include none as a portfolio manager. Dovetailing with that key-person risk is the firm's inability to develop and retain talent on the analyst team.

The firm has been shareholder-friendly in some ways. Its ETFs are cost competitive relative to actively managed rivals, and Wood personally invests in them, which helps align interests.
But overall, the firm's stewardship falls short. A capability to manage its myriad risks and a culture that fosters career growth within the research team would do more.

Parent

ARK Space Exploration & Innovation ETF

ARKX actively selects global companies engaged in space exploration and innovation. The fund seeks long-term capital growth.

The ARK Space Exploration & Innovation ETF focuses on investment opportunities in space exploration and associated technologies. The ETF holds stocks in companies involved in orbital and suborbital aerospace, enabling technologies, and aerospace beneficiaries. The ETF has a strong focus on U.S.-based companies and has a relatively high expense ratio compared to other ETFs in the sector.

ARK Space Exploration & Innovation ETF: Can It Rebound?

Leidos Hld

Rocket Lab USA

Space stocks may have fallen back to earth. But a select few still offer out of this world opportunities.

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Virgin Galactic

Procure Space ETF

The Chandrayaan-3 mission's success is expected to pave the way for more ambitious projects, furthering global space research and exploration.

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Planet Labs

ViaSat

Pursuing wealth in capital markets always carries its share of volatility, and space stocks present a compelling opportunity for the risk-taker. This relatively new and unpredictable segment is catching the eye of many investors, particularly those looking for sectors with the potential for astronomical growth.

Buy Alert: 3 Space Stocks Nearing Super Attractive Entry Points

Some of the best picks in the space sector could launch to higher highs over the long term. Especially if analysts are right about the potential.

3 Space Stocks You Better Be Buying on Each and Every Dip

ARKX invests in companies focused on space exploration and innovation. Many profitable opportunities within the fields of research and tourism may reside in space and could well position this ETF for long-term profits.

ARKX: A Space Exploration ETF That Struggles To Lift Off

ARK Industrial Innovation ETF

Underlying growth, measured by Trimble's annualized recurring revenue, remains excellent. The Transporeon acquisition has disappointed so far, and it looks like Trimble paid a high price, but the stock's valuation more than reflects that now.

Down 26%, This Cathie Wood Holding Is a Screaming Buy Now

Humanity's passion for exploring space has never been more palpable. An array of companies operating in space, both public and private, have been making waves in a burgeoning industry that propels people, cargo, and innovations skyward.

The 3 Best Space Industry Stocks to Buy for Galactic Returns

iShares U.S. Aerospace & Defense ETF

iShares U.S. Industrials ETF

Communication Services Select Sector SPDR Fund

Financial Select Sector SPDR Fund

Industrial Select Sector SPDR Fund

While I've recently discussed what is driving outperformance in the consumer discretionary sector and the communications sector, the industrial sector has recently looked more interesting.

Industrial ETFs: From the Ground to Space

Space investing is in its infancy, but analysts and investors believe the final frontier is ripe with opportunity and disruptive potential. Stock picking to that effect is, however, tricky business, highlighting the utility of exchange traded funds such as the ARK Space Exploration & Innovation ETF (ARKX).

Space Investing Is Ready for Liftoff

As a theme, space investing is still in its infancy, but it's luring some of the biggest names in business, including the titans of the consulting.

Space Investing Taking Shape, Luring Big Names

Lockheed Martin

The once government-dominated space sector has become increasingly commercialized in recent years, with a myriad of investment opportunities emerging in the process. Hence, wagering on buying the best space stocks to buy presents an exhilarating prospect for the adventurous investor.

3 Thrilling Space Stocks for Aggressive Investors to Buy

Last year was an interesting one when it comes to space investing. On a down note, total investments in space-related projects and technology declined by $45 billion from 2021, but the 2022 total of $424 billion is still impressive.

Space Investing Still Has Compelling Growth Outlook

C3.ai

Desktop Metal

Terran Orbital Corp

Invesco QQQ

Redwire Corp

SPDR S&P 500 ETF Trust

Stock indices closed the first week of March on a strong note. This tells me the near-term trend for stocks is likely higher. I previously wrote that the artificial intelligence sector was leading the stock market. This has been the case in the past few weeks.

Stock Indices Near Term Trend Is Up; Aerospace Stocks Leading (Technical Analysis)

Space companies kept the Federal Aviation Administration (FAA) busy the past year. A record number of rockets were launched, paving the way for investors to consider adding space exploration as part of their growth portfolios.

Space Companies Launched Rockets in Record Numbers in 2022

Had enough of the balloons yet? The discourse surrounding UFOs and IFOs over the U.S., Canada, and China may seem like the newest flavor-of-the-week news story, but nations competing for control of vital aerospace zones shouldn't be ignored.

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Space remains the final frontier, and humans are venturing into space more boldly than at any time in our collective past. A growing number of space companies, both public and private, are being used to transport people and goods into outer space, launch satellites, take images of the Earth, and build new crafts that promise to take us further than we've ever gone before.

3 Space Stocks to Buy as All Eyes Are on the Sky

Astra Space

SPDR S&P Kensho Final Frontiers ETF

Space stocks are on the launchpad. Should all go well, the industry could be worth up to $800 billion by 2030, says UBS, as reported by Forbes.

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Earnings season is back and ready to really kick 2023 into gear for markets. All sorts of firms are ready to report this week, but one firm to watch may be the aerospace and defense firm L3Harris (LHX) given the growing need worldwide for defense and surveillance systems as geopolitical risk continues to grow.

Play L3Harris Earnings in Aerospace ETF ARKX

Despite a 30% drop in the previous year, ARKX is still an excellent short for multiple reasons. The short interest in ARKX is low, indicating that fewer people are betting against the stock, which will accentuate drawdowns due to the lack of short covering.

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Northrop Grumman

Space stocks are volatile right now, but the industry could get off the ground in the coming years.

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After analyzing ARK's Genomic ETF and Autonomous Technology & Robotics ETF, I now move on to Aerospace & Space Exploration. Drone and satellite demand are mega technological trends for this decade and ARKX provides good exposure to the beneficiaries of these themes, especially in a constructive interest rate environment.

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Last year's broad market selloff hasn't stopped deals and acquisitions in some growing industries, with one such area being aerospace and defense firms. The Russian war on Ukraine has highlighted the rising use of drones in warfare, while the tech downturn may have also allowed firms to make acquisitions and partnerships in the burgeoning space.

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It hasn't been the easiest of years for investing in tech, with megacap tech firms in particular taking a lot of hits in the broad market selloff.

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The Russian war on Ukraine entered a new phase this week, with Ukraine launching a retaliatory drone attack deeper inside Russian than it had previously reached.

News for ARK Space Exploration & Innovation ETF ETF (ARKX)