ARK Invest has only been around since 2014, but it is already developing a reputation as one of Wall Street’s best-performing asset managers. Headed by CEO Cathie Wood, the company offers various financial products, including exchange-traded funds (ETFs) built around innovative secular trends like autonomous technologies, next-generation internet, and genomics…
Over the last three years, the company’s flagship product — the ARK Innovation ETF (NYSEMKT:ARKK) — has skyrocketed in value by 200%, crushing the 52% return of the S&P 500 over the same period. Given Ark’s track record for picking winners, investors should note that Roku (NASDAQ:ROKU) and Square (NYSE:SQ) are two of the top four holdings in the Innovation ETF.
Here’s why you should consider adding these two ARK-endorsed tech stocks to your portfolio.
1. Roku: The essential streaming platform
During a recent interview, Wood noted: “Roku is becoming the operating system of streaming TV.” To that point, the company provides the leading smart TV operating system in the United States and Canada, with market shares of 38% and 31%, respectively. That scale gives Roku an advantage over its rivals and makes it an essential distribution platform for both premium and free streaming services.
Last year, Roku bolstered its offerings of subscription content, bringing services like AT&T‘s HBO Max and Comcast‘s Peacock into the fold. The company also added content from more than 100 free linear TV channels and a Live TV Guide to the ad-supported options on The Roku Channel. These moves helped Roku grow its user base to 51.2 million active accounts, up 39% from the prior year.
Just as noteworthy, its growth strategy is also driving user engagement higher. Viewers streamed 58.7 billion hours on Roku’s platform last year, up 55% from 2019. In other words, streaming hours are growing more quickly than active accounts, meaning each viewer is spending more time engaged with Roku. That’s a big deal, and marketers have taken notice.
Last year, ad spend on Roku’s OneView platform more than doubled, driving a 24% increase in average revenue per user. Put simply, marketers are willing to pay more to reach Roku’s expanding audience, more than half of whom don’t have cable. That has powered strong revenue growth.
As more viewers cut the cord, connected TV should capture an increasingly large portion of digital ad spend. And as the leading streaming platform in the U.S. — which accounts for roughly 40% of digital ad spend worldwide — Roku is well-positioned to be a long-term winner.
2. Square: The rising fintech platform
Square’s businesses tap into another momentous secular trend: the growing use of digital payments. The financial tools and services it offers to consumers and merchants have put it in a position to pursue what it calculates is a…
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