Disrupters Like Tesla Are Now The Disrupted

S&P 500 disrupters shook up entire sectors during the pandemic. But now they’re the ones with targets on their backs — at least in the eyes of investors.




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Shares of the top 10 holdings in the ARK Innovation ETF (ARKK), including Tesla (TSLA), Square (SQ), Teledoc (TDOC) and Zoom Video (ZM), are largely underperforming their “legacy” competition this year, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. ARK Innovation is a $24 billion-in-assets ETF that owns companies that are upending industries, often leaving old-school competition in their wake.

But a surprising flipside is showing this year. The disrupters’ stocks are now getting disrupted.

It’s just a sign that after pushing many S&P 500 technology firms higher in 2020, investors are finding more upside, or leverage, from more traditional areas of the economy, says Jessica Rabe, co-founder of DataTrek Research. More sectors are participating in the rally — and even leading it in some cases.

“Leverage is why some sectors do better at specific points in the economic cycle than others,” she said. “Higher earnings leverage makes for larger earnings surprises. It’s pretty much that simple.”

Tesla: The S&P 500 Disrupted?

Elon Musk’s Tesla made automakers sweat around the world for years. But now, the assembly line appears to be in reverse.

It’s almost unbelievable, but after jumping more than 700% in 2020, Tesla stock is up just 1.9% in 2021 so far. That’s not only lagging the S&P 500’s 10.1% gain this year. But it’s falling way short of the gains in legacy automakers’ shares. General Motors (GM), which rebranded itself as an electric-car maker is up 33.9% in 2021 so far. And Ford (F) is up 30.3%.

Cathie Wood’s ARK Invest still thinks Tesla has a massive head start, especially in self-driving technology. It’s the No. 1 holding in the ARK Innovation ETF. But seeing shares of the disrupted pull ahead is noteworthy. Do you know what to look at before you buy Tesla stock?

“Old School” Financials Strike Back

Disrupting financial firms turned into a fast way to make money last year. Square was the champion.

By outmatching traditional banking tools and upending the cash register for retailers, Square’s stock jumped 247.9% in 2020. But this year, the tables turned. The legacy financials are ringing the register now. The Financial Select Sector SPDR (XLF) is now up 17.6% this year. That far tops the Technology Select Sector SPDR’s 2021 gain of 8.3%.

Digging into the sector shows the flip even more dramatically. Shares of Square are up just 13%. On the other hand, shares of traditional bank Bank of America (BAC) are up 25.6%. And get this. Even Oracle (ORCL), maker of “old fashioned” Micros branded cash registers, is outperforming Square by rising 22.5% this year. Square is the No. 2 holding in ARK Innovation at 6.3% of the portfolio. Should you buy Oracle stock now?

Traditional Health And Real Estate Stocks Revive

Been putting off your trips to the doctor? Apparently, many people are and the doctor is calling for you now, in person.

Shares of hospital operator HCA (HCA) are up more than 17% this year. That’s not only topping the S&P 500 this year, but also shares of online care provider, Teladoc Health. Teladoc has been a godsend for many people who need medical help from home. But this year, shares are down nearly 10%. That’s after jumping more than 138%, though, last year. Teledoc is the No. 3 holding in ARK Innovation.

It’s a similar story in real estate. There’s Zillow, a provider of real estate shopping tools online. Despite the rise of online open houses and online home shopping, the stock is down 3.1% this year. Meanwhile, Realogy (RLGY), owner of traditional Realtor firms Century 21 and Coldwell Banker, is up more than 11% this year. Keep in mind shares of Zillow jumped nearly 200% in 2020.

And then there’s Zoom Video, which revolutionized working from home. Shares are down 4.6% this year. But at the same time, office space management firm CBRE Group (CBRE) is up nearly 30%.

It’s only four months into 2021. And disruption is usually measured in years. But the shift is notable.

Disrupters Get Disrupted

Top holdings in ARK Innovation are mostly lagging traditional rivals’ stocks this year so far

Company Symbol Stock % 2020 Ch. YTD Stock % Ch. Sector
AUTOS
Tesla (Disrupter) (TSLA) 743.4% 1.9% Consumer Discretionary
General Motors (Disrupted) (GM) 13.8% 33.9% Consumer Discretionary
Ford Motors (Disrupted) (F) -5.5% 30.3% Consumer Discretionary
BANKING
Square (Disrupter) (SQ) 247.9% 12.8% Information Technology
Bank of America (Disrupted) (BAC) -13.9% 25.6% Financials
Oracle (Disrupted) (ORCL) 22.1% 22.5% Information Technology
HEALTH
Teladoc Health (Disrupter) (TDOC) 138.8% -9.5% Health Care
HCA Healthcare (Disrupted) (HCA) 11.3% 17.3% Health Care
MEDIA
Roku (Disrupter) (ROKU) 148.0% 6.9% Communication Services
DISH Network (Disrupted) (DISH) -8.8% 14.1% Communication Services
REAL ESTATE
Zillow Group (Disrupter) (ZG) 197.2% -3.1% Communication Services
Realogy Holdings (Disrupted) (RLGY) 35.5% 11.4% Real Estate
OFFICE
Zoom Video Communications (Disrupter) (ZM) 395.8% -4.6% Information Technology
CBRE Group (Disrupted) (CBRE) 2.3% 29.8% Real Estate
E-COMMERCE
Shopify (Disrupter) (SHOP) 184.7% -0.8% Information Technology
Amazon.com (Disrupted) (AMZN) 76.3% 2.4% Consumer Discretionary
MUSIC
Spotify Technology (Disrupter) (SPOT) 110.4% -13.8% Communication Services
Warner Music Group (Disrupted) (WMG) N/A -5.1% Communication Services
SEARCH
Baidu (Disrupter) (BIDU) 71.1% -3.8% Communication Services
Alphabet (Disrupted) (GOOGL) 30.9% 30.0% Communication Services
DIAGNOSTICS
Exact Sciences (Disrupter) (EXAS) 43.3% -5.2% Health Care
Koninklijke Philips (Disrupted) (PHG) 13.3% 10.6% Health Care
S&P 500 16.3% 10.1%
Sources: IBD, S&P Global Market Intelligence, bold shows outperformance