Research > ETFs > ETF / ETP Commentary > 

Why Is John Deere in a Disruptive Tech ETF?

The industrial sector isn’t a group many investors associate with disruptive growth and innovation. After all, companies like Boeing (NYSE: BA) and Caterpillar (NYSE: CAT) are viewed as large, old, and perhaps even sleepy entities.However, a glance at some of ARK’s actively managed exchange traded funds turns up several funds with exposure to old-guard industrial companies such as Deere (NYSE: DE). The ARK Autonomous Technology & Robotics ETF (ARKQ ) and the the ARK Space Exploration and Innovation ETF (ARKX) both have stakes in the agriculture equipment giant.To some investors, the fact that ETFs like ARKQ and ARKX invest in a stock like Deere may be disappointing. Upon further examination, however, Deere is a sensible allocation for ARKQ. After all, tractors – Deere’s core competency – brought automation to farming and that’s one of the original iterations of automation coming to a major American industry. With that change came increased efficiencies, higher profitability, and lower labor costs across the industry.Deere is remaining true to that tradition today, but is also expanding its automation footprint in fashion relevant to ARKQ investors.“In its push to build fully autonomous farm machines, Deere acquired Bear Flag Robotics, an autonomous tractor company. Bear Flag builds autonomous systems that retrofit existing tractors so that a single operator can control a fleet of tractors remotely,” according to ARK research.Deere is onto something here because agriculture is still ripe for innovation, which could help farmers spend less time in the field.“Autonomous machinery should boost farm productivity, much like the original tractor did, lowering labor’s share of farming costs, while boosting real farm wages. Indeed, automation can turn “non-market” activity into real GDP,” adds ARK. “A farm owner who currently operates her own tractor, for example, could pay for autonomous tractor service per acre, lowering her own time in the field, time for which she may not be paid explicitly.”Said another way, it may seem strange that Deere shares space in an ETF with Tesla (NASDAQ: TSLA) and Alphabet (NASDAQ: GOOG) as it does in ARKQ, but, in reality, ARKQ having a stake in Deere makes a lot of sense given the fund’s investment objectives.As automation technologies evolve and Deere integrates the Bear Flag purchase, the company could find itself at the epicenter of some more unique offerings.“While they build tractors that conform to human drivers today, Deere and other companies could transform autonomous tractors and other machines into many shapes and sizes depending on their use cases. Bear Flag’s system fits into existing tractors today, but we wonder if autonomous tractors will be smaller machines working in tandem with drones and other robots in the future,” concludes ARK.For more on disruptive technologies, visit our Disruptive Technology Channel.

Performance data shown is past performance and is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Yield and return will vary, therefore you have a gain or loss when you sell your shares. For standard quarterly performance, go to the fund's Snapshot page by clicking on the ETF/ETP's symbol.

ETFs may trade at a premium or discount to their NAV and are subject to the market fluctuations of their underlying investments.

For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain FBS platforms and investment programs. Please note, this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral. Additional information about the sources, amounts, and terms of compensation can be found in the ETF's prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice. BlackRock and iShares are registered trademarks of BlackRock, Inc. and its affiliates.

FBS receives compensation from the fund's advisor or its affiliates in connection with a marketing program that includes the promotion of this security and other ETFs to customers ("Marketing Program"). The Marketing Program creates incentives for FBS to encourage the purchase of certain ETFs. Additional information about the sources, amounts, and terms of compensation is in the ETF's prospectus and related documents. Please note that this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral.

News, commentary (including "Related Symbols") and events are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.

Any data, charts and other information provided on this page are intended to help self-directed investors evaluate exchange traded products (ETPs), including, but limited to exchange traded funds (ETFs) and exchange traded notes (ETNs). Criteria and inputs entered, including the choice to make ETP comparisons, are at the sole discretion of the user and are solely for the convenience of the user. Analyst opinions, ratings and reports are provided by third-parties unaffiliated with Fidelity. All information supplied or obtained from this page is for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell a particular security, or a recommendation or endorsement by Fidelity of any security or investment strategy. Fidelity does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating ETPs. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use. Determine which securities are right for you based on your investment objectives, risk tolerance, financial situation and other individual factors and re-evaluate them on a periodic basis.

Before investing in any exchange traded product, you should consider its investment objective, risks, charges and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.