DJ John Deere and Workhorse Are in a New Space ETF. Why That's Not so Far Out There. -- Barrons.com

2021-03-31 11:09

By Al Root

John Deere selling tractors on the moon? Or maybe backhoes on Mars? Hardly. But the heavy equipment maker is in Cathie Wood's new ARK Space Exploration & Innovation ETF. And while the unexpected holding might have industrial investors scratching their heads, it makes some sense and is a positive for the stock.

No, Deere (ticker: DE) doesn't plan to open an outer-space outpost -- the company had a little fun, tweeting an image of a tractor being beamed up -- but it does rely on space technology such as GPS, which lets self-driving tractors navigate fields, as well as space-based earth imaging. New companies are even launching satellites to measure soil moisture, which can help farmers increase crop yields.

What's more, Deere is a leader in drone applications for farming, says Ren Leggi, ARK's client portfolio manager, adding the new fund "really is about anything above ground." That, for ARK, means things that fly around, from rockets to drones.

Drone applications are why not only Deere is in of the Space Exploration and Innovation ETF (ARKX), but another head scratcher: EV maker Workhorse (WKHS). Deere makes up 3.2% of the ETF, Workhorse 1.1%.

Workhorse is planning to use drones, along with its electric vans, to reduce delivery costs. "By 2030 those drone delivery platforms can scale fourfold," says Leggi. Amazon.com (AMZN) is also a 3% weight in the ETF, in part for the drone-delivery reason.

For Deere and Workhorse, being included in an ETF is a good thing because it means more demand for shares as an ETF grows.

Right now, Deere stock is doing just fine on its own, mostly because of higher crop prices and the global economic recovery. Shares are up almost 40% year to date, far better than comparable returns of the S&P 500 and Dow Jones Industrial Average -- up about 6% and 8%, respectively.

Workhorse shares need a little help, though. Shares are down 31% year to date, falling after the USPS awarded a contract to replace its delivery vans to Oshkosh (OSK) -- not Workhorse.

Write to Al Root at allen.root@dowjones.com

(END) Dow Jones Newswires

March 31, 2021 11:09 ET (15:09 GMT)