By Mark DeCambre
Happy Thursday! I’ll be walking you through some of the big themes that MarketWatch is spotting in exchange-traded funds this week.
Everybody was jumping on the bandwagon of star stock picker Cathie Wood and her Ark Investment suite of funds in 2020, including the flagship Ark Innovation ETF /zigman2/quotes/204808965/composite ARKK +1.73% but the tune has changed lately. Add hedge-fund manager Michael Burry of “The Big Short“ fame to the list of those who may be wagering that Wood’s strategies, focused on disruptive technologies, will sour, and there is now a fund in the works with that aim. We talked to them.
Send tips, or feedback, and find me on Twitter at @mdecambre to tell me what we need to be jumping on.
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The good and the bad
|Top 5 gainers of the past week||%Performance|
|Vanguard Extended Duration Treasury ETF /zigman2/quotes/205711909/composite EDV||2.7|
|iShares 20+ Year Treasury Bond ETF /zigman2/quotes/206026314/composite TLT||2.1|
|Vanguard Long-Term Treasury Index ETF /zigman2/quotes/201457689/composite VGLT||2.0|
|SPDR Portfolio Long Term Treasury ETF /zigman2/quotes/209443811/composite SPTL||2.0|
|Aberdeen Standard Physical Gold Shares ETF /zigman2/quotes/203093219/composite SGOL||1.9|
|Source: FactSet, through Thursday midday, Aug. 19, excluding ETNs and leveraged products . Includes NYSE, Nasdaq and Cboe traded ETFs of $500 million or greater|
|Top 5 decliners of the past week||%Performance|
|Invesco WilderHill Clean Energy ETF /zigman2/quotes/208932878/composite PBW||-9.7|
|SPDR S&P Oil & Gas Exploration & Production ETF /zigman2/quotes/203527521/composite XOP||-9.5|
|VanEck Vectors Rare Earth/Strategic Metals ETF /zigman2/quotes/205602686/composite REMX||-8.6|
|Invesco China Technology ETF /zigman2/quotes/203596391/composite CQQQ||-8.0|
|Global X Copper Miners ETF /zigman2/quotes/200953483/composite COPX||-7.7|
The knock on Wood
On Monday, we caught up with Matthew Tuttle, Tuttle Capital CEO, a fund provider that looks after less than a dozen funds with about $230 billion under management. Earlier this month, Tuttle filed to launch the actively managed short Ark ETF, which would use the ticker symbol SARK and would be structured as an inverse ETF that uses a complex strategy of options contracts, like swaps, to bet against Wood’s flagship fund.
Tuttle declined to talk about the fund specifically, aiming to avoid running afoul of regulators, because the application for SARK is still being reviewed by the Securities and Exchange Commission and wouldn’t likely be approved, if at all, until mid-October.
Speaking broadly about the shorting strategy, Tuttle said that there is clearly appetite from individual investors who want access to a simple way to take the other side of Wood’s bullish bets on companies like Tesla Inc . /zigman2/quotes/203558040/composite TSLA +5.11% , Teladoc Health Inc . /zigman2/quotes/207420252/composite TDOC +0.78% , Coinbase Global /zigman2/quotes/225893452/composite COIN -0.78% , Zoom Video Communications Inc . /zigman2/quotes/211319643/composite ZM +2.49% , and Palantir Technologies /zigman2/quotes/221054928/composite PLTR +1.25% , representing some of its largest holdings.
“What Ark has done is almost created a whole new sector…you can think of it as unprofitable tech,“ Tuttle told MarketWatch.
However, shorting individual technology or biotechnology stocks may not give you the type of short exposure you might be looking for.
Traders who sell shares “short,“ usually borrow them and then sell them, betting they can profit by buying the stocks back later at lower prices. As such, short interest is often taken as an indicator of the degree of negative sentiment among investors in the stocks. Earlier this month, 12% of the total volume of Ark Innovation shares were being sold short, marking a record high short interest, the Financial Times (paywall) wrote , citing data from S3 Partners.
Ultimately, Tuttle said: “For every major sector or industry there is a long ETF and a short ETF,“ so short Ark Innovation vehicles could be seen more about rounding out the market and offering a wider array of opportunities, to individual investors in particular, than as some vendetta against Wood.
As for Burry’s short bets, Tuttle cautioned that public disclosures about Scion Asset Management, the hedge-fund managers fund, may not reflect his current holdings, since it is just a snapshot at a point in time, as is the case with 13F filings.
“A 13F is a picture of history. It is not a real-time snapshot. Theoretically when he bought them, he could have made his money and gotten out,“ Tuttle said.