Over the past few years, Cathie Woods has made a name for herself. It started with her ARK Invest flagship Exchange Traded Fund the ARK Innovation ETF (ARKK), which returned an astonishing 45% annually for five years straight. Her other Ark Invest funds had similar success, and regularly these funds would rank in the top 10 of the best performing non-leveraged equity ETFs investors could buy.
Cathie became more of a household name when she not only went on CNBC years ago and said she thought Tesla was a $2,000 stock (this was prior to Tesla splitting), and she was proven correct. When she made this claim, her Ark funds were doing well, but most investment insiders thought she was crazy and that her prediction for Tesla would never come true. So, when she was proven correct, everyone started watching what she was doing and either trying to copy her or attempting to bet against her.
Copying what she was doing was and still is easy since her fund publishes the daily trades they made during the previous session. Not only do they publish the stocks they sold and bought, but how many shares of each company they traded. For a time, the morning show on CNBC would review her previous days' trades and discuss whether or not they agreed with what her funds were buying and selling.
Some would say that Cathie's luck has now run out because while for years she had some of the top-performing ETFs, 2021 has not been so kind to her. Her flagship fund, the ARK Innovation ETF, is actually down 6.25% in 2021. (Despite that, it still has an annualized 5-year return of 43.18%.) In addition, the ARK Genomic Revolution ETF (ARKG) is down 30% for the year, while the ARK Next Generation Internet ETF (ARKW) is down 3.25% year-to-date.
After a string of good years, some would say that her funds are now reverting to the mean. Others think she was just lucky, especially with Tesla, which most of her funds owned, which helped propel them to incredible returns.
Some of those nay-sayers have taken it one step further and actually started their own ETF, which actively bets against Cathie Woods and her stock picks. The Tuttle Capital Short Innovation ETF (SARK) is new, with the inception date of 11-09-2021, which essentially shorts Woods flagship ARKK ETF.
The SARK provides -1x inverse exposure daily to the ARKK fund through the purchase of swaps. This can be achieved since Woods publishes her funds' trades daily, allowing other investors to know exactly what her fund owns at the end of each trading session.
The SARK fund has the same management fee, 0.75%, as the Cathie Woods ARK fund but currently only has about $6.3 million in assets. This is largely because the fund is very new and worth watching to see if all the Cathie Woods nay-sayers are willing to back up their talk with real money. The SARK fund should not be held for long periods since it is a daily rebalancing fund to gain that inverse -1x exposure. The contango effect will negatively affect the fund, even if Cathie is wrong and her stocks decline in the future.
However, the SARK fund has been up 7.79% over the last month, while Cathie's fund is only up 0.79%. Indicating that those early investors in the SARK fund have been rewarded.
Longer-term, though, it will be interesting to see how SARK investors do since Cathie did lead a number of the Ark Invest ETFs to incredible returns for 5 years straight. That is very impressive, and perhaps she proves the critics wrong, and 2021 was just a one-off down year for her funds.
Matt Thalman
INO.com Contributor - ETFs
Follow me on Twitter @mthalman5513
Disclosure: This contributor held long positions in Apple, Tesla, Intel, Google, Amazon.com, Facebook, Priceline and Microsoft at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
