In this article, we discuss the 10 hedge funds that are betting against Cathie Wood’s ARK Innovation ETF.
Over the past few months, several hedge funds have revealed short positions on ARK Innovation ETF (NYSE: ARKK), the flagship exchange-traded fund offered by the investment firm led by Cathie Wood. The fund, which, as of September 21, was trading at $116 per share, has more than $21 billion in assets under management with investments concentrated in high-growth domains like technology, health, and space. The short interest on the ETF stood at a record 12% last month, according to specialist data provider S3 Partners
This represented a total bet of $2.7 billion against the fund, up from just $40 million a year earlier. The dramatic change in fortunes for the fund, which was one of the most successful last year with returns of 152%, has been making headlines on Wall Street. Wood, who has refused to back down from her bets on high growth stocks, has confronted her critics, most notably Michael Burry of Scion Asset Management, accusing them of not understanding innovation. She has doubled down on her bets on growth stocks in the second quarter, latest filings show.
Some of the top holdings of the funds that are betting against the ARK Innovation ETF of Cathie Wood include JD.com, Inc. (NASDAQ: JD), The Walt Disney Company (NYSE: DIS), and Facebook, Inc. (NASDAQ: FB), among others discussed in detail below. Data from S3 Partners indicates that even though ARKK short-sellers were down $38 million in market-to-market losses in the first half of the year, they have since recovered and are now up $137 million so far this year as the share price of the fund drops.
The fund has been the architect of tech-led disruption that has transformed the world of finance in the past few years. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Our Methodology
With this context in mind, here is our list of the 10 hedge funds that are betting against Cathie Wood’s ARK Innovation ETF. The funds were picked from a database of 873 hedge funds tracked by Insider Monkey.
Only those funds that had PUT options against ARK Innovation ETF between March and June this year were selected for the listing. The list is compiled according to the value of these PUT options in ascending order.
Two investment firms, ranked ninth and tenth, sold off their bearish stake in the firm entirely during the second quarter, according to the latest 13F filings.
Hedge Funds Betting Against Cathie Wood’s ARK Innovation ETF
10. Balyasny Asset Management
Balyasny Asset Management is a Chicago-based hedge fund led by Dmitry Balyasny with a portfolio value of over $21 billion. Latest data shows that the fund owned PUT options against 436,500 shares of ARK Innovation ETF at the end of March 2021 worth $52 million, representing 0.25% of the portfolio. The fund sold these options off entirely between March and June this year. It is placed tenth on our list of 10 hedge funds that are betting against Cathie Wood’s ARK Innovation ETF.
Dmitry Balyasny of Balyasny Asset Management
Balyasny Asset Management holds a large stake in Microsoft Corporation (NASDAQ: MSFT), a Washington-based technology firm. Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Microsoft Corporation (NASDAQ: MSFT) with 24.8 million shares worth more than $6.7 billion.
Just like JD.com, Inc., The Walt Disney Company, and Facebook, Inc., Microsoft Corporation is one of the stocks attracting the attention of institutional investors.
In its Q1 2021 investor letter, Polen Capital, an investment management firm, highlighted a few stocks and Microsoft Corporation (NASDAQ: MSFT) was one of them. Here is what the fund said:
“We have written extensively about Microsoft in recent commentaries. It was our leading contributor last year and one of our largest weightings within the Portfolio. It continues to experience business momentum through several dominant, essential, and competitively advantaged businesses, like Office 365 and Azure. The markets it competes for are enormous, which gives the company the ability to compound at scale. In the past quarter alone, the company generated over $40 billion in revenue, representing a 17% growth rate. The inherent operating leverage in Microsoft’s business model continues and led to 34% earnings growth this past quarter. Despite the broad rotation we saw in the first quarter and Microsoft’s robust performance in 2020, we think its business fundamentals continue to exhibit strength, and the stock continues to reflect the fundamentals.”
9. Deer Park Road Corp
Deer Park Road Corp is a Colorado-based hedge fund manager that provides investment services to high net individuals. It has a portfolio value of over $2.4 billion. According to the latest filings, the firm owned PUT options against 2.1 million shares of ARK Innovation ETF at the end of March 2021 worth $257 million, representing 9.21% of the portfolio. The firm sold these options off entirely between March and June this year. It is ranked ninth on our list of 10 hedge funds that are betting against Cathie Wood’s ARK Innovation ETF.
One of the premier holdings of Deer Park Road Corp is Barrick Gold Corporation (NYSE: GOLD), a Canadian mining firm with stakes in the copper and gold business. At the end of the second quarter of 2021, 47 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in Barrick Gold Corporation (NYSE: GOLD), down from 49 the preceding quarter worth $1.3 billion.
Along with JD.com, Inc., The Walt Disney Company, and Facebook, Inc., Barrick Gold Corporation is one of the stocks hedge funds are piling into.
In its Q4 2020 investor letter, GoodHaven Capital Management, an asset management firm, highlighted a few stocks and Barrick Gold Corporation (NYSE: GOLD) was one of them. Here is what the fund said:
“Barrick’s recent results have been consistent with our expectations. Barrick has begun inching up the dividend as planned, which should continue increasing absent them finding a large acquisition (they want more copper assets) or a materially lower price of gold. We’d also expect periodic special dividends during stronger gold price environments. At current gold prices we estimate normalized free cash flow at Barrick of over $1.60/share. The company is now about net-debt free. We see plenty of upside and absent a collapse in gold not too much downside. Missing from much of the public discussions about gold, but potentially interesting, is the supply/demand backdrop. As the Wall Street Journal (8/16/20) recently said “gold is amongst the rarest metals in the earth’s crust and much of the easier to get to ore has already been mined. What is left is harder to find and more expensive to extract…” According to the World Platinum Council, it was forecasted that there will be a supply and demand imbalance of 1.2 million ounces globally. The potential macro tailwinds that could add value to an alternate currency like gold including currency concerns, excessive debt and continuing negative real interest rates are still out there. While the shares performed well for the year they were weak in the second half and now stand more attractively priced.”
8. Ikarian Capital
Ikarian Capital is a Texas-based hedge fund led by Neil Shahrestani with a portfolio value of over $1.2 billion. Regulatory filings show that the fund owned PUT options against 119,900 shares of ARK Innovation ETF at the end of the second quarter of 2021 worth $11 million, representing 0.89% of the portfolio. It is placed eighth on our list of 10 hedge funds that are betting against Cathie Wood’s ARK Innovation ETF.
Ikarian Capital has invested heavily in Biogen Inc. (NASDAQ: BIIB), a biotech firm based in Cambridge. At the end of the second quarter of 2021, 67 hedge funds in the database of Insider Monkey held stakes worth $3.1 billion in Biogen Inc. (NASDAQ: BIIB), up from 63 in the preceding quarter worth $1.4 billion.
In addition to JD.com, Inc., The Walt Disney Company, and Facebook, Inc., Biogen Inc. is one of the stocks that hedge funds seem bullish on.
In its Q2 2021 investor letter, Longleaf Partners Fund highlighted a few stocks and Biogen Inc. (NASDAQ: BIIB) was one of them. Here is what the fund said:
“Biogen (52%, 1.24%), a biotechnology company specializing in therapies for the treatment of neurological diseases, contributed in a way that warrants a longer than usual writeup. When we first began buying the company in early January, the stock scored well on all three Business, People and Price criteria, but the range of outcomes was wider than most investments for us. On the business, while the company has had a leading position in neuroscience for decades, it had become a collection of assets that was hard for the stock market to value. This led to most short-term investors focusing on year-over-year (YOY) earnings declines in 2021 and pipeline uncertainty. We focused most on strong cash flows from Biogen’s Multiple Sclerosis franchise, a growing yet hidden biosimilars business, and a pipeline that we believed was actually quite interesting and diversified beyond the manic market focus on Aducanumab, a proposed treatment for Alzheimer’s. On the people front, we also liked what the board and management had been doing (large, discounted repurchases and prudent internal and external investments) and not doing (no big, dumb M&A or unsustainable dividends). Our single point appraisal was around $375/share, but we saw a range at the low end of slightly above $250 if the pipeline totally failed or approaching $500 if the company saw a reasonable amount of pipeline success. We also thought that we were effectively paying a very low double-digit multiple of FCF/share. It is important to note that we were not betting on our science expertise or any other predictions that fall outside our circle of competence. Rather, we used our bottom-up appraisal skills to find a security that was mispriced at that given moment – we had followed the company for over 10 years before our purchase – and that shorter-term investors were afraid to own due to the potential for near-term stock price volatility. We started with a partial position, as we felt the wider-than-usual range of outcomes and uncertainty around the stock could lead to the chance to fill it out at a better price later.
On June 7, the FDA approved Aducanumab (now known as Aduhelm) after a contentious process that has yet to fully play out. The stock shot upward, and our single point value increased to $425. With the stock trading at that level, we exercised our price discipline and sold our position. In this era of “multi-decade-compounders at any price” and given SAM’s history of being long term, it feels weird to be in and out of something so quickly. But it also feels OK to be able to use our appraisal skills to secure a payoff for our long-term clients. The company’s stock price has fallen since our sale, and we will continue to watch the price-to-value (P/V) gap going forward.”
7. Scion Asset Management
Scion Asset Management is a California-based hedge fund led by Michael Burry with a portfolio value of over $2 billion. According to the latest filings, the fund owned PUT options against 235,500 shares of ARK Innovation ETF at the end of the second quarter of 2021 worth close to $31 million, representing 1.47% of the portfolio. It is ranked seventh on our list of 10 hedge funds that are betting against Cathie Wood’s ARK Innovation ETF.
Michael Burry of Scion Asset Management
One of the top holdings of Scion Asset Management is Discovery, Inc. (NASDAQ: DISCA), the media company based in New York. Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm DE Shaw is a leading shareholder in Discovery, Inc. (NASDAQ: DISCA) with 5.6 million shares worth more than $165 million.
JD.com, Inc., The Walt Disney Company, and Facebook, Inc. are some of the top stocks to buy according to elite hedge funds, just like Discovery, Inc..
In its Q1 2021 investor letter, Mayar Capital, an asset management firm, highlighted a few stocks and Discovery, Inc. (NASDAQ: DISCA) was one of them. Here is what the fund said:
“We also sold most of our holdings in Discovery as the stock price continued to increase to new highs. However, in late March the stock declined considerably when brokers liquidated holdings by Archegos Capital (see above in General Commentary) to satisfy margin calls. That brought the stock price down to levels that we found attractive, and we bought back a significant amount of the shares that we had sold earlier that month.”
6. Cormorant Asset Management
Cormorant Asset Management is a Boston-based hedge fund led by Bihua Chen with a portfolio value of close to $3 billion. According to 13F filings, the fund owned PUT options against 750,000 shares of ARK Innovation ETF at the end of June 2021 worth $69 million, representing 2.35% of the portfolio. It is placed sixth on our list of 10 hedge funds that are betting against Cathie Wood’s ARK Innovation ETF.
One of the top investments of Cormorant Asset Management is Zymeworks Inc. (NYSE: ZYME), the biopharmaceutical firm headquartered in Canada. At the end of the second quarter of 2021, 19 hedge funds in the database of Insider Monkey held stakes worth $459 million in Zymeworks Inc. (NYSE: ZYME), down from 27 in the preceding quarter worth $473 million.
JD.com, Inc., The Walt Disney Company, and Facebook, Inc. are some of the top stocks to buy keeping in mind hedge fund sentiment, alongside Zymeworks Inc..
5. Pura Vida Investments
Pura Vida Investments is a New York-based hedge fund led by Efrem Kamen with a portfolio value of more than $3.2 billion. Securities filings reveal that the fund owned PUT options against 600,000 shares of ARK Innovation ETF at the end of June 2021 worth $78 million, representing 2.48% of the portfolio. It is ranked fifth on our list of 10 hedge funds betting against Cathie Wood’s ARK Innovation ETF.
One of the top holdings of Pacific Biosciences of California, Inc. (NASDAQ: PACB), a biotech firm focusing on genetic analysis. Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm ARK Investment Management is a leading shareholder in Pacific Biosciences of California, Inc. (NASDAQ: PACB) with 20 million shares worth more than $716 million.
In its Q1 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Pacific Biosciences of California, Inc. (NASDAQ: PACB) was one of them. Here is what the fund said:
“Pacific Biosciences of California, Inc. provides long-read DNA sequencing systems to scientists conducting genetic analysis. Shares performed well for the quarter. We believe there is increasing excitement about the potential for its platform to move beyond research into clinical applications. The recently appointed CEO was previously Chief Commercial Officer at Illumina, and we think he is well qualified to commercially execute on Pacific Biosciences’ differentiated long-read platform.”
4. GoldenTree Asset Management
GoldenTree Asset Management is a New York-based hedge fund led by Steven Tananbaum with a portfolio value of over $3.7 billion. Securities filings show that the fund owned PUT options against 1 million shares of ARK Innovation ETF at the end of the second quarter of 2021 worth $102 million, representing 2.72% of the portfolio. It is placed fourth on our list of 10 hedge funds that are betting against Cathie Wood’s ARK Innovation ETF.
Steven Tananbaum of GoldenTree Asset Management
One of the biggest holdings of GoldenTree Asset Management is Comcast Corporation (NASDAQ: CMCSA), a media and tech firm based in Pennsylvania. Out of the hedge funds being tracked by Insider Monkey, New York-based firm Eagle Capital Management is a leading shareholder in Comcast Corporation (NASDAQ: CMCSA) with 29 million shares worth more than $1.7 billion.
In its Q1 2021 investor letter, Nelson Capital Management, an asset management firm, highlighted a few stocks and Comcast Corporation (NASDAQ: CMCSA) was one of them. Here is what the fund said:
“Comcast is the Largest cable provider in the U.S. and is the dominant internet access provider in the markets it serves. Though Comcast will likely see further declines in cable subscriptions due to ongoing cord-cutting, it should be able to off set that lost revenue by growing internet access customers and instituting higher pricing. The pandemic has increased the importance of a fast internet connection, with more content streaming to homes at increasingly higher quality. Comcast made significant upgrades early on, allowing it to quickly deploy new technology and increase speeds to meet the evolving needs of its customers.”
3. Moore Global Investments
Moore Global Investments is a New York-based hedge fund led by Louis Bacon with a portfolio value of more than $7 billion. Regulatory filings show that the fund owned PUT options against 800,000 shares of ARK Innovation ETF at the end of the second quarter of 2021 worth more than $104 million, representing 1.48% of the portfolio. It is ranked third on our list of 10 hedge funds that are betting against Cathie Wood’s ARK Innovation ETF.
Louis Bacon Moore of Moore Capital
Moore Global Investments holds a large stake in Facebook, Inc. (NASDAQ: FB), the California-based firm that owns and runs social media platforms. At the end of the second quarter of 2021, 266 hedge funds in the database of Insider Monkey held stakes worth $42 billion in Facebook, Inc., up from 257 in the preceding quarter worth $40 billion.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Facebook, Inc. (NASDAQ: FB) was one of them. Here is what the fund said:
“We continued to keep our learnings from 2020 in mind during the quarter as we sought to increase the up capture of the portfolio. We also made adjustments to the portfolio’s top 10 holdings to increase the participation of select stocks, including Facebook, while trimming our weighting to stable names, which now represent 47% of the portfolio. Our repositioning has been encouraging so far with the portfolio performing better on up days in the market while maintaining good down capture during more turbulent sessions.”
2. Taconic Capital
Taconic Capital is a New York-based hedge fund led by Frank Brosens with a portfolio value of more than $3 billion. Latest filings show that the fund owned PUT options against 910,000 shares of ARK Innovation ETF at the end of the second quarter of 2021 worth $119 million, representing 3.77% of the portfolio. It is placed second on our list of 10 hedge funds that are betting against Cathie Wood’s ARK Innovation ETF.
Frank Brosens of Taconic Capital
Taconic Capital has invested heavily in The Walt Disney Company (NYSE: DIS), a California-based mass media and entertainment firm. At the end of the second quarter of 2021, 112 hedge funds in the database of Insider Monkey held stakes worth $10.8 billion in The Walt Disney Company, down from 134 in the preceding quarter worth $12.5 billion.
In its Q4 2020 investor letter, Harding Loevner, an asset management firm, highlighted a few stocks and The Walt Disney Company (NYSE: DIS) was one of them. Here is what the fund said:
“One of the original constituents of the Nifty Fifty holds a place in our portfolio today. When we bought Disney three years ago, we wrote that “we view Disney theme parks in the US, Europe, and China as resistant to online substitution.” We did not reckon on a pandemic, which closed all of them, and sent all of us to our couches. Disney, however, was ready for us, brilliantly illustrating the importance of management foresight and change management. Or, as Louis Pasteur said, “chance favors the prepared mind.
A century after its founding in 1923, Disney is in the middle of a bold shift from its legacy media networks & entertainment model—with cable TV, theme parks, and theater films dominating its earnings—to a direct-to-consumer streaming media model. The keys to Disney’s transition: matchless storytelling, coupled with financial strength. The company reliably creates content that people all over the world are eager to consume. It also hastened spending on original content to attract subscribers to its new streaming platform. These factors have allowed Disney to weather the pandemic having expanded its direct engagement with customers. Such connections yield a rich harvest of insights used to customize offerings on a mass scale, reinforcing that engagement in a virtuous circle and thereby raising the lifetime value of each customer. Subscribers to Disney+ reached 86.8 million one year after launch, compared to the 60 – 90 million management projected to reach in 2024. To be sure, Netflix, Apple, and Amazon remain formidable competitors in new-era streaming entertainment (mind what we said about everyone standing up at once), but there’s fight left in this old dog.”
1. Laurion Capital Management
Laurion Capital Management is a New York-based hedge fund led by Benjamin Smith with a portfolio value of more than $18 billion. Latest data reveals that the fund owned PUT options against 1.3 million shares of ARK Innovation ETF at the end of June 2021 worth $171 million, representing 0.95% of the portfolio. It is ranked first on our list of 10 hedge funds that are betting against Cathie Wood’s ARK Innovation ETF.
A top holding of Laurion Capital Management is JD.com, Inc. (NASDAQ: JD), a retail infrastructure provider based in China. Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management LLC is a leading shareholder in JD.com, Inc. with 51.5 million shares worth more than $4.1 billion.
In its Q1 2021 investor letter, Arisaig Partners, an asset management firm, highlighted a few stocks and JD.com, Inc. (NASDAQ: JD) was one of them. Here is what the fund said:
“Our largest holding as a firm, JD.com, we expect to grow earnings at an annualised rate of 30% over the next five years, implying it will trade on an EV / EBITDA of 7.5x at the end of this period. Is this a growth stock or a value stock? Does anyone care? Do these labels really matter?
For the Asia Fund, with a higher pre-existing allocation to our core FMCG holdings coming into the year, we took advantage of capital market volatility to further concentrate on our highest conviction names. JD.com has been the main destination for our limited reallocations as evidence continues to emerge supporting our thesis that the company has a strong right-to-win in the large and highly fragmented USD1.8th Chinese grocery market. We have also been encouraged by the fact that after years of persistence, the company is beginning to engage with us on ESG issues (we have specifically discussed data protection, climate change and the circular economy). ESG is now being considered at the board level, and specific sustainability reporting should follow in the coming months. Having long displayed a healthy obsession with customer service, we interpret these latest conversations as a sign that JD is beginning to develop a more sophisticated understanding of its impact on all stakeholders.”
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This article is originally published at Insider Monkey.
