Some might have called Matthew Tuttle crazy for betting against famed stock picker Cathie Wood in 2021. Instead, an ETF that trades against the Ark Innovation ETF (ARCA: ARKK) from Wood has turned into a very profitable investment for those willing to take a chance against high growth names.
What Happened: Tuttle Capital Management launched the Tuttle Capital Short Innovation ETF (NASDAQ: SARK) as an inverse option for those wanting to bet against the Ark Invest flagship fund on Nov. 9, 2021. The ETF attempts to achieve the inverse of the return of the Ark Innovation ETF for a single day.
“This distinctive exposure allows investors to potentially profit from a decline in a portfolio of companies involved in disruptive industries such as electric vehicles, next-gen internet, genomics and fintech,” the press release said.
Tuttle told Benzinga there was demand for a short Ark ETF: “There are currently over 30 million shares short on ARKK so there is massive demand,” he said.
Tuttle pointed to a quick exit by Ark in Zillow Group and the high exposure to Tesla as reasons why some might want to bet against Ark and Wood.
“Whether you believe that the current bull thesis for transformational industries is a stretch or you are looking to provide protection to an existing portfolio of high-growth stocks, SARK is a potentially attractive opportunity worth exploring.”
At the time of the Tuttle Capital Short Innovation ETF, Ark Innovation was one of the top performing ETFs of the last three and five years with returns of 174.8% and 538.7% respectively. Since that time, shares have fallen significantly, rewarding investors who added Tuttle's ETF to their portfolio.
Shares of Ark Innovation are down 49% year-to-date, hurt by big drops in some of the largest holdings of the ETF.
Teladoc Health (NYSE: TDOC) dropped after posting weak financial results. The company is a top ten holding in the Wood's ETF and Ark Invest is the largest Teladoc shareholder across its family of funds.
Coinbase (NASDAQ:COIN) Global Inc (NASDAQ: COIN) is down over 50% in 2022.
Other big falls include top ten holdings Zoom Video Communications Inc (NASDAQ: ZM), Roku Inc (NASDAQ: ROKU) and Block Inc (NYSE: SQ).
Electric vehicle giant Tesla Inc (NASDAQ: TSLA) is the largest position in the fund and is down 25% year-to-date.
Related Link: Want To Bet Against Cathie Wood? There's A New ETF For That
Investing $1,000 In SARK: The Tuttle Capital Short Innovation ETF opened for trading on November 9, 2021, and hit a high of $30.78 on its first day of trading.
A $1,000 investment in the ETF could have purchased 32.49 shares. The $1,000 investment would be worth $1,937.05 today thanks to a rise in the SARK share price to $59.62 at the time of writing.
This would represent a return of 93.7% over the last six months.
The Ark Innovation ETF, on the other hand, hasn’t fared so well. A $1,000 investment in the Ark Innovation ETF could have purchased 8.05 shares at the intraday high on Nov. 9, 2021. The $1,000 investment would be worth $399.60 today, representing a decline of 60% over the last six months.
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