Topline
Famed Wall Street stock-picker Cathie Wood responded Tuesday to hedge fund manager Michael Burry's bet against her high-profile technology fund last quarter, saying the legendary investor who predicted the housing market crash in 2007 and inspired The Big Short doesn't understand the fundamentals creating "explosive growth" in the innovation space.
Key Facts
Responding on Twitter to Burry's second-quarter bet against her flagship fund, Wood defended tech's recent underperformance by saying the bull market has only strengthened this year and "broadened beyond the innovation strategies [like Tesla] that boomed last year."
Wood, the CEO of New York City investment firm ARK Invest, said the stock market is "likely to reward disruptive innovation strategies" again when recently spiking inflation cools down or fears of recession increase, at least one of which she believes will happen in the next three to six months.
Pointing to now-plunging prices of recently spiking commodities like lumber, copper and oil, Wood reiterated her firm's belief that rising inflation, which has tempered the growth of tech stocks this year, is only temporary and won't ultimately "destroy valuations."
In a filing released Monday, Burry's Scion Asset Management disclosed it holds bearish put options, which are placed when investors believe an asset's value will fall, on 235,500 shares, worth about $30 million, of ARK's Innovation ETF.
Despite skyrocketing nearly 90% over the past year, the ARK Innovation ETF, whose top holdings include Tesla, Coinbase and Zoom Video Communications, is up only 5% this year.
Crucial Quote
"To his credit, Michael Burry made a great call based on fundamentals and recognized the calamity brewing in the housing/mortgage market," Wood said Tuesday. "I do not believe that he understands the fundamentals that are creating explosive growth and investment opportunities in the innovation space."
Key Background
Technology stocks led the market's rally last year, but this spring, accelerating economic growth and the threat of rising interest rates spurred a stock-market rotation away from growth stocks, like those in tech, to cyclical and value-leaning slices of the market that struggled during the pandemic (like energy and financials). Though it surged more than 40% last year, the tech-heavy Nasdaq is up just 16.5% this year, compared to the S&P 500's 21% gain.
Tangent
Burry's market criticism this year hasn't been limited to tech stocks. Though he built a massive position in GameStop late last year, he called the stock's short squeeze and resulting surge in January “unnatural, insane and dangerous." Filings released the following month show Burry, who made millions shorting subprime mortgages during the 2008 financial crisis, sold a stake that would've been worth more than $1 billion for less than $50 million.
Further Reading
"wood" - Google News
August 17, 2021 at 08:47PM
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Ark Invest’s Cathie Wood Hits Back At ‘Big Short’ Investor: He Doesn’t Understand ‘Explosive Growth’ In Tech - Forbes
"wood" - Google News
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