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Cathie Wood says stocks are not in a bubble, thinks investors betting against her fund are off base

Cathie Wood says stocks are not in a bubble, thinks investors betting against her fund are off base

19 Aug 2021

Cathie Wood, chief executive officer and chief investment officer of ARK Investment Management LLC, speaks during the Sooner Than You Think conference in the Brooklyn borough of New York on Tuesday, Oct. 16, 2018.

Alex Flynn | Bloomberg | Getty Images

ARK Invest’s Cathie Wood defended her innovation-focused strategies in the wake of investors betting against her funds on Thursday.

“I don’t think we’re in a bubble which is what I think many bears think we are,” Wood said on CNBC’s “Tech Check” on Thursday. “In a bubble, and I remember the late ’90s, our strategies would have been cheered on. You remember the leap frogging of analysts making estimates one higher than the other, price targets one higher than the other. We have nothing like that right now. In fact, you see a lot of IPOs or [special purpose acquisition companies] coming out and falling to earth. We couldn’t be further away from a bubble.”

On Monday, regulatory filings spotted by CNBC Pro showed Michael Burry bet against Woods’ ARK Innovation ETF using options. Burry’s Scion Asset Management bought 2,355 put contracts against the red-hot tech ETF during the second quarter and held them through the end of the period. Burry was one of the first investors to call and profit from the subprime mortgage crisis.

Other hedge funds also have put bets and other short bets against the fund’s ETFs.

“When I see such negative sentiment out there, especially when it comes to valuation and longer time horizons, investment time horizons, I actually feel a little more comfortable. I like bad news,” Wood added. “The discounting is worse now than the news will actually be. I actually feel better in that environment for out strategies.”

Wood said that much of the bearishness on her funds is focused around inflation and interest rates going higher. However, the portfolio manager’s macro thesis focuses on deflation from innovation.

“The innovation around which we have centered our research, these five platforms: DNA sequencing, robotics, energy storage, artificial intelligence and blockchain technology, are barely off the ground,” said Wood.

Shares of Wood’s flagship fund, ARK Innovation, hit a bottom in May as investors rotated into value stocks in the first half of 2021 and out of tech shares. The ETF did end the second quarter up 9%, but it’s still down 7% year to date.

ARKK traded around the flatline on Thursday.

“The seeds for all of these platforms were planted in the 20 years that ended in the tech and telecom bust and ended in tears and there’s a lot of muscle memory around that but that’s not what’s going on right now. I don’t think the market is ready for this. We’ve never been at a more provocative time for innovation in history,” Wood said.

Wood made a name for herself after a banner 2020 in which ARK Innovation returned nearly 150%. The fund had big holdings in shares like Zoom and Teladoc, which thrived during the pandemic. The ETF ballooned with investors hoping to get a piece of the “disruptive innovation” names that Wood touts on her popular YouTube channel. The fund’s assets under management are now more than $22.5 billion, according to FactSet.