From earning the title of stock market influencer to launching the influential ARK Transparency ETF (BATS:CTRU), Cathie Wood continues to gain attention in 2021. However, as the year draws to a close, not all of this attention has been positive. With the omicron variant and rising consumer prices weighing on the market, her innovative picks have struggled. In fact, almost all of the stocks in her flagship innovation exchange-traded fund entered a bear market in early December. While some experts are betting that so-called Cathie Wood stocks could outperform again in 2022, others are taking a different approach and betting against Wood. One increasingly popular way to do so is through the Tuttle Capital Short Innovation ETF (NASDAQ:SARK).
In fact, earlier this week, the SARK ETF hit $100 million in assets under management (AUM). According to Tuttle Capital Management, the fund reached this milestone in just 24 trading days. If anything, that speaks to a growing amount of investors looking for a new approach in the new year.
Introducing the SARK ETF
Matthew Tuttle, CEO of Tuttle Capital, which serves as an advisor to SARK, is no stranger to the world of exchange-traded funds. In fact, he’s noted for his investing strategies that combine interest in ETFs and special purpose acquisition companies (SPACs). His latest endeavor, the Short Innovation ETF, goes up to bat against one of the biggest names in the stock market.
So how exactly does the SARK ETF work? And why does it matter right now?
As Tuttle told InvestorPlace, it is simply the inverse of the ARK Innovation ETF (NYSEARCA:ARKK), Wood’s flagship fund. “If ARKK is up a percent, we should be down a percent,” Tuttle said. “If it’s down a percent, we should be up a percent. In more sophisticated terms, we have swap contracts that give us the inverse of the return.”
Essentially, buying the SARK ETF gives investors a way to sell Wood’s ARKK ETF short. According to Tuttle, investor demand for such a product only is growing. And prior to the launch of his latest fund, he believes investors didn’t have adequate options.
“We wanted to put it in a nice, easy package,” he said, referring to the opportunity to bet against Wood.
Tuttle says he also wanted to give investors a better hedge against inflation. Instead of inverse funds that short companies like Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), the SARK ETF focuses on growthier companies that remain unprofitable. Going into 2022, Tuttle told InvestorPlace this is especially relevant in what is set to be a higher-rate, higher-inflation year.
Tuttle was careful to emphasize that he and his team are not betting against innovation, by any means. Their goal with the SARK ETF has been simply to provide a better hedge for those seeking it.
Timing Is Everything
Why does Tuttle think that the SARK ETF has resonated so well with investors so far? As he sees it, it mostly comes down to timing.
“I think that A) we hit it at the right time and B), there was already a lot of demand out there,” he said. Tuttle also added that he feels that many investors are realizing that this new ETF is in fact a better hedge.
To help meet investors where they are, Tuttle says he gets most of his market news from Twitter as opposed to outlets like CNBC. “There’s a lot of talk about carnage,” he noted. “But if you look at the [S&P 500] and the Nasdaq, we’re not really far from all-time highs, but the carnage is beneath the surface.”
He also acknowledged that part of the appeal likely stems from the fact that retail investors with high-growth stocks in their portfolios are unable to use inverse products on both aforementioned indices because both are generally doing fine. Ultimately, Tuttle said that this has led investors to the SARK ETF.
What Comes Next?
The way Tuttle sees it, the appeal of the SARK ETF will continue into 2022 and well beyond. “It fits in perfectly with the environment, rising rates, higher inflation,” he said, also noting the market uncertainty that many investors are facing.
As for where he’s putting his own money to work in the year ahead, Tuttle says that it is divided up between his firm’s funds, with the bulk currently in the firm’s FOMO ETF (BATS:FOMO).
“I move [my money] around a bit but I always keep more in FOMO just because that’s the biggest growth,” he noted. Tuttle added, though, that he “[owns] a decent-sized chunk” of SARK.
As of now, there seems to be plenty of reason to believe SARK’s strategy is sound, particularly as the market braces for more uncertainty in the year ahead. Investors should follow suit, and pay close attention to some of the unprofitable tech names they hold.
If you follow Wood’s work with ARKK, the SARK ETF is certainly worth watching, if for no other reason than to determine which is a better bet in 2022.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
