Michael Burry of Scion Asset Management is once again making headlines for his market predictions — and this time Cathie Wood’s Ark Management is his target.
Burry rose to fame after being one of the first investors to correctly predict the financial crisis of 2008. He recognized that the underlying mortgages in mortgage-backed securities were wildly undervalued, and put large bets against them. Aside from making a lot of money after the underlying mortgages eventually folded, Burry became famous for his ability to value assets — and his latest bet is making news once again.
Scion Asset Management put contracts against 235,500 shares of the ARK Innovation ETF at the end of the second quarter according to a regulatory filing this week, Bloomberg reports. This means Burry has made a roughly $31 million dollar bet against ARK.
An investor purchases a “put” when they believe the value of an asset is going to go down. It is essentially placing a bet that someone will fail. Wood and her fund have been heavily weighted in technology stocks, which contributed to success in 2020 but has failed to keep consistent momentum throughout 2021. Bloomberg adds that the ARK Innovation ETF was able to lure in billions in the past year after wild success in 2020 but has struggled to maintain success amid concerns about lofty prices and acceleration inflation.
Burry has publicly voiced his concerns about overvalued tech stocks going into 2021, calling the frenzied retail trading earlier this year the “greatest speculative bubble of all time” on Twitter before deleting his account.
Just a few short months ago, Burry made another huge bet against tech, with almost half a billion dollars in put contracts against Wall Street darling Tesla. Interestingly, Burry adds to that bet by buying puts against ARK, as the fund is heavily weighted in Tesla with Wood being a long-time supporter of Musk’s. Tesla slumped 4.7% as the U.S. opened a formal investigation into the company’s Autopilot system, Bloomberg added.
Burry’s large bet against what were once tech shoe-ins for big returns could signal an even more important turning point. Large, and consistent, bets against tech funds coupled with increasing prices might just be enough for the tech run-off that led 2020 to finally sizzle for good.
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