“The best female investor in the world”
Opposite him is Cathie Wood, who is not only considered the best investor in the world, but has also founded her own investment company with ARK Invest. A woman from the field, with an influence that should not be underestimated. When she recently announced that she had joined the trading app Robinhood, it gave their share a huge boost. Cathie Wood is tech savvy. ARK Invest primarily invests in disruptive technologies. And Tesla holds the largest single position in its ARK INNOVATION ETF fund.
But what exactly happened now that both made it into the headlines recently? Michael Burry bet on the crash of 1.1 million Tesla shares via put options at the end of June. At the same time, he bought 2,355 put options on the ARK INNOVATION ETF (ARKK for short) and thus bet on a crash of 235,500 ETF shares. So Burry bet not only directly but also indirectly against Tesla shares.
The ARKK course will fall
Put options enable buyers to sell shares at a predetermined point in time at a specific strike price. If the price is below this strike price before the option expires, the owner of the put options can resell the shares at a profit. Burry expects falling courses at the ARKK.
It is not known since when he has been betting against the ETF, but as early as February he tweeted that Woods’ promise of disruptive growth would not be fulfilled. He has meanwhile deleted the tweet.
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Wood: Michael Burry doesn’t understand the basics
On Tuesday, Cathie Wood responded via Twitter. Burry was right in 2007. But she doesn’t think he understands the fundamentals that led to explosive growth.
Nevertheless, she is currently under great pressure. Since the ARKK’s annual high in February, the fund has lost more than 25 percent of its value. And: Despite Tesla’s soaring, the company’s share price would have to more than quadruple to actually reach Wood’s target of $ 3,000 per share. According to the Wall Street Journal, analysts expect an average price of $ 652.
Is Wood really wrong with your assessment and Michael Burry has another big hit? It should stay exciting.
By the way: Cathie Woods is also an avowed fan of the crypto currency Bitcoin. In contrast to Michael Burry.
How investors should react now
First of all, don’t panic. Now, you don’t have to sell off every ETF that contains Tesla stock. Nevertheless, it is difficult, especially for inexperienced investors, to take a concrete position in Burry and Wood’s trial of strength. Because, as always, the stock market is speculative. Both investors have years of experience in the market and both were able to celebrate great successes – but both could be wrong in this case as well. Private investors should therefore not be too unsettled.
Nevertheless, it makes sense not to base your strategy too heavily on ETFs that contain a high proportion of cyclical consumer goods and cryptocurrencies should only make up a small percentage of the portfolio. Not because Michael Burry is not a Bitcoin disciple, but because cryptocurrencies are (still) highly volatile. Five percent should be the upper limit.
And Tesla? ETF investors can relax. A broadly diversified ETF like that iShares Core MSCI World (NASDAQOTH: A0RPWH) has an 11.03% stake in consumer discretionary, which includes Tesla. The car manufacturer is currently represented with 0.88% in the ETF. If Burry is right this time too, private investors need not worry too much.