Billionaire David Tepper Bought Calls on the ARKK ETF. What Does That Mean?
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Cathie Wood’s ARK Innovation ETF (NYSEMKT:ARKK) is far from its heyday. While the exchange-traded fund (ETF) is up by 22% year-over-year, its five-year return of 12% trails the S&P 500’s comparative return of 80% by a wide margin.
Recently, Morningstar included ARKK on its “Top 15 Wealth-Destroying Funds Over the Past 10 Years” list, with the ETF tallying in at No. 3. Morningstar noted ARKK has destroyed an estimated $7.1 billion of wealth. For Morningstar’s “Top 10 Wealth-Destroying Fund Families Over the Past 10 Years” list, the ARK ETF Trust came in at No. 1, destroying an estimated $14.3 billion of wealth.
“After garnering huge asset flows in 2020 and 2021 (totaling an estimated $29.2 billion), its funds were decimated in the 2022 bear market, with losses ranging from 34.1% to 67.5% for the year,” said Morningstar portfolio strategist Amy Arnott. “Many of its funds enjoyed a strong rebound in 2023, but that wasn’t enough to offset their previous losses.”
However, one acclaimed fund manager hasn’t lost faith in ARKK yet, according to his Q4 13F filing.
David Tepper Discloses Stake in ARKK ETF Calls
As of Dec. 31, David Tepper’s Appaloosa owned ARKK calls against 2.55 million shares, making the calls his 14th-largest 13F position out of 40 total positions. Appaloosa operates as a concentrated hedge fund with a long-term focus. Its top 10 positions make up 69.21% of its 13F portfolio, while its average holding period tallies in at 7.13 quarters, or 1.78 years. As of Dec. 31, 2023, its 13F portfolio was worth $5.79 billion.
Appaloosa doesn’t own shares of the ARKK ETF, so its taking on a more leveraged approach with the calls. A single call provides a shareholder with exposure to 100 shares of the underlying stock and costs much less than what those 100 shares are worth. However, with the upside risk comes downside risk as well. Still, Appaloosa’s position in ARKK calls is a clear signal that is bullish on the ETF.
Tepper has a long history of making successful calls, as evident by his estimated net worth of $20.6 billion.
On the date of publication, Eddie Pan did not hold (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.
