I don’t know about you, but the day after Labor Day has never been a very productive one. The same cannot be said for ARK Invest CEO and founder Cathie Wood. Yesterday, the collection of exchange-traded funds she manages were just as busy as ever.
Wood confidently bought some healthcare stocks that have been under a lot of pressure lately. Shares of CRISPR Therapeutics (NASDAQ:CRSP), Invitae (NYSE:NVTA), and Personalis (NASDAQ:PSNL) have lost more than 40% of their value since they peaked near the beginning of 2021. Here’s why Wood finds them so attractive right now.
Wood’s been bullish on gene-editing pioneer CRISPR Therapeutics since 2017 when she began buying the stock for ARK Invest’s exchange-traded funds (ETFs).
CRISPR Therapeutics stock has tumbled around 43% since it peaked this January. Lots of shareholders have been scratching their heads because the company hasn’t reported any particularly bad news this year.
In fact, it’s been a great year for CRISPR Therapeutics and CTX001, its experimental gene therapy for transfusion-dependent thalassemia and sickle cell disease. In June, the company highlighted further evidence a single administration of CTX001 can help patients end their reliance on problematic blood transfusions.
The stock has tumbled simply because it rose too fast in 2020. At recent prices, CRISPR Therapeutics still boasts an enormous $9.3 billion market cap. That’s still a lot for a company that won’t have any products to sell for at least another year.
Shares of Invitae are down around 44% from a peak they reached in February. Despite the recent drop, shares of this medical genetics company have more than tripled since ARK Invest began buying the stock in 2016.
It’s not hard to see why Wood’s buying up shares this week at their greatly reduced price. Second-quarter sales soared 152% over the previous-year period to $116 million and they still have a lot of room to grow.
Precision cancer therapies can be far more effective than old-fashioned chemotherapy, but patients need tests from Invitae to know if they’re eligible. A recent study suggests just 3% of colorectal cancer patients are getting their tumors screened for mutations that could make them susceptible to effective new treatment options.
In 2021, Invitae has already signed agreements with dozens of drugmakers who market precision cancer therapies. In a nutshell, big pharma could end up paying for lots of cancer patients to get their tumors tested by Invitae.
Wood has been buying up shares of Personalis since its stock market debut in 2019. ARK Invest bought more shares of this young genomics company on Tuesday even though it’s given up around 58% of its value since peaking this January.
Like Invitae, Personalis is a diagnostics company working hand in hand with cancer drug developers to help them understand the complex interplay between tumors and the immune cells that surround them. Unlike its competitors, Personalis is attempting to track changes in all 20,000 human genes with a single test.
Personalis’ ambitions are feasible thanks to a contract with the U.S. government to help complete the Million Veteran Program. This comprehensive genetic overview of over 825,000 veterans so far is already one of the largest whole-genome sequencing projects ever conducted.
With insight its competitors can’t quite match, drugmakers are beating a path to Personalis’ door. Non-government revenue in the second quarter soared 72% year over year to $8.2 million.
Personalis expects around $85 million in total revenue this year, which isn’t nearly enough to cover operating expenses. The company expects to lose between $65 million and $70 million this year.
Before you follow Wood into Personalis or any of these stocks, make sure they become a small part of a well-diversified portfolio. If margins don’t improve in the quarters ahead, Personalis’ $977 million market cap could get a lot smaller.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.