What do the most successful investors do when their favorite stocks pile up? If you are Cathie Wood, Founder and CEO of ARK Invest, you keep buying more.
Shares of the manufacturer of life science equipment Berkeley Lights (NASDAQ: BLI) took a hit last week, and two ARK Invest ETFs quickly bought more. Wood also bought two genomics stocks which fell this year, Customize (NASDAQ: PSNL) and Invitation (NYSE: NVTA). Read on to see why she’s confident enough about the prospects for these companies to go against the grain.
Berkeley Lights shares are down 74% from their peak last December, but the dramatic losses haven’t scared Wood away from this pioneer in digital cell biology. Last week, Wood added shares of Berkeley Lights to the ETF ARK Genomics several times. After a scathing report from a short seller started pushing Berkeley Lights shares lower on Wednesday, she bought shares of the struggling stocks for the flagship. ARK Innovation ETF, too much.
Berkeley Lights makes expensive lab equipment that can sort single cells on a semiconductor wafer and monitor their reactions to experimental drugs in real time. The bears in this action argue that recurring income from sales of consumer goods suggests that customers are not using company equipment once it is installed.
Luckily for Berkeley Lights investors, recent earnings results don’t align with the main thrust of the Bear Thesis. Recurring revenues have lagged behind direct equipment sales in the past, but are catching up quickly. In the first half of 2021, recurring revenue increased 54% year-on-year to $ 8.3 million. During the same period, direct sales of the platform grew only 33% year-on-year to reach $ 22.5 million.
Diagnostic stocks have performed well for Wood’s ETFs in the past, and she seems confident about this relative newcomer to the space. ARK Invest bought more shares of ETF cancer genomics specialist ARK Genomics every day last week.
Shares of Personalis have fallen by more than half since the share peaked in January. Investors have worried about the company’s reliance on the Million Veteran (MVP) program for the majority of its revenue. The ambitious goal of this government-backed research program is to learn how genes, lifestyle, and military exposures affect health and disease.
Personalis’ NeXT platform is designed to track over 20,000 genes to understand why some immune systems attack tumors and others allow them to grow. The company has already read and delivered 140,000 complete human genome data sets to the Department of Veterans Affairs.
In addition to the stable income, Personalis uses the information gleaned from the MVP program to inform its liquid biopsy department. The strategy seems to be working. The company believes oncology client revenues will exceed $ 25 million in the three-month period ending September 30, a new quarterly record.
Personalis isn’t the only genetic testing stock, according to Wood, could be a winner down the road. ETF ARK Innovation bought Invitae shares every day last week.
The Invitae share price also peaked in January, but fell 45% from its all-time high. Despite the dramatic drop, it is still trading at over 15.6 times trailing sales.
Invitae’s stock isn’t cheap by standard valuation metrics, but it’s one of the strongest competitors in the genetic testing market that’s only just starting to grow. Lack of access to genetic tumor profiling still prevents most patients from accessing new, highly targeted cancer treatments.
Invitae can point to study after study that proves that national testing guidelines are not keeping pace with new drug approvals. As a result, the biopharmaceutical industry has made its way to Invitae’s doorstep.
In the second quarter, Invitae signed 43 partnership agreements with drugmakers who know more testing will lead to increased sales of their targeted treatments. The tests could be free for patients, but Invitae could end up generating considerable revenue.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.