Most people who have been following the stock market over the past year know the name Cathie Wood. The founder of asset management firm ARK Invest has parlayed her strategy of investing in cutting-edge technology companies, and her notable media appearances, into a place as one of the most closely followed money managers today. She's earned the attention: All of ARK's funds have more than doubled their investors' money in the past year. 

Despite her overall successes, though, her funds do hold a few stocks that have fallen out of favor with Wall Street. CRISPR Therapeutics (CRSP -1.97%) and Proto Labs (PRLB -0.79%) are down significantly from their recent highs. For investors looking to profit from either the gene-editing or additive manufacturing revolutions, those slumps could spell opportunity. And those who purchase either stock can feel secure in the knowledge that one of the world's hottest investors has done so too.

A school of fish swimming one way with a lone fish swimming the other way with a light bulb over its head like it has a different idea.

Image source: Getty Images.

1. CRISPR Therapeutics

CRISPR Therapeutics utilizes the CRISPR-Cas9 gene-editing technique to develop transformative treatments. Though the company has been making progress in its clinical programs, the stock has fallen nearly 40% from the peak it reached in mid-January. CRISPR is developing treatments in three clinical areas. Management expects progress in these programs to propel its market capitalization from about $10 billion today to $20 billion to $25 billion in the near term. 

The first program is hemoglobinopathies, or inherited disorders affecting red blood cells. In the first clinical trials of CRISPR gene-editing by a U.S. company, CRISPR Therapeutics and partner Vertex Pharmaceuticals (VRTX -1.35%) announced in December that their CTX001 treatment had effectively cured 10 patients of two blood disorders. The study is only a phase 1/2 trial, and management expects to finish enrolling participants later this year.

Its second set of programs are immuno-oncology treatments that harness the power of the body's own immune system to fight cancers. All three of the company's drug candidates in this area leverage gene-edited cells transplanted from a healthy donor. Each is scheduled for a readout this year. Already, one treatment showed that an engineered cell from the patient's immune system can provide a very high response rate for one of the worst forms of non-Hodgkin's lymphoma. 

Finally, the company is partnering with ViaCyte in its first effort in regenerative medicine. The pair are beginning a phase 1/2 trial combining ViaCyte's stem cell capabilities with CRISPR's gene-editing expertise. The result is expected to be a new way to treat diabetes. The approach actually replicates a study from two decades ago that used fresh pancreatic cells from cadavers. If this treatment proves effective, the stock should quickly gain ground to reflect CRISPR's opportunity to disrupt the $28 billion human insulin market. Overall, the scientific advances coming out of this company should have investors excited about the future.

2. Proto Labs

Manufacturing any new product has always required a lot of time and money. The equipment, molds, and machines necessary to produce one new design are the same whether a company is making one part or churning out thousands. For that reason, innovations in manufacturing have always tended to focus on more efficiently mass-producing parts, as opposed to quickly adapting to new designs.

Proto Labs has flipped that model on its head, building an entire business around delivering custom parts at unprecedented speeds. The platform served more than 18,000 individual product designers last year.

The approach has been facilitated by the adoption of 3D printing, where components are created by building up material to form a design, rather than starting with a lot of material and removing much of it. It's both a cheaper and faster method. As an example, the company has been able to manufacture new components for ventilators and diagnostic equipment with market-leading turnaround times during the pandemic.

While Proto Labs is well positioned, its growth has been lackluster. Management recently reported full-year results for 2020, and its $434 million in revenue was 6% below 2019's figure. That decline wasn't all due to COVID-19, either. Revenue in 2019 was only 3% above 2018. The market is getting impatient, but the company's new CEO, Rob Bodor, is hoping a more user-friendly interface and an expansion of its offerings to customers will jump-start sales.

The refreshed user platform, referred to as Proto Labs 2.0, went live in November for Europe and in February for the Americas. Bodor, who took over this month, said new features and capabilities will continue to show up throughout 2021. Proto Labs also recently acquired 3D Hubs, which will give the company the capacity to identify manufacturing partners for jobs it cannot accept, as well as provide more lead times and price points for customers with different needs. 

Proto Labs stock rallied in the wake of the acquisition, a positive analyst note, and bullish guidance from 3D printing company ExOne (XONE). Unfortunately for shareholders, it has fallen nearly 50% from the peak it touched in late January. Management didn't do much to help, projecting that conditions in the first quarter would be much like they were in 2020 and 2019.

It's understandable that shareholders would be impatient -- this stock has been trading mostly on potential for years. However, for investors with long-term time horizons, taking a stake in Proto Labs could one day pay off. At least, that's what Cathie Wood is counting on.