The Nasdaq Composite (^IXIC 0.89%) is a hotbed of innovation, and the bull market in disruptive stocks in 2020 helped give the Nasdaq one of its best years ever. Recently, though, the Nasdaq's rise has taken a bit of a pause, and on Tuesday afternoon, the index was down a fraction of a percent as of 1 p.m. EDT.
ARK Invest's CEO and chief investment officer, Cathie Wood, has gotten a lot of notoriety for her stock picking prowess over the past year, largely because she's embraced some of the best stocks on the Nasdaq. Tesla (TSLA 0.83%) is the best-known of Wood's top picks, and odds are you already know as much as you want to know about the electric vehicle specialist. However, some other Nasdaq stocks aren't as familiar to ordinary investors even though they have their own opportunities to soar in the years ahead. Below, we'll look at two of the stocks you'll find prominently among ARK Invest exchange-traded fund (ETF) holdings that probably haven't made it onto your radar screen.
A play on automation
Trimble (TRMB 0.98%) isn't a new company, but it has quickly become one of Wood's favorite picks. The stock is the third-largest position in ARK Invest's Autonomous Technology & Robotics ETF (ARKQ 2.33%), making up more than $180 million at recent prices. That's not a huge amount by ARK's standards, but it gives the fund manager a 1% stake in Trimble.
Founded more than 40 years ago, Trimble's software, hardware, and services are geared toward modeling, data analytics, connectivity, and positioning. Trimble serves a vast array of industries ranging from transportation and utilities to agriculture, construction, and geospacial surveys and mapping.
ARK Invest has long been a fan of Trimble. In the agricultural space, Trimble's systems have allowed automated farm equipment to use global positioning system navigation to maximize planting, fertilizing, and harvesting efficiency. Trimble will likely play a role in space exploration as well, adding to its optionality.
Trimble shares have doubled since last April, but the company has considerable growth potential. There's room for Trimble's stock to keep rising if it can keep capitalizing on opportunities in automation, and with the share price down almost 5% on Tuesday, investors would get a bit of a bargain on Trimble currently.
A new Twist on genetics
Meanwhile, ARK Invest has made an even bigger investment in genetics specialist Twist Bioscience (TWST -0.56%). The company weighs in at No. 5 among holdings of the ARK Genomic Revolution Multi-Sector ETF (ARKG 1.09%), and the nearly $420 million ARK Invest has invested in Twist amounts to about 7% of Twist's outstanding shares. Twist's stock has been extremely volatile lately, having risen as much as eightfold from its lows last year before falling back by about a third since mid-January.
Twist's business centers on DNA synthesis, with a cutting-edge genomic sequencing system that can produce viable synthetic genetic material for use in experiments at biotech and biopharmaceutical companies and research institutions. Wood has identified Twist's ability to help clinicians find signals indicating potential cancer as groundbreaking in the field, with the capacity to enable earlier detection and likely save large numbers of lives.
At this stage, Twist is going through a pattern that's familiar to high-growth investors. In its most recent quarterly numbers, Twist reported a 64% jump in revenue, with losses narrowing from year-earlier levels. Yet the stock failed to gain ground, leading some to conclude that its recent gains precluded it from benefiting from the good news on the business fundamentals front. Shares are down another 2% on Tuesday afternoon, but that only makes the value proposition that much better for those interested in the genomics stock.
Keep your eyes on Wood's buys
Even Cathie Wood doesn't bat a thousand with her stock picks, so there's no guarantee that Twist or Trimble will keep rising. Nevertheless, these two companies have attractive businesses and have rewarded shareholders so far. That bodes well for their prospects in the near future as well.