What do the most successful investors do when their favorite stocks tank? If you're Cathie Wood, founder, and CEO of ARK Invest, you keep buying more.
Shares of life-science equipment manufacturer Berkeley Lights (BLI -6.68%) took a hit last week, and two ARK Invest ETFs quickly bought more. Wood also bought two genomics stocks that have tanked this year, Personalis (PSNL -13.78%) and Invitae (NVTA -5.86%). Read on to see why she's confident enough about the outlook for these businesses to go against the grain.
Shares of Berkeley Lights have tumbled 74% from their peak last December, but the dramatic losses haven't scared Wood away from this pioneer of digital cell biology. Last week, Wood added shares of Berkeley Lights to the ARK Genomics ETF multiple times. After a scathing short-seller's report began pushing Berkeley Lights stock lower on Wednesday, she bought shares of the embattled stock for the flagship ARK Innovation ETF, too.
Berkeley Lights makes expensive laboratory equipment that can sort individual cells onto a semiconductor plate and monitor their reactions to experimental drugs in real time. This stock's bears argue that recurring revenue from sales of consumable goods suggests clients aren't using the company's equipment once it's installed.
Fortunately for Berkeley Lights investors, recent earnings results don't jibe with the main thrust of the bear thesis. Recurring revenue has lagged behind direct equipment sales in the past, but it's catching up fast. In the first half of 2021, recurring revenue soared 54% year over year to $8.3 million. Over the same period, direct platform sales rose just 33% year over year to $22.5 million.
Diagnostics 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 the cancer genomics specialist for the ARK Genomics ETF every day last week.
Shares of Personalis have fallen by more than half since the stock peaked this January. Investors have been fretting about the company's reliance on the Million Veteran Program (MVP) for a majority of revenue. The ambitious goal of this government-backed research program is to learn how genes, lifestyle, and military exposures affect health and illness.
Personalis' NeXT Platform is built to track more than 20,000 genes to understand why some immune systems attack tumors and others let them grow. The company has already read and delivered 140,000 whole human genome datasets to the Department of Veterans Affairs.
In addition to the steady revenue, Personalis uses insight gleaned from the MVP program to inform its liquid biopsy service. The strategy appears to be working. The company thinks revenue from oncology customers will pass $25 million during the three-month period ending Sept. 30, a new quarterly record.
Personalis isn't the only genetic testing stock Wood thinks could be a winner down the road. The ARK Innovation ETF bought shares of Invitae every day last week.
Invitae's stock price also peaked in January, but it's fallen 45% from its all-time high. Despite the dramatic drop, it's still trading at more than 15.6 times trailing sales.
Invitae stock isn't cheap by any standard valuation metrics, but it is one of the strongest contenders in the market for genetic testing that has only just begun growing. Poor 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 national testing guidelines aren't keeping pace with the blistering rate of new drug approvals. As a result, the biopharma industry has been beating a path to Invitae's door.
In the second quarter, Invitae signed 43 partnership deals with drugmakers that know more testing will lead to more sales of their targeted treatments. The testing might come at no cost to patients, but Invitae could end up booking heaps of revenue.