What do the world's most confident investors do when their favorite stocks dive along with the rest of the stock market? If you're Cathie Wood, the CEO and founder of ARK Invest you do some bargain shopping.
Rising interest rates in the U.S. and a financial crisis in China have been driving down shares of the exchange-traded funds (ETFs) Cathie Wood manages for ARK Invest. These forces matter. But, they don't strongly affect the investment thesis behind the vast majority of stocks in those ETFs.
Shares of Signify Health (SGFY), 908 Devices (MASS -1.07%), and Invitae (NVTA 800.00%) are all trading at steep discounts compared to peak prices they reached earlier this year. Here's why Wood finds them so attractive right now.
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Signify Health
Wood keeps taking advantage of weakness for start-up healthcare stocks like this one. On Monday, Tuesday, and Wednesday last week, Wood's flagship ARK Innovation ETF (ARKK -0.66%) added heavily to its Signify Health position.
Shares of Signify Health have tumbled around 54% since the company's initial public offering this February. This July the company launched its Transition to Home solution in more than 50 American hospitals, but investors are still playing wait-and-see.
In a nutshell, Signify Health helps medical benefits managers run value-based programs like Medicare Advantage. Specifically, the company helps companies like UnitedHealth run in-home evaluations in an attempt to avoid expensive hospital readmissions.
In 2020, the company's network of providers completed evaluations for over 1.4 million patients. Operating expenses in the first half of 2021 have risen sharply due to new hiring initiatives and a higher proportion of in-home evaluations actually getting performed in homes instead of virtually.
It could take another quarter or two to work out some kinks. Over the long run, though, this company's lucrative in-home evaluation service looks poised to deliver strong profits. Despite the growing pains, the company expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to reach an encouraging $160 million by the end of 2021.
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908 Devices
Ark Invest funds have been accumulating shares of this mass spectroscopy gear manufacturer since it made its stock market debut late last year. On Monday, and Tuesday, the ARK Genomic Revolution ETF (ARKG -2.79%) added to its already significant position. Now, ARK Invest owns around 10% of the company's total shares.
Shares of 908 Devices haven't fared well during this September's tech stock sell-off. In recent days, the stock has tumbled all the way down to around 57% below the peak it reached this February.
This company's done well in past years with handheld devices that can detect trace levels of narcotics and explosives. Its desktop accessories for larger mass spectroscopy devices often found in biopharmaceutical manufacturing facilities, though, are where investors want to direct their attention.
The company's most recently launched device, the Rebel, allows biologics manufacturers to monitor vitamins and amino acids in real-time instead of sending samples off to a central laboratory. This cuts down on variability between batches and gives manufacturers more opportunities to optimize production.
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Invitae
Wood's been aggressively accumulating shares of this medical genetics stock since this spring. On Monday, Tuesday, and Wednesday she added more shares of Invitae. Now, ARK Invest owns more than 7% of the company.
Unfortunately, ARK Invest's interest in Invitae hasn't prevented it from sliding lower. The stock has lost around half its value since it peaked this February.
Invitae's stock price may have gotten ahead of itself earlier this year, but I can tell you I'm a buyer at this price. I scooped up some shares last month.
Genetic testing can inform care to significantly lower healthcare costs while improving outcomes. Choosing the right test is a challenge, though, that many of us never get past. By consolidating all diagnostic tests into one relatively inexpensive solution, Invitae makes choosing unnecessary.
Invitae has lowered the cost of its tests from $1,500 a few years ago, to just $250 today. Despite competing fiercely, the company's gross profit over the past year is higher than it's ever been. It's probably just a matter of time before the company's impressive performance gets reflected in its stock price.
