Growth stocks associated with innovative healthcare businesses aren't getting the positive attention they deserve. At least that's what Cathie Wood's recent purchases suggest.

Recently, the CEO of ARK Investment Management added heavily to Exact Sciences (EXAS -3.97%)CareDx (CDNA 2.97%), and Butterfly Network (BFLY -6.76%). All three of these healthcare stocks are more than 76% below the peak prices they reached in early 2021. Here's why Wood thinks they could bounce back.

Smart investor looking at multiple stock charts.

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1. Exact Sciences

On Friday, Aug. 26, 2022, Wood acquired more than 120,000 shares of Exact Sciences for the ARK Genomic Revolution ETF. Shares of this diagnostics company have slid around 76% from an all-time high it reached in early 2021.

It was COVID-19 testing volumes that drove shares of Exact Sciences through the roof during the heat of the pandemic. As you may have already guessed, receding demand for COVID-19 tests is responsible for the stock's subsequent tumble.

A pandemic-driven test surge may have pushed Exact Sciences' stock price through the roof temporarily. Wood's been buying this stock because she anticipates steadily growing demand for the company's cancer tests over a much longer time frame. 

Exact Sciences' cancer testing business is already moving steadily in the right direction. The company is most famous for Cologuard, a colon cancer test that allows patients to collect their own samples. Second-quarter sales of Cologuard and other cancer screening services rose 34% year over year to $354 million.

2. Butterfly Network

Last Friday, Wood bought over 655,000 shares of Butterfly Network. Shares of this medical device manufacturer have tumbled about 79% from their all-time high in early 2021.

Butterfly Network builds handheld ultrasound scanners that Gene Roddenberry would admire if he were still with us. The devices aren't exactly flying off the shelves, but sales growth isn't anything to complain about. This year the company expects revenue to climb between 32% and 41% year over year.

Without major contenders in the field of handheld ultrasound, Butterfly Network's sales still have a lot of room to grow. At the midpoint of the company's guided range, revenue is expected to land in a range between $83 million and $88 million.

In addition to selling handheld ultrasound devices, Butterfly Network sells a service that helps clinicians make sense of the images they produce. Relatively predictable subscription revenue is driving topline growth at the moment. 

3. CareDx

Last Friday, Wood also bought nearly 200,000 shares of CareDx. This is a diagnostics company that specializes in monitoring transplant patients. The stock tumbled along with most innovative diagnostics stocks and it's still around 78% below the peak it reached in early 2021.

CareDx is the undisputed leader when it comes to monitoring organ transplant recipients for early signs of rejection. CareDx's lead product, AlloSure Kidney looks for DNA from a donated kidney in patient blood samples. Medicare and other end payers are generally keen to pay $2,841 for the blood-based test because it's still cheaper than the standard biopsy procedure.

Transplant rejection issues are relatively easy to manage with immunosuppressive drugs when they're caught early. Waiting too long, though, can lead to lengthy and expensive hospitalizations. It's probably just a matter of time before CareDx products replace biopsies as the standard method for monitoring nearly all transplant recipients.