Cathie Wood looks for stocks that are leading innovators. But the stocks that fit that mold aren't always leaders when it comes to delivering huge returns over the short term.
On the contrary, quite a few of the stocks in Wood's Ark Invest portfolios have been big losers. Wood is loading up on three stocks in particular, down by 70% or more.
1. Beam Therapeutics
Shares of Beam Therapeutics (BEAM -0.89%) have plunged close to 73% since hitting an all-time high in mid-2021. The gene-editing stock fell close to 40% earlier this year before rebounding somewhat.
Wood apparently believes that Beam is a bargain after this beatdown. Her flagship Ark Innovation ETF and the Ark Genomic Revolution ETF have regularly bought shares of the biotech company in recent weeks. Beam now ranks as the 16th-largest holding for the Ark Innovation ETF and the eighth-largest holding for Ark Genomic Revolution ETF.
It's no secret why Wood likes Beam Therapeutics: The company is a leader in base-editing technology. Other gene-editing methods are akin to scissors that cut DNA. Base editing is more like an eraser and a pencil that can make precise genetic changes with no unintended off-target edits.
Beam already has one clinical-stage pipeline candidate. BEAM-101 is in phase 1 testing in treating sickle-cell disease. The company expects to begin another early-stage study by mid-2023 evaluating BEAM-201 in treating T-cell acute lymphoblastic leukemia/T-cell lymphoblastic lymphoma. It also hopes to file for regulatory approvals by early 2024 to advance two other base-editing therapies targeting genetic diseases into clinical trials.
2. Intellia Therapeutics
Beam isn't the only gene-editing stock that has been hammered over the last couple of years. Shares of Intellia Therapeutics (NTLA -5.56%) are nearly 75% below the peak levels achieved in the summer of 2021.
Wood hasn't lost her enthusiasm for Intellia, though. Her Ark Innovation ETF and Ark Genomic Revolution ETF have added to their positions in the biotech stock throughout April and into early May. Intellia is the 11th-largest holding for ARKK and the seventh-largest holding for ARKG.
Intellia is one of a handful of companies leading the charge in developing CRISPR gene-editing therapies. It hopes to advance lead candidate NTLA-2001 into a pivotal clinical study targeting rare genetic disease transthyretin (ATTR) amyloidosis with cardiomyopathy by the end of 2023. The company is also evaluating the experimental therapy in a phase 1 study targeting hereditary ATTR amyloidosis with polyneuropathy.
In addition, Intellia is testing NTLA-2002 in a phase 1/2 study for treating hereditary angioedema. It recently doses the first patient on the phase 2 portion of this study and expects to complete enrollment later this year.
3. Teladoc Health
Teladoc Health (TDOC -4.64%) takes the dubious prize as the worst performer among these three stocks. Shares of the telehealth services provider have plummeted more than 90% since maxing out in early 2021.
However, Wood hasn't thrown in the towel on Teladoc whatsoever. In recent weeks, four of her Ark Invest ETFs have bought the telehealth stock: the aforementioned Ark Innovation ETF and Ark Genomic Revolution ETF, plus the Ark Fintech Innovation ETF and Ark Next Generation Internet ETF. Teladoc ranks in the top 16 for each of these ETFs and is the No. 5 holding for ARKG.
Teladoc generated sizzling growth during the first part of the COVID-19 pandemic, with widespread lockdowns. The company's expensive acquisition of Livongo Health, though, proved to be problematic later, as it was forced to record hefty goodwill impairments.
Still, Teladoc's revenue continues to rise by double-digit percentages even as COVID fears have largely subsided. The company has expanded its telehealth offerings, with especially strong performances from its BetterHelp behavioral health business.
Should you buy these stocks, too?
Risk-averse investors will probably want to stay away from all three of these beaten-down stocks. None of them are profitable yet. Of the three, only Teladoc Health has a product on the market right now.
However, I think that more aggressive long-term investors might want to consider following Cathie Wood's lead in buying these stocks. Beam and Intellia could be huge winners if their respective gene-editing therapies eventually win regulatory approvals. Teladoc still has a significant market opportunity in providing virtual care and remains the industry leader.
