Cathie Wood is one of the most successful investors of our time. Her flagship fund, Ark Innovation ETF (ARKK 1.05%), has already delivered a market-beating 59% return on capital so far this year. At its peak less than two years ago, the fund was up by over 600% since inception. Wood's investment philosophy centers around identifying disruptive new technologies across various sectors, such as biotechnology, fintech, e-commerce, and artificial intelligence.
Which Cathie Wood growth stocks stand out as top buys right now? Twist Biosciences (TWST 1.48%) and Exact Sciences (EXAS 0.10%) both sport tremendous upside potential at current levels. Read on to find out more about these two cutting-edge healthcare companies.
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Twist Biosciences: A leader in synthetic DNA
Twist Biosciences is a leader in the emerging field of synthetic DNA. The biotech employs a proprietary silicon-based platform to manufacture high-quality and low-cost synthetic DNA at scale, enabling its customers to accelerate their research and development. At last count, Twist occupied the 23rd largest position in Wood's flagship Ark Innovation ETF, with a stake exceeding $90.6 million.
What's the investing thesis? Twist has been growing rapidly in recent years, driven by the increasing demand for its products and services. In the second quarter of fiscal 2023, for instance, Twist's revenue increased by 25% year over year to $60.2 million. Twist expects to generate revenue of approximately $237 million in fiscal 2023, representing an annual growth rate of 16.5% compared to 2022. Next year, Wall Street expects this growth trend to accelerate, with revenue rising by another 25.4% year over year.
Twist is not profitable yet, as it is investing heavily in expanding its capacity and developing new products. However, the biotech does have a strong balance sheet, with $315.2 million in cash and cash equivalents and $72.5 million in short-term investments as of March 31. Therefore, the company should have the financial resources necessary to reach profitability before having to tap the public markets for a sizable capital raise.
Twist also has a massive customer base, with over 3,300 customers across a wide range of industries. Additionally, the company is targeting multiple large addressable markets capable of supporting sustained revenue growth for years to come. Speaking to this point, Twist anticipates growing its annual revenue at a compound annual growth rate in excess of 28% through 2025.
Exact Sciences: A cancer screening specialist
Exact Sciences is a leading provider of cancer screening and diagnostic tests, with a mission to help people get the right care at the right time. The company's flagship product, Cologuard, became the first and only Food and Drug Administration-approved stool DNA test for colorectal cancer in 2014. Colorectal cancer is the second leading cause of cancer death in the U.S. and the leading cause of death in the U.S. among non-smokers.
Cologuard is a noninvasive and convenient option for people who are at average risk for colorectal cancer and who may not want to undergo an invasive colonoscopy. Since its launch, Cologuard sales have driven an exponential rise in the company's annual revenue. Even so, Exact remains unprofitable, and it is expected to remain so for the foreseeable future (per Wall Street's estimate).
EXAS Revenue (Annual) data by YCharts
The good news is that Exact's plans to expand beyond colorectal cancer ought to open up new areas of growth in the years to come. In fact, the company's management believes that its pipeline is targeting additional markets outside of colorectal cancer that could represent another $40 billion-a-year opportunity. With such an enormous commercial opportunity in play, it's no wonder why Exact is Ark Innovation's seventh-largest holding at the time of this writing.
