Cathie Wood is enjoying a remarkable comeback in 2023. Her renowned ARK Innovation Fund (ARKK -1.05%) has soared by more than 50% this year, surpassing the recovery in the broader markets by a wide margin. However, Wood's bold, innovation-oriented investing approach is not suitable for everyone. Her investment philosophy is inherently a high-risk, high-reward proposition, after all.

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Nevertheless, a handful of Wood's holdings across her diverse range of actively managed exchange-traded funds are low-risk innovation plays that arguably deserve a place in any kind of portfolio. Pharmaceutical behemoths Vertex Pharmaceuticals (VRTX -1.86%) and Pfizer (PFE -0.94%) are perfect examples.

A researcher using a microscope in a lab.

Image source: Getty Images.

Both companies have innovative pipelines, wide economic moats, and reliable revenue streams. Read on to learn more about these two low-risk Cathie Wood stocks.

Vertex Pharmaceuticals: A burgeoning rare-disease giant

Vertex Pharmaceuticals is a rare-disease specialist with an entrenched position in cystic fibrosis (CF). CF is a rare, life-threatening genetic disorder that causes progressive lung damage. As of July 25, 2023, Wood held the stock as the 22nd-largest position in the ARK Genomic Revolution (ARKG -1.73%) ETF. 

Vertex has four Food and Drug Administration (FDA)-approved CF medicines: Kalydeco, Orkambi, Symdeko, and Trikafta. Trikafta, authorized by the FDA in 2019, is the drugmaker's most important revenue generator and growth driver by a wide margin. 

Vertex's CF franchise has historically generated strong revenue growth and profitability for the company. In the first quarter of 2023, for instance, Vertex reported $2.37 billion in total revenue, up 13% from the year-ago period. The biotech also has a robust pipeline of experimental medicines for CF and other conditions, such as alpha-1 antitrypsin deficiency, sickle cell disease, beta thalassemia, pain, and kidney disease.

What's the downside? Thanks to its highly profitable CF franchise and blossoming late-stage pipeline, Vertex's shares are trading at over 25 times projected earnings at the time of this writing. That's a rich valuation for a large-cap biotech company. 

The counterpoint is that Vertex is pursuing several high-value indications that could keep its top line rising well into the next decade. If that comes to pass, the biotech might actually be a bargain right now.

What's the bottom line? Vertex sports a compelling mix of growth, safety, and deep value. Its shares aren't cheap, but that's to be expected for one of the top innovators in biotechnology. All told, Vertex is a reliable growth play with intriguing long-term expansion opportunities.

Pfizer: A stellar yield at an attractive price

With a market cap of approximately $209 billion, Pfizer is easily one of the world's largest pharmaceutical companies. After spinning off its legacy medicines business in 2020, Pfizer now specializes in branded medicines and vaccines. Its shares are currently the 36th-largest holding in the ARK Genomic Revolution ETF.

What's the appeal? Pfizer offers prospective shareholders three good reasons to buy its shares:

  1. It pays a hefty 4.46% dividend yield on an annualized basis. That's among the highest within its immediate peer group and the healthcare sector at large. 
  2. Pfizer's shares are exceptionally cheap at roughly 11.1 times projected earnings, reflecting the weakness in its COVID-19 franchise and concerns about future patent expirations.
  3. Wall Street is arguably way too bearish about the drugmaker's series of bolt-on acquisitions and internal pipeline efforts. These activities could support solid levels of top-line growth in the back end of the decade.

What's the investing takeaway? Pfizer is a cheap, high-yield dividend stock with impressive long-term growth prospects. Bargain hunters, in turn, may want to take advantage of this favorable dynamic.