If you want to know what most institutional investors are up to on any given day, you have to wait months for the quarterly disclosures the Securities and Exchange Commission requires them to file to become public.
This isn't the case for the collection of exchange-traded funds managed by Cathie Wood and Ark Invest. The Florida-headquartered firm that Wood manages announces its trades every day after the market closes.
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Wood has a successful career, but not every pick she makes works out. Here's a look at some of the stocks she's been buying hand over fist to gauge their chances of outperforming.
Archer Aviation
Flying taxis, or electric vertical takeoff and landing aircraft (eVTOLs), are a lot closer to reality than you may realize. Earlier this year, the Federal Aviation Administration's (FAA) director of certification toured Archer Aviation's (ACHR 1.00%) headquarters. According to Archer's CEO, Adam Goldstein, certifying eVTOLs by 2025 is one of the FAA's top priorities.
The FAA hasn't been as vocal about supporting the nascent eVTOL industry as Goldstein, but it appears to be progressing toward certification. In July, the FAA amended regulatory definitions in a manner that creates a path for vehicles with powered-lift functionality. With respect to Archer specifically, the FAA recently granted one of its planes a Special Airworthiness Certificate that allows it to begin test flight operations.
Forward momentum convinced Wood to buy more than 3 million shares of Archer Aviation stock last week. Now, Ark Invest's stake in the up-and-coming air taxi provider is more than 3 times the size of the firm's stake in a leading competitor, Joby Aviation.
Wood bought millions of shares of Archer last week, but it still makes up less than 1% of Ark Invest's total holdings. If you're going to take a chance on this stock before the underlying business is cleared for takeoff, it's best to make it a relatively small position in your own portfolio too.
Ginkgo Bioworks
Wood has dipped her toes into the nascent eTVOL industry, but she's already ankle-deep in Ginkgo Bioworks' (DNA 10.60%) biofoundry platform. After the company bought millions more shares this month, it makes up more than 2% of Ark Invest's total holdings.
Ginkgo Bioworks is making biology easier to engineer. Its unique technology platform can program cells to produce a wide array of products such as food ingredients, chemicals typically distilled from petroleum, and medicines. Ginkgo also has a diagnostics segment that isn't performing nearly as many COVID-19 tests as it did in recent years.
On the one hand, it's encouraging to see pharmaceutical giants such as Merck collaborate with Ginkgo to improve the efficiency of their own drug manufacturing processes. That said, Ginkgo's cell engineering business is still losing lots of money, and growth has slowed to a trickle.
The company added 21 new cell programs in the second quarter, but this new activity isn't translating to significant revenue growth. Ginkgo expects cell engineering revenue to land in a range between $145 million and $160 million this year. In 2022, the company reported $144 million in cell engineering revenue.
Ginkgo's cell engineering business has stagnated, but the company's still burning cash like a business in high-growth mode. Its operations lost nearly $400 million in the first half of 2023.
I'm not the first analyst to notice Ginkgo's stagnating cell engineering business. The stock has tumbled 36% since it peaked in July. Despite the drop, it still looks overbought with a recent price of 9.1 times trailing sales. It's probably best to keep this hyper-risky stock on a watchlist until it stops bleeding money.
