Cathie Wood's investing strategy centers around the concept of disruptive technology. Her family of Ark Invest exchange-traded funds (ETFs) specializes in companies at the razor's edge of pioneering fields like self-driving vehicles, personalized medicine, and futuristic medical devices.
This strategy has produced market-crushing returns in the past, but it is also an exceptionally risky way to invest and comes with a tremendous amount of volatility. For instance, Wood's flagship ARK Innovation ETF was up by over 740% at its peak back in early 2021, but it has since fallen by nearly 75% from its all-time high.
This sharp pullback in many of Wood's top holdings might be a great time to bargain hunt. In particular, I'm still a bull on a handful of the fund manager's boldest picks in the areas of biotech and gene editing.
Although most of these companies are speculative due to their unproven platforms and/or business models, the upside potential in some of these names is high enough to arguably warrant a smallish position as part of a broader portfolio of innovation-oriented equities.
With this view in mind, I think Beam Therapeutics (BEAM -1.02%) and Recursion Pharmaceuticals (RXRX 3.57%) are two Cathie Wood stocks worth buying on the dip for investors with an elevated tolerance for risk.
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Beam Therapeutics: A new form of genomic medicine
Beam Therapeutics is pushing the envelope in genomic medicine through a revolutionary new technique known as base editing. In theory, it is designed to be a more precise and flexible way to modify gene expression, compared to more traditional approaches.
Cathie Wood holds approximately $180 million worth of Beam Therapeutics stock across two of her ARK Invest ETFs: the ARK Innovation ETF and ARK Genomic Revolution ETF. She has also been buying the stock at multiple points over the past 30 days, even as its shares have steadily faded over this period.
What's the bull thesis? Beam could have at least three base-edited candidates in clinical trials by the middle of next year. Specifically, BEAM-101 is presently in a phase 1/2 trial for sickle cell disease, and BEAM-201 is being assessed in an early-stage trial for T-cell malignancies.
Next year, the biotech has plans to advance BEAM-302 into human trials for a rare protein disorder known as alpha-1 antitrypsin deficiency. As a result, the company ought to have a fair amount of human-trial data to share with investors over the next 12 to 24 months. If the data paints an encouraging picture on efficacy and safety in any of these settings, Beam Therapeutics stock should soar. Base editing, after all, represents a potentially game-changing platform for human medicine.
Recursion Pharmaceuticals: A biotech pioneer
Recursion Pharmaceuticals is a biotech company that develops novel treatments for rare diseases and cancer. Perhaps more importantly, though, it also has a cutting-edge drug discovery platform called Recursion OS, which uses artificial intelligence (AI) to identify promising therapeutic targets without human bias.
Recursion OS could revolutionize the pharmaceutical industry by accelerating the drug discovery process, reducing the time and cost of clinical trials, and enabling the development of breakthrough therapies. Cathie Wood holds roughly $52 million of the biotech's shares in her ARK Genomic Revolution ETF, and she has purchased the stock five times in the last 30 days at the time of this writing.
Why is Recursion stock an intriguing speculative buy? To be up-front, I don't think the stock is poised to deliver above-average returns in the short term. The company is in the early innings of its build-out, and the pharma industry has a long way to go to figure out how best to incorporate AI into the drug discovery process.
My view, though, is that Recursion's unique platform could unlock billions in latent value over the course of the next five to 10 years by saving clients significant time and money. So, if you have an extended time horizon, it might be worth taking a flier on this innovative biotech and its revolutionary AI-powered platform.
