Cathie Wood invests in speculative stocks that don’t always pan out, as 2022 showed. The chief of Ark Investment Management watched her firm outperform in 2021, though last year saw a sharp deceleration in interest in various hough-growth names. Indeed, her firm’s top 10 holdings all lost significant amounts of value. Accordingly, it’s become more and more clear that these Cathie Wood stocks are volatile bets, and should be treated as such.
However, after a dismal 2022, these Cathie Wood stocks are rebounding nicely. Wood appears to be undeterred by short-term market gyrations, focusing instead on the long-term growth these young companies provide.
There is some logic behind investing in growth right now. Rate hikes have slowed drastically, meaning Wood’s 5-year investment horizon could yield substantial returns. Cyclicality ensures that a favorable environment for these Cathie Wood stocks should return some time over this period. Thus, this could be the year to start taking a look at some of her top holdings.
| BEAM | Beam Therapeutics | $30.06 |
| DNA | Ginkgo Bioworks | $1.16 |
| SQ | Block | $58.28 |
| ROKU | Roku | $55.69 |
| SHOP | Shopify | $46.90 |
| PATH | UiPath | $13.55 |
| CERS | Cerus Corp. | $2.22 |
Beam Therapeutics (BEAM)
Beam Therapeutics (NASDAQ:BEAM) is often discussed viewed as a CRISPR technology and genetic editing play. However, Beam Therapeutics has developed a technology called base editing, which is slightly different from CRISPR.
CRISPR Cas-9 editing can result in unwanted effects, due to double-strand breaks. Base editing avoids double-strand breaks, thereby reducing potential errors and unwanted effects. It is a technology that’s in development, thought it’s also an upward iteration of the technology that promises to change medicine.
The promise is one-time cures and therapies, and the ability to knock out defective genes in rare diseases, reversing their symptoms. In time, there’s reason to believe base editing could result in rapidly-programmable precision medicines. Imagine a future in which specific diseases’ genetic defects are readily-identifiable and easily corrected. That’s the promise investors like Cathie Wood see in BEAM stock.
The science is not yet at that level, though, and Beam Therapeutics lost more than a quarter of a billion dollars in 2022. It has $1.1 billion in liquidity, meaning this company has a few years of runway left to provide the returns Wood believes is possible.
Ginkgo Bioworks (DNA)
Ginkgo Bioworks (NYSE:DNA) is another stock related to cell programming, like Beam Therapeutics. However, unlike Beam Therapeutics, Ginkgo Bioworks isn’t working to apply cell programming to human diseases.
Instead, Ginkgo Bioworks is focused on multiple industries as diverse as agriculture, chemicals, and pharmaceuticals. It’s kind of like biotechnology for all other fields outside of disease.
The pharmaceutical industry is Ginkgo Bioworks’ largest customer, representing its most significant future opportunity. The company’s heart is its foundry platform that allows it to scale synthetic biology programs for its customers. These so-called Cell Programs will increase rapidly in 2022. The company added 59 in the year, and 20 in the fourth quarter alone. These 59 new programs represented 90% growth on a year-over-year basis.
Fundamentally, Ginkgo Bioworks is a mixed bag with $478 million in 2022 revenues, up 52%, but $2.1 billion in net losses also. Still, at just over $1 per share, DNA stock is poised to more than triple over the next 12-18 months.
Block (SQ)
Shares of Block (NYSE:SQ) stock should remain relatively steady in May. The firm is expected to see earnings increase substantially year-over-year, when it reports earnings for this past quarter. Wall Street expects the payments giant will report around $4.6 billion in quarterly revenues.
That equates to roughly 15% growth annually, which is also approximately the rate of growth analysts expect for the Block on a top-line basis for the next year and a half.
That’s positive news, depending on where you stand. Block’s revenues were flat in 2022 after several years of massive growth. Investors who expect that to continue will be disappointed. But 15% growth this year and next, after a flat 2022, is a positive for glass-half-full investors.
That’s the narrative the markets have to digest regarding Block. Investors are also focused on gross profit for the company, which continues to improve with costs. Block remains a fintech leader, and the argument for cyclicality remains, favoring Block overall.
Roku (ROKU)
Cathie Wood got as much as she could have asked for when Roku (NASDAQ:ROKU) released Q1 results. It delivered better-than-expected earnings, with positive surprises across the board. Still, markets didn’t reward the streaming platform stock for its strong performance. That can’t be an excellent feeling for Wood and other proponents of Roku.
The predictable reason Roku share prices aren’t rising despite the beat is that macroeconomic fears rule the day. Inflation and recession worries for the remainder of 2023 blunt the positives for Roku.
That’s too bad, considering Roku’s $741 million in sales were well above the $708 million expected. The same is true regarding losses, which were smaller than anticipated. Active accounts increased by 17%, and hours watched increased by 20%.
That said, Roku does have issues that can’t be attributed to macroeconomic fears alone. The company’s average revenue per user (ARPU) declined by 5%, so Roku needs to double down on its monetization efforts moving forward.
Shopify (SHOP)
Investors should consider Shopify’s (NYSE:SHOP) strong 2022. That makes it one of the better Cathie Wood stocks to invest in. Although it is a growth stock like Wood’s other investments, it is far less speculative than many other bets.
That’s because Shopify is a bet on the growth of e-commerce, rather than future technology that may never become commercially-viable. Shopify should give investors approximately 20% top-line growth over the next few years. That’s very much in line with the company’s recent results in 2022, which showed 21% year-over-year revenue growth.
Shopify has to address its losses, undoubtedly. Those are real, pressing issues. But Shopify is the leading e-commerce platform for small and medium-sized businesses to set up online shops. Multiple large businesses trust it for their e-commerce needs, sure. But the company’s focus on the bedrock of the American economy is what had the stock flying high in the past. I think it’s reasonable to assume that if the economy doesn’t completely tank, investors will pick up on this trend.
It’s expected that overall e-commerce growth through 2026 will remain high. That’s a clear opportunity for investors in SHOP stock.
UiPath (PATH)
UiPath (NYSE:PATH) makes sense as a Cathie Wood investment. She values growth over a medium-term horizon, which is precisely why investors might consider the software firm.
UiPath is expected to grow its revenues by $250 million this year and the next. That would be a 20% increase. So, if that happens, and any recession isn’t too deep, PATH shares are likely to appreciate.
UiPath is particularly compelling right now because it focuses on automation. UiPath’s Business Automation Platform pairs robotic process automation and the firm’s Ai-powered automation platform. That gives the company all kinds of avenues to sell its software. Perhaps then, the company could eclipse 20% growth through 2024.
UiPath sells its software across various industries, integrating it with multiple technologies. The company is helping clients, including call centers, to automate tasks, reduce data errors, and increase ratings for the company overall.
Cerus Corp. (CERS)
Cerus Corp. (NASDAQ:CERS) is a strong company with a relatively inexpensive stock. Shares of CERS stock now trade around the $2.20 level, despite a record 2022 in which product revenue reached $162 million, up 24%.
When the firm released those earnings back in February, management also gave guidance for modest product revenue growth for all of 2023. The upper end of that guidance is set at $170 million, not much more than the $162 million in 2022.
Other sources suggest revenues should be nearer $178 million in 2023 overall. More importantly, some experts indicate that Cerus will eclipse $200 million in sales next year.
Cerus’ business ensures the safety of the blood supply, with the company selling a pathogen reduction technology called INTERCEPT. That system is the only one with a CE mark and FDA approval. The firm’s red blood cell system is currently under review in Europe, and late-stage clinical development in the U.S.
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On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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