In this article we will take a look at the 10 best biotech stocks to buy according to Cathie Wood. You can skip our detailed analysis of Wood’s history, investment philosophy, and hedge fund performance, and go directly to the 5 Best Biotech Stocks to Buy According to Cathie Wood.
Catherine Wood, the trailblazing investor who runs New York-based hedge fund ARK Investment Management, has earned a name for herself in the finance world through intelligent investments into technology-related growth stocks over the years. Although her fund has taken a beating over the past few weeks with the dramatic fall in the prices of crypto stocks, Wood is in a position to weather the storm as her diverse portfolio offers her excellent returns to offset the potential speculation around the crypto industry.
One of the smartest investments Wood has made is in Teladoc Health, Inc. (NYSE: TDOC), a virtual healthcare company that is a disruptor in the healthcare industry and fits neatly into the disruptive innovation investment strategy of ARK Investment. Teladoc Health, Inc. (NYSE: TDOC) stock has soared more than 139% in the past year as the pandemic boosted the core business model of the company. Even as the coronavirus crisis subsides and Teladoc stock falls in value, Wood is still bullish on the firm that represents over 5% of her portfolio.
The same trends can be observed while viewing ARK holdings in Exact Sciences Corporation (NASDAQ: EXAS), the biotech firm that markets cancer testing products. Exact Sciences Corporation (NASDAQ: EXAS) has been rapidly expanding to cement its position as the leading global cancer screening firm. Through the past year, it has also been making testing products for other diseases like COVID-19, which earned the company more than $236 million in revenue in 2020. The company has a three-year compound annual growth rate of 20%.
Wood is also bullish on Swiss biotech firm CRISPR Therapeutics AG (NASDAQ: CRSP). The biotech firm represents 2% of the investment portfolio of ARK and has been a market leader in gene-editing to produce therapeutics for serious diseases. CRISPR Therapeutics AG (NASDAQ: CRSP) is a high risk, high reward stock, with the company still in pre-revenue stages but marketing health-related technology that has significant upside potential. CRISPR stock touched record highs of $220 this year but has pulled back by more than half since.
Wood is betting big on biotech firms, with her top 10 holdings in the industry representing close to 20% of her entire investment portfolio. For an industry that usually comprises single-product companies, this might seem like a risky endeavor, but Wood has a history of returning handsome profits on her bets. In 2020, the ARK Innovation ETF offered investors 152% in returns, largely outperforming the hedge fund industry and putting Wood into contention for the best investor of the year.
Wood is the architect of the technology-led disruption that has paradoxically hurt her own colleagues. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
10 Best Biotech Stocks to Buy According to Cathie Wood
Cathie Wood of ARK Investment Management
With this context in mind, here is our list of the 10 best biotech stocks to buy according to Cathie Wood.
Best Biotech Stocks to Buy According to Cathie Wood
Novartis AG (NYSE: NVS) is a Switzerland-based biotechnology and pharmaceutical firm founded in 1996. It is placed tenth on our list of 10 best biotech stocks to buy according to Cathie Wood. Novartis stock has offered investors returns exceeding 3.4% in the past year. The hedge fund run by Wood owns more than 7 million shares in the company worth over $618 million. These represent more than 1.2% of the investment portfolio of the New York-based investment management company.
In earnings results posted on April 27, Novartis AG (NYSE: NVS) reported earnings per share of $1.52 for the first quarter of 2021. The revenue over the period was more than $12.4 billion, up more than 1% compared to the same revenue over the same period last year.
At the end of the first quarter of 2021, 19 hedge funds in the database of Insider Monkey held stakes worth $1.7 billion in Novartis AG (NYSE: NVS), down from 23 the preceding quarter worth $1.6 billion.
Just like Teladoc Health, Inc. (NYSE: TDOC), Exact Sciences Corporation (NASDAQ: EXAS), and CRISPR Therapeutics AG (NASDAQ: CRSP), Novartis AG (NYSE: NVS) is one of the best biotech stocks to buy according to Cathie Wood.
In its Q4 2020 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and Novartis AG (NYSE: NVS) was one of them. Here is what the fund said:
“Novartis is one of Europe’s largest pharmaceutical companies and possesses a highly diversified portfolio of innovative products. Its share price underperformed both the broader market and its pharma peers during 2020, largely due to a few disappointing late-stage trials and the company’s lack of Covid-19-related therapeutics or vaccines. These short-term issues provided us with an attractive entry point to invest in a leading pharmaceutical franchise with compelling economics. We estimate that the market is currently ascribing almost no value to Novartis’ pipeline despite the company’s excellent track record in new drug development. We expect that Novartis will deliver mid-single-digit, top-line growth and expand margins over the next five years as a result of its cost-savings plan. The company possesses one of the most diversified product portfolios in the pharma industry with 15 $1b+ compounds, which reduces its reliance on any single compound.”
Iovance Biotherapeutics, Inc. (NASDAQ: IOVA) is a California-based biopharma firm founded in 2007. It is ranked ninth on our list of 10 best biotech stocks to buy according to Cathie Wood. Iovance concentrates on the development of therapies that boost the immune system to act against cancer cells. Some of the clinical studies the company is presently involved in include products for the treatment of metastatic melanoma, as well as recurrent, metastatic, or persistent cervical cancer, and head and neck squamous cell carcinoma.
Iovance Biotherapeutics, Inc. (NASDAQ: IOVA) posted earnings results for the first quarter of 2021 on May 6, reporting earnings per share of -$0.51 that just missed market estimates by $0.03. The cash position at the end of the quarter was $610 million.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm ARK Investment Management is a leading shareholder in Iovance Biotherapeutics, Inc. (NASDAQ: IOVA) with 19 million shares worth more than $624 million.
10x Genomics, Inc. (NASDAQ: TXG) is a California-based biotechnology company that works on gene sequencing. It was founded in 2012 and is placed eighth on our list of 10 best biotech stocks to buy according to Cathie Wood. The company stock has returned more than 120% to investors over the course of the past twelve months. ARK Investment holds more than 3.5 million shares in the firm worth over $634 million. This represents close to 1.25% of the investment portfolio of the firm led by Wood.
On May 5, 10x Genomics, Inc. (NASDAQ: TXG) posted strong quarterly results, reporting earnings per share of -$0.11 for the first three months of 2021, beating market estimates by $0.17. The revenue over the period was more than $100 million.
At the end of the first quarter of 2021, 23 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in 10x Genomics, Inc. (NASDAQ: TXG), down from 33 in the previous quarter worth $745 million.
Just like Teladoc Health, Inc. (NYSE: TDOC), Exact Sciences Corporation (NASDAQ: EXAS), and CRISPR Therapeutics AG (NASDAQ: CRSP), 10x Genomics, Inc. (NASDAQ: TXG) is one of the best biotech stocks to buy according to Cathie Wood.
7. Pacific Biosciences of California, Inc. (NASDAQ: PACB)
Number of Hedge Fund Holders: 24
Pacific Biosciences of California, Inc. (NASDAQ: PACB) is a California-based biotech firm founded in 2004. It is ranked seventh on our list of 10 best biotech stocks to buy according to Cathie Wood. Pacific stock has returned a whopping 619% to investors in the past year. The company comprises almost 1.4% of the investment portfolio of ARK Investment. It mainly focuses on gene-related research. It also develops products like PacBio System and binding kits. The company has research collaboration agreements with institutions across the world.
In February, investment advisory Piper Sandler upgraded Pacific Biosciences of California, Inc. (NASDAQ: PACB) stock to Overweight from Neutral and revised the price target to $52 from $20 on the back of a $900 million cash infusion from Softbank.
Just like Teladoc Health, Inc. (NYSE: TDOC), Exact Sciences Corporation (NASDAQ: EXAS), and CRISPR Therapeutics AG (NASDAQ: CRSP), Pacific Biosciences of California, Inc. (NASDAQ: PACB) is one of the best biotech stocks to buy according to Cathie Wood.
Baron Health Care Fund, in their Q1 2021 investor letter, mentioned Pacific Biosciences of California, Inc. (NASDAQ: PACB). Here is what the fund said:
"Pacific Biosciences of California, Inc. provides long-read DNA sequencing systems to scientists conducting genetic analysis. Shares performed well for the quarter. We believe there is increasing excitement about the potential for its platform to move beyond research into clinical applications. The recently appointed CEO was previously Chief Commercial Officer at Illumina, and we think he is well qualified to commercially execute on Pacific Biosciences’ differentiated long-read platform.”
Twist Bioscience Corporation (NASDAQ: TWST) is a California-based firm that markets synthetic DNA products. It was founded in 2013 and is placed sixth on our list of 10 best biotech stocks to buy according to Cathie Wood. Twist stock has offered investors returns exceeding 7% over the past week. ARK Investment owns more than 6 million shares in the company worth over $748 million. This stake represents close to 1.5% of the investment portfolio of ARK Investment.
Twist Bioscience Corporation (NASDAQ: TWST) posted quarterly results on May 6, reporting a revenue of over $31 million for the second fiscal quarter. The earnings per share over the period were -$0.78, just missing market predictions by $0.02.
At the end of the first quarter of 2021, 24 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in Twist Bioscience Corporation (NASDAQ: TWST), up from 23 in the previous quarter worth $1.3 billion.
Just like Teladoc Health, Inc. (NYSE: TDOC), Exact Sciences Corporation (NASDAQ: EXAS), and CRISPR Therapeutics AG (NASDAQ: CRSP), Twist Bioscience Corporation (NASDAQ: TWST) is one of the best biotech stocks to buy according to Cathie Wood.
