To say the least, this year hasn’t been kind to Cathie Wood’s “disruptive innovation” investment strategy and her ARK funds. Unfortunately for investors of ARKK, the ETF has been a massive letdown this year, sinking nearly 53% thus far — much worse than the S&P 500, which is down almost 18% year to date. But perhaps there are gems hidden within the portfolio?
While ARKK’s top 3 holdings Tesla, Zoom, and Roku aren’t performing well so far, CRISPR, Signify, and Cerus, three of Cathie’s top healthcare selections, are worth a closer look:
CRISPR Therapeutics (NASDAQ: CRSP) is a Swiss–American biotechnology company aiming to transform patients’ lives with serious diseases. Unlike most stocks, CRSP is up over 5.7% year to date. However, shares are still down significantly from the stock’s 52-week high of $142.64, resulting in a drop of over 32% this past year — so is it time to invest in this growth stock?
There are several reasons to be optimistic about CRISPR Therapeutics, including its upcoming collaboration with Vertex Pharmaceuticals. This partnership will focus on exa-cel, a gene-editing therapy that treats blood disorders beta-thalassemia and sickle cell disease — and could be worth billions, 40% of which CRISPR will receive. It’s important to note that this treatment is not yet approved, and until it is, there will be some risk involved in this investment.
CRISPR also has plenty of cash on hand. The company reported that its cash and cash equivalents for 2021 totaled $2.37 billion, a 40.47% increase from 2020. Total collaboration revenue was also up significantly, hitting $913.1 million for the year ended December 31, 2021, compared to $0.5 million for the year ended December 31, 2020.
CRISPR ticks three boxes that are “must-haves” for a biotech:
- Partnerships with larger biotechs,
- Plenty of cash on hand, and
- A promising pipeline program.
If you’re willing to take the risk, this promising company could be a win. We see fair value at this time sitting at $82.70 per share, though analysts are more bullish and have pegged $115.30 as the consensus price target.
Signify Health (NASDAQ: SGFY) is a leading healthcare platform that combines technology, analytics, and healthcare provider networks across the U.S. It is also the top-performing stock on this list, up over 6.5% year to date. The company strives to provide value-based healthcare, meeting people where they are — at home. Through its in-home health evaluations (IHEs), Signify Health connects clinicians to Medicare Advantage and Medicaid plan members.
Last year, the company conducted 1.9 million IHEs. However, there are 84 million Medicare and Medicaid members who it could serve. That is a large addressable market, which has helped drive Signify’s compound annual growth rate of 24% over the past few years. The company also reported revenue of $773 million in 2021, and for the full year 2022 results, Signify Health estimates total revenue in the range of $948 million to $971 million.
Signify Health has been performing well this year. The company’s gains are impressive, but Signify’s stock isn’t cheap. Based on the stock’s performance this past year, short-term gains will likely be muted from current levels. That said, shares are still substantially lower than the stock’s 52-week high of $29.33. Based on our calculations, the company has 42% upside to fair value of $22.66 per share.
Cerus (NASDAQ: CERS) is another biotechnology company. Cerus focuses on “safeguarding the world’s blood supply” by developing and supplying technologies and pathogen-protected blood components to blood centers and hospitals. The company’s proprietary technology is Intercept Blood System, which helps minimize the pathogens in blood components used for transfusions.
Although Cerus is not yet profitable, its losses are shrinking. The company reported its net loss for the fourth quarter of 2021 was $9.1 million, compared to a net loss of $14.4 million for the fourth quarter of 2020.
Cerus also anticipates product revenue growth of between 22% and 26% this year, equating to a potential $165 million. The company’s first quarter 2022 financial results figures are promising; total revenue was $43 million, up 46% year over year. Compared to other companies, many of which are worried about upcoming declines, Cerus is well-positioned to remain a promising growth stock.
Cerus has not performed as well this year as the other two stocks on this list. The stock is down nearly 20% year to date. However, it is still up 12% this past year and is performing better than most of its ARKK peers. At its current price, CERS could be a promising long-term investment.