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Investors have been keenly eyeing thematic exchange-traded funds (ETFs) since 2019, with a particular focus on those centered around disruptive innovation. A key player in this space is ARK Invest, led by the renowned Cathie Wood, known for her strategic investments in various sectors like biotechnology, fintech, and telecommunications.
While many of Wood’s thematic ETFs have delivered impressive returns this year, they also come with higher expenses and volatility due to active management and early-stage investments. For investors seeking ideas without the associated costs, ARK Invest funds remain a valuable resource. Let’s delve into two speculative yet intriguing biotech stocks under Cathie Wood’s ownership that might be smart buys as we approach the new year: Ginkgo Bioworks Holdings (NYSE: DNA) and Recursion Pharmaceuticals (NASDAQ: RXRX).
Ginkgo Bioworks: Customized Biology
Ginkgo Bioworks, often referred to as Ginkgo, stands as a pioneer in synthetic biology. Instead of creating consumer products, the company focuses on enhancing the efficiency of the design-build-test-learn cycle to enable the creation of biologically based products. Ginkgo benefits from network effects as it gains more customers and data, making its stock an appealing opportunity.
This year, Ginkgo expanded its presence in pharmaceutical research and development, collaborating with Pfizer for RNA-based therapeutics and Arbor Biotechnologies for gene-editing tools. Additionally, a partnership with Google Cloud for large language models in biological engineering solidifies its unique value proposition.
While Ginkgo’s share price has experienced an 84% decline since its IPO less than three years ago, the potential remains substantial. With addressable markets spanning agriculture, biosecurity, pharma, and more, Ginkgo’s growth phase holds promise for patient investors comfortable with risk.
Recursion Pharmaceuticals: A Novel Approach to Drug Discovery
The US pharma market is projected to reach $636 billion in sales by 2023, yet the process of developing new drugs remains slow and costly. To address these challenges, Recursion Pharmaceuticals pioneers the integration of artificial intelligence, machine learning, virtual reality, and automated experiments in drug discovery.
In 2023, Recursion partnered with Nvidia to enhance its Biohive-1 supercomputer’s computing power and collaborated with Tempus to share data, aiming to expand its techbio platform. Although analysts have assigned a noteworthy price target to Recursion this year, investors should recognize this as a long-term project, with the true value unfolding over the next five years.
Despite the extended timeline, Recursion’s innovative approach to drug discovery could yield substantial returns for early shareholders, making its shares an appealing addition to portfolios focused on long-term growth.
