One of the most outspoken investors in the stock market today is arguably Cathie Wood. The investment manager of ARK Investment funds has taken out lofty bets on names like Tesla (NASDAQ: TSLA) and Teladoc Health (NASDAQ: TDOC), in addition to many other “cutting edge” companies. But are penny stocks something that she’s invested in? The answer is yes, and we’ll discuss some of her top holdings under $5 in this article.
The ARK Investment Strategy – Are Penny Stocks Worth It?
In many cases, the penny stocks we look at today were not trading at these levels when Wood’s fund purchased them. However, I will say that she still holds positions in them, and many carry more weight than some of the more famous names like Peloton (NASDAQ: PTON) or Snowflake (NYSE: SNOW). The thing that many investors are scratching their heads about is why is she holding so many bags right now? It all boils down to the ARK Invest strategy.
As the company says, “ARK aims to deliver long-term capital appreciation by investing in the leaders, enablers, and beneficiaries of disruptive innovation…We believe investors should seek to invest in companies transforming the way the world works.” But it is no secret that the firm is aware that it will likely underperform when growth trends are weak.
“ARK’s strategies generally underperform in “risk off” markets (down market). This happens, in part, because we believe other investors and advisers tend to return to benchmark names at such times, which ARK generally does not. ARK believes that at such times, the fundamentals for the companies held in our portfolios look better.
Put plainly, when there are bearish trends in the market, ARK is willing to take on max pain in exchange for its expected outperformance in the long term.
Penny Stocks To Buy [or avoid]
- Archer Aviation Inc. (NYSE: ACHR)
- Joby Aviation Inc. (NYSE: JOBY)
- Ginkgo Bioworks Holdings Inc. (NYSE: DNA)
- Invitae Corporation (NASDAQ: NVTA)
- Nano Dimension Ltd. (NASDAQ: NNDM)
- Compugen Ltd. (NASDAQ: CGEN)
- ATAI Life Sciences (NASDAQ: ATAI)
- Cerus Corporation (NASDAQ: CERS)
- Quantum-Si Incorporated (NASDAQ: QSI)
- Zymergen Inc. (NASDAQ: ZY)
Cathie Wood Penny Stocks to Buy 1. Archer Aviation Inc. (NYSE: ACHR)
There are a few names on this list of penny stocks literally going vertical or focused on doing so. Archer Aviation, for instance, is working on becoming a leader in electric take-off and landing aircraft. Flying cars – possibly – and Archer has set its sights on making a meaningful impact on the emerging marketplace. Cathie Wood’s ARK Space Exploration & Innovation ETF (NYSE: ARKX) is the home of some of these types of companies.
Archer’s eVTOL aircraft is designed for urban air mobility. It has a production aircraft designed to take up to 4 passengers and a pilot, progressing toward Preliminary Design Review. It has also received FAA Special Airworthiness Certification to begin test flights.
However, unlike most Cathie Wood stocks, ACHR shares have maintained a steadier uptrend for the last few months. After hitting a low of $2.61, the beaten-down penny stock has managed to reclaim the $4 level in April. The company also attracted interest from JP Morgan analysts, who initiated coverage on the stock with an Overweight rating. They also placed a $7 price target on the penny stock. This comes just a day after Archer and United Airlines announced the creation of an eVTOL advisory committee for advising on standards in the emerging eVTOL industry. As of April 28th’s ARKX report, the ETF has a stake of 2.1 million shares of ACHR stock.
2. Joby Aviation Inc. (NYSE: JOBY)
Like Archer, Joby has also set its sights on high-flying business operations. The company is also taking part in the eVTOL revolution. In this case, Joby has focused on advancing its platform to meet the needs of air taxi service riders. The company aims to begin service as early as 2024, using its aircraft to hold four passengers and a pilot. Joby’s eVTOL platform is also built around the maximum range per single charge. In this case, aircraft can reach a max range of 150 miles at up to 200 miles per hour.
Analysts have grown optimistic about the potential of JOBY stock. Based on recent ratings from JP Morgan, Deutsche Bank, and Cantor Fitzgerald, analysts are looking at JOBY stock to reach anywhere from $7 to $10. Furthermore, Cantor has an Overweight rating set on the eVTOL stock. Meanwhile, the Ark Space Exploration ETF has a 1.398 million share position in JOBY stock as of 4/28/22.
3. Ginkgo Bioworks Holdings Inc. (NYSE: DNA)
You can’t discuss “cutting edge tech” without briefly discussing biotech stocks. In this case, however, the ARKK ETF and ARKG ETF have positions in a company that hasn’t quite met the mark from a stock market perspective. Ginkgo Bioworks made its public debut on the NYSE less than a year ago, and shares have slumped from over $10 to as low as $2.62. ARK Investments seems to think it’s worth holding onto, whether you call it “growing pains” or something else. As of 4/28, the Ark Innovation ETF (ARKK) has a heavier weighting in DNA stock than in Roblox (NYSE: RBLX).
Ginko is designing a cell programming platform and aims to expand its capabilities in things like agricultural biologics. According to an April update, the company is planning to acquire Bayer’s 175,000 sq/ft Sacramento Biologics Research and Development site, team, and internal discovery platform. Bob Reiter, Head of R&D for Bayer Crop Science, explained, “Bayer is moving to strengthen its product development and commercial positioning through strategic research partnerships for new product development, and we are excited to deepen our relationship with Ginkgo, which we expect to be a key partner for many years to come.”
The big question now is, will Ark’s big bet pay off? As of April 28th, ARKK holds 44,945,086 shares of DNA stock, and ARKG owns 19,659,004 shares.
4. Invitae Corporation (NASDAQ: NVTA)
The share price of NVTA stock has gotten demolished over the last year and a half. Traders have seen the current penny stock drop from more than $50 to under $5 this week, with more selling pressure taking NVTA stock to fresh lows of $4.63. The company specializes in medical genetics and focuses on providing information to aggregate genetic tests into a single service faster and cheaper than current offerings. It targets genetic illness, pregnancy, cancer, and general health. As the company says, “Your genes can give you clues into your risk of developing disease, and…there are steps you can take to help you stay healthy.”
One recent bearish catalyst for NVTA stock came from comments made by the FDA. It warned that noninvasive prenatal screening – NIPS – tests might provide false information. Based on the details, the Administration warned that these types of tests hadn’t been officially approved. Since those comments were made, shares of NVTA stock slumped lower. Meanwhile, Cathie Wood’s ARK Innovation ETF and ARK Genomic Revolution ETF have weightings of about 1% in NVTA stock.
5. Nano Dimension Ltd. (NASDAQ: NNDM)
With emerging technology driving growth stocks last year, Cathie Wood’s ARK Next Generation ETF (NYSE: ARKW) took aim at companies with specific characteristics. More specifically, the ETF’s focus is on companies “expected to benefit from shifting the bases of technology infrastructure to the cloud, enabling mobile, new and local services, such as companies that rely on or benefit from the increased use of shared technology, infrastructure and services, internet-based products and services, new payment methods, big data, the internet of things, and social distribution and media.”
Nano Dimension made the list of Cathie Wood stocks in the ARKW ETF. The company manufactures things like printed circuitry and high-performance control electronics. Its DragonFly IV system can fabricate conductive and dielectric-based products and integrate things like antennas, transformers, and coils for a one-production-step conversion. These are used in drones, smartphones, satellites, and even in-vivo medical devices. If NNDM stock is on your list like it is on Cathie’s, keep May 31 in mind. The company presents its latest round of financial results for Q1 2022. Currently, ARKW has a position of just over 1.2% of the ETF’s weighting at 7.8 million shares.
Cathie Wood’s Investing Approach: Ark On Steroids
Wood has taken a robust approach to her long-term outlook and conviction for ARK’s future performance:
“We think the benchmarks are where the big risks are long term, because they are filling up with value traps — those companies that have done very well historically but are going to be disintermediated and disrupted by the massive amount of innovation that’s taking place.”
In addition to the names listed above, there are other penny stocks that Wood’s ARK ETFs have positions in. These include:
- Compugen Ltd. (NASDAQ: CGEN): 3.09 million shares held in ARK Genomic Revolution ETF a/o 4/28/2022.
- ATAI Life Sciences (NASDAQ: ATAI): 1.61 million shares held in ARK Genomic Revolution ETF.
- Cerus Corporation (NASDAQ: CERS): 10.75 million shares held in ARK Innovation ETF & 4.22 million shares held in ARK Genomic Revolution ETF.
- Quantum-Si Incorporated (NASDAQ: QSI): 11.75 million shares held in ARK Genomic Revolution ETF.
- Zymergen Inc. (NASDAQ: ZY): 3.02 million shares held in ARK Genomic Revolution ETF.
Are Cathie Wood Penny Stocks A Buy Right Now?
Thanks to such a high conviction in her trade thesis, some wonder if the risk is worth the potential reward. In many cases, however, the holdings of most ARK ETFs are drastically lower over the last 1-2 years. This has been reflected in the overall prices of the ETFs themselves and just on a year-to-date timeframe:
|ETF NAME||SYMBOL||JAN 3 2022 |
|APR 28 2022 |
|ARK Innovation ETF||ARKK||$96||$45.89|
|ARK Space Exploration & Innovation ETF||ARKX||$19.01||$15.29|
|ARK Fintech Innovation ETF||ARKF||$41.20||$20.96|
|ARK Genomic Revolution ETF||ARKG||$61.71||$33.73|
|ARK Next Generation Internet ETF||ARKW||$120.75||$62.64|
With many of these ETFs down 50% or more, it will be interesting to see how the market responds when inflation is rising along with rates and the threat of a recession has come into the conversation.