The Ark Innovation ETF (ARKK -0.07%) has had an abysmal performance this year, down 53% so far. It’s much worse than the S&P500 and its loss of 19%. The fund focused on growth-oriented companies, many of which are not posting strong and consistent earnings. And as investors worried about a possible recession, they moved away from these stocks.
The three stocks that currently make up the Ark’s best holdings are CRISPR therapeutics (CRSP 2.35%), Cerus (ESRB 0.00%)and Signify health (SGFY -0.06%). The one thing these stocks have in common: they all belong to the health sector.
1. CRISPR therapeutics
Shares of CRISPR Therapeutics are down 2% this year. You could say that after a sharp drop of 50% in 2021, it may have bottomed out. However, there are also reasons to be optimistic about this growth stock.
The company collaborates with Vertex Pharmaceuticals on a gene-editing therapy, exa-cel, which treats the blood disorders of beta-thalassemia and sickle cell disease. It’s an opportunity that could be worth billions, with an estimated 32,000 patients who could benefit from the treatment. The companies plan to file for approval of the treatment with regulators later this year.
CRISPR will receive 40% of the profits, which could bring some stability to the company. Currently, the company’s revenue fluctuates due to collaboration and grant revenue. In the first three months of this year, its revenue totaled only $940,000 and its net loss was $179.2 million.
Until approval comes, there will be high risk with CRISPR. The good thing is that the company has tons of cash and short-term investments on its books, totaling $2.2 billion. There is no rush, and investors may feel that there may soon be more optimism for the company. If you’re willing to take a risk, this can be a good buy.
Cerus is a biomedical company with proprietary technology, its Intercept Blood System, which helps minimize pathogens in blood components used for transfusions. Its system is essential to keep people safe, and the advantage it has over some of its competitors is that it can be used in blood transfusion centers. This allows it to integrate with blood collection and make the process more efficient and reduce the need for product shipping and transportation.
The company expects to generate product revenue growth of between 22% and 26% this year, up to $165 million. As companies scale back and worry about declines, Cerus has remained a promising growth stock. Although not yet profitable, the company’s losses have decreased. During the period ended March 31, Cerus posted a net loss of $12.3 million, compared to a loss of $17.5 million for the prior year period.
Down 17% this year, Cerus has not performed very well. But it’s still better than most Ark stocks and could be a promising long-term investment.
3. Signify health
The top performing stock on this list is Signify Health. Its 7% gains are impressive, even after factoring in a recent decline. The value-based care company seeks to help reduce costs in the healthcare industry through its home health assessments (IHE). Working with Medicare Advantage and other managed care plans, its licensed clinicians help assess individuals so outcomes and financial incentives are aligned.
The company sees a large addressable market for its services, noting that it conducted just 1.9 million IHEs last year and there are 84 million members who are in Medicare Advantage and Medicaid Managed. Care that she could help serve. Signify has grown at a compound annual growth rate of 24% over the past few years. This year, it expects its sales to be between $948 million and $971 million.
The only caveat for investors is that shares of Signify are not cheap; it trades at 40 times 12-month earnings. While it’s done well this year, it’s not necessarily a slam dunk to be a good buy at its current price.
David Jagelsky has no position in the stocks mentioned. The Motley Fool holds positions and recommends CRISPR Therapeutics and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.