Cathie Wood’s commitment to buying shares of businesses working on disruptive innovations, via her ARK Innovation ETF and ARK Genomic Revolution ETF, makes her investing style very much on the riskier side of the spectrum — especially when she invests in already risky areas like biotech. But if her theses are correct, the upside to investors could be tremendous, assuming they can tolerate what might be a very long and bumpy ride between buying shares and seeing a payoff.
On that note, let’s examine a pair of Cathie Wood’s picks that are prototypical of her high-risk, high-reward approach to growth stock investing.
1. Ginkgo Bioworks
You’ve probably heard of semiconductor foundries, which take customers’ designs for microchips, clarify any outstanding technical details that are blocking implementation, and then manufacture them at an industrial scale. The point of working with a foundry is that its massive manufacturing capabilities grant it access to economies of scale, so its customers can procure customized chips at a far lower cost per unit than they’d need to shell out if they tried to produce them in-house.
Ginkgo Bioworks (NYSE: DNA) aims to be a biofoundry platform for the biopharma industry, taking blueprints for customized microorganisms or biomolecules and then producing them cheaply and in vast quantities.
Cathie Wood last bought Ginkgo on May 10, and Ark Invest owns around 10% of the company, though it only represents around 1% of the value of her aggregated portfolios. The rationale behind her investment is clear.
Biofoundries are not anywhere near as widespread or accepted in biopharma as semiconductor foundries are in the semiconductor industry. If Ginkgo can make the concept work profitably at scale, it will be the first, largest, and most well-known biofoundry to do so, and that will make it a lucrative business to own shares of. In such a situation, the scale required for its manufacturing operations to be profitable will act as a natural moat against competitors, which will likely be smaller and thus more expensive for customers.
Still, Wood is…
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