Cathie Wood Pulls the Trigger on These 2 ‘Strong Buy’ Stocks

Cathie Wood Pulls the Trigger on These 2 ‘Strong Buy’ Stocks

Cathie Bois is famous for his unique investment style. Favoring strong growth and disruptive players, she often seems to throw caution to the wind and be willing to go where other Wall Street titans might fear to go.

However, despite Wood’s strategy, some might think there’s a risk she’s not willing to take. Addressing the recent comeback of meme stocks, the CEO of Ark Invest recently issued a warning to investors eager to get in on the action, wisely warning that it would end badly for many who pile into speculative names such as GameStop and AMC.

“Buyer beware, there were a lot of people in the early meme stock craze who were seriously hurt,” Wood commented.

That said, it’s not as if Wood suddenly turned to value investing for inspiration. Still following its innovator exposure playbook, we decided to take stock of two of the less lauded names that make up part of its Ark Invest portfolio.

Here it appears that the street is in sync with the Wood view; according to TipRanks Database, both of these stocks are considered strong buys by the analyst consensus. Let’s see why.

Primary medicine (PRME)

The first Wood-backed stock we’ll look at fits perfectly with Wood’s innovation-focused investing style. Prime Medicine is a biotechnology company at the forefront of gene editing. Founded in 2019, the company’s innovative approach focuses on its Prime Editing platform, a revolutionary technology that enables precise and flexible editing of the human genome.

Unlike traditional CRISPR methods, which typically create double-strand breaks in DNA, Prime Editing uses a more refined method involving a “search and replace” technique to make specific changes. This method significantly reduces the risk of unintended mutations, thereby improving the safety and effectiveness of genetic therapies.

Prime Medicine’s technology shows promise for treating a wide range of genetic disorders, potentially offering cures for diseases for which treatment options are currently limited or non-existent. The company’s development efforts span key strategic areas including hematology, liver, eye, neuromuscular and lung, although the majority of the pipeline is still in the preclinical stage. One drug, however, is arriving in the clinic.

In April, the FDA gave the green light to the company’s investigational new drug (IND) application for PM359, indicated by its lead publisher, to treat chronic granulomatous disease (CGD). This is the first ever Prime Editor product candidate to make it this far and Prime plans to initiate a phase 1/2 trial of the drug with a first readout of study data planned for 2025.

Meanwhile, Wood significantly increased Ark Invest’s stake in PRME in the first quarter, acquiring 2.85 million shares. The company’s total holdings now stand at nearly 5.99 million shares, currently worth $45.13 million.

This will likely be considered a good move by Chardan analyst Geulah Livshits, who also likes the look of what’s on offer here.

“The platform nature of its technology means the company should be able to move forward more quickly for subsequent programs using the same manufacturing and delivery technology,” the 5-star analyst explained. “Additionally, the current regulatory environment is strongly supportive of transformative therapies for rare diseases, with FDA officials repeatedly indicating their desire to accelerate the development of such therapies, including through greater engagement, use surrogate parameters and flexible trial designs. We believe these factors can enable Prime to achieve sustained growth by advancing its programs within and beyond its current pipeline.

“As Prime is poised to launch IND-enabling activities for 1+ programs in its in vivo liver franchise and appoint a DC for RHO adRP in 2024, we believe the company is positioned for a value inflection then that it moves from developing a collection of (interesting) scientific projects to advancing a pipeline of products,” Livshits continued.

Ultimately, Livshits rates PRME shares a Buy, while his $17 price target suggests the stock has room for an outsized 140% growth over the coming year. (To see the Livshits track record, Click here)

Livshits’ optimistic view of PRME is not an anomaly. The other 9 recent analyst ratings are all positive, which naturally makes the consensus here a Strong Buy. With an average target of $15.33, investors could potentially see returns of around 104% over the next year. (See PRME stock market forecasts)

Cathie Wood Pulls the Trigger on These 2 ‘Strong Buy’ Stocks

Absci (ABSI)

We’ll stay in the biotech space for Wood’s next pick. AbSci is a company that is tapping into the hottest trend in today’s market: using generative AI for drug development.

Describing itself as an AI drug creation company, AbSci’s platform can produce high-affinity antibodies targeting specific epitopes entirely through computer simulations. Reflecting their motto, “data to train, AI to create, and wet lab to validate,” AbSci can generate antibody drug candidates much faster than traditional laboratory techniques. By streamlining traditionally laborious steps, AbSci aims to reduce costs and time to market for new biologic drugs, thereby addressing critical healthcare needs.

That said, the pipeline is still in its early stages. Among the drugs in development, the company is working on ABS-101, potentially the best-in-class anti-TL1A antibody, for which it initiated IND studies in February. The company expects Phase 1 clinical studies for ABS-101 to begin early next year with interim data readout expected in the second half of 2025. Additionally, proof-of-concept results for the new candidate immuno-oncology drug ABS-301 are expected. around mid-2024.

As for Wood’s involvement, his company, Ark Invest, initiated a new position in ABSI stock in the first quarter, acquiring nearly 3.28 million shares valued at $14.87 million.

The company also has a fan in Scotiabank’s George Farmer, who thinks investors should seize an opportunity while it’s still in its infancy.

“We recommend buying ABSI stock to capture the value potential of the company’s novel AI-driven drug development strategy and the early-stage biologics pipeline on which it is based,” noted Farmer. “Why? Preclinical results to date confirm the competitive advantage that ABS-101, an AI-powered anti-TL1A treatment, can have over existing agents in clinical development to address the massive disease treatment market inflammatory bowel disease (IBD).

To this end, Farmer rates ABSI an Outperform (i.e. Buy), alongside a $13 price target. The implication for investors? A nice 182% increase from current levels. (To consult Farmer’s list, Click here)

Most of Farmer’s colleagues agree with his assessment. Based on a 4 Buy to 1 Hold mix, the stock boasts a Strong Buy consensus rating. Forecasts call for one-year returns of around 90%, given that the average price target is $8.75. (See ABSI Stock Forecast)

To find great ideas for trading stocks at attractive valuations, visit TipRanks. Best Stocks to Buya tool that brings together all the information about stocks from TipRanks.

Disclaimer: The opinions expressed in this article are solely those of the analysts featured. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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