‘Too cheap to ignore’: Cathie Wood grabs these 2 stocks under $5
Buzz Update ‘Too cheap to ignore’: Cathie Wood grabs these 2 stocks under $5
Cathie Wood has built her career on opposing views and her company Ark Invest is notorious for going against the grain. As such, the 2022 bear market has done little to change its stance. In fact, recently Wood argued that the Fed’s aggressive monetary stance in its continued efforts to rein in soaring inflation was misguided. Pointing to deflationary signals, Wood says that unless she changes course, the Fed’s actions could lead to a repeat of the Great Depression.
“If the Fed doesn’t pivot, the setup will look more like 1929,” Wood said. “The Fed raised rates in 1929 to stifle financial speculation, then in 1930 Congress passed Smoot-Hawley, imposing tariffs of more than 50% on more than 20,000 goods and pushing the global economy in the Great Depression.”
Meanwhile, here and now, Fed policies and interest rate hikes have wreaked havoc on markets and sent equities across the board tumbling, leaving many stocks looking pretty cheap.
So Wood went shopping and we used TipRanks database to find out what the analyst community has to say about two small, sub-$5 stocks his company recently repurchased. It turns out that each ticker only received buy ratings. Not to mention that substantial upside potential is also on the table.
Wood is known to favor edge business and the top pick certainly reflects that. ATAI is at the forefront of what could be a new paradigm in the treatment of mental health disorders – it is testing the use of psychedelics for medicinal purposes.
The company’s business model is differentiated; it operates through a decentralized platform that purchases and manages clinical programs with small affiliates formed around pipeline candidates. All can access shared funds, with capital allocated based on need.
After scrapping some of its early programs deemed superfluous, the company’s pipeline was narrowed to 8 candidates aimed at treating depression, anxiety, schizophrenia and substance abuse.
PCN-101/R-ketamine leads the way, indicated as a treatment for treatment-resistant depression (TRD). Then there’s RL-007, which targets cognitive impairment associated with schizophrenia. These two drugs are currently in phase 2 studies.
Further in development, the pipeline includes GRX-917 (deuterated etifoxine), which is in development for generalized anxiety disorder (GAD), and for which the company recently announced positive preliminary pharmacokinetic and pharmacodynamic results from a phase 1 study. Positive preliminary results from the single ascending dose (SAD) portion of the phase 1 test of KUR-101 (deuterated mitragynine) indicated to treat opioid use disorder (OUD) have also recently announced.
With shares down 64% year-to-date, Wood is in a buying mood. In the third quarter, Ark Invest invested 6,133,914 ATAI shares, increasing its position by 280%. At the current share price, these are now worth $17.61 million.
While the first data from the phase 2a validation trial of PCN-101 are expected before the end of the year, the Canaccord analyst Sumant Kulkarni thinks the upcoming reading could dictate short-term sentiment, although the analyst also thinks those who take a long-term view will ultimately be rewarded.
Kulkarni writes: “We believe it is important for the stock that PCN-101 achieves objectives. As with any neuropsychiatry essay, we are aware of the risks, but at current levels we consider the absolute dollar decline to be less than the potential upside.
“Our overall thesis on the stock remains the same,” the analyst added, “that is, we continue to believe that ATAI presents a potentially solid opportunity for investors (especially those who have patience and/or longer-term vision) participate in the underserved mental health space.In this sense, we highlight ATAI’s relatively diverse mental health-focused pipeline (with a good mix of non- psychedelics and psychedelics), and the cash trail to 2025E which covers some potentially significant catalysts.
Kulkarni is obviously extremely optimistic; with a buy rating, the analyst’s $27 price target leaves room for one-year gains of an astounding 868%. (To see Kulkarni’s track record, Click here)
The taking of Kulkarni is not an anomaly; all current reviews – 5 in total – are positive, giving the title a consensus Strong Buy rating. Moreover, the average target stands at $25.60, which suggests that they will climb around 818% over the 12-month period. (View ATAI Stock Predictions on TipRanks)
Wood’s next pick we’ll look at is a protein biomarker discovery and clinical diagnostics company. SomaLogic operates in what is called the proteomic space. This is an emerging segment, with the global proteomics market expected to grow at 15% per year and reach $64 billion in 2024.
SomaLogic envisions a large portion of this market and may have the tools to do so. Its SomaScan discovery platform can examine 7,000 proteins in just 55 microL of blood sample, far beyond the capabilities of any competitor. He has also built up a strong list of clients which includes Bristol-Myers Squibb, Novartis, Amgen, Cambridge University and Stanford among others. Additionally, FDA and NIH labs use its proteomics platform.
The company is relatively new to the public markets, and IPOd in September 2021 via a SPAC merger. The timing is unfortunate, as SPACS have been seriously out of favor in the 2022 bear market. Namely, stocks are down 77% year-to-date.
With the stock on the back foot, Wood obviously thinks he offers good value for money. Ark Invest opened a new position in SomaLogic in the third quarter and acquired 11,017,672 shares. These are currently worth more than $29.6 million.
Stifel analyst also takes a bullish view Daniel Ariaswhich, within the emerging proteomics space, considers Somalogic “best in class in several respects”.
“The company has a first-mover advantage in the market, thanks to an established portfolio that has been in the market for several years and has formed the basis of strong relationships with leading commercial research institutes (i.e. Novartis and Amgen) and academics,” Arias explained.
“Quarterly highs and lows for SLGC have made modeling visibility difficult this year, but Q4 may have upside potential, 23 should still be a year of solid growth for the business – and we continue to consider SLGC as one of the companies that is well-positioned to capitalize on a growing proteomics market. With shares trading near cash, we believe they are looking attractive in the small-cap space. added the analyst.
To that end, Arias is pricing SLGC shares long, while its price target of $8 suggests the stock’s value could skyrocket around 189% over the coming year. (To see Arias’ track record, Click here)
Do other analysts agree with Arias? They do. Only buy ratings, 3 in fact, have been issued in the last three months, so the consensus rating is a strong buy. At $8, the average price target is the same as Arias. (See SLGC’s stock forecast on TipRanks)
To find great ideas for stocks trading at attractive valuations, visit TipRanks’ Best stocks to buya recently launched tool that brings together all information about TipRanks stocks.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. 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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