Most people who have followed the stock market over the past year know the name Cathie Wood. The founder of the asset management firm ARK Invest has transformed its strategy of investing in leading technology companies and its striking media appearance into a place as one of the most followed money managers today. She deserved the attention: all of ARK’s funds have more than doubled their investors’ money in the past year.
Despite her overall successes, her funds do hold a few stocks that fall outside Wales’ favor. CRISPR Therapeutics (NASDAQ: CRSP) and Proto Labs (NYSE: PRLB) is significantly lower than their recent highs. For investors who want to take advantage of the revolution of genes or additional manufacturing, these slumps can provide the opportunity. And those who buy one of the stocks can feel safe knowing that one of the world’s hottest investors has done the same.
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1. CRISPR Therapeutics
CRISPR Therapeutics uses the CRISPR-Cas9 no-till technique to develop transformative treatments. Although the company has made progress with its clinical programs, the stock has dropped nearly 40% from its peak in mid-January. CRISPR is developing treatments in three clinical areas. Management expects that progress with these programs will increase the market capitalization from approximately $ 10 billion today to $ 20 billion to $ 25 billion in the short term.
The first program is hemoglobinopathies, or hereditary diseases that affect red blood cells. In the first clinical trials of CRISPR gene processing by a US company, CRISPR Therapeutics and partner Vertex Pharmaceutical products (NASDAQ: VRTX) announced in December that their CTX001 treatment had effectively cured 10 patients of two blood disorders. The study is a Phase 1/2 trial only and management expects participants to complete it later this year.
The second series of programs are immuno-oncological treatments that use the power of the body’s own immune system to fight cancer. All three of the company’s drug candidates in this area use gene-edited cells transplanted from a healthy donor. Each is scheduled for a lecture this year. One treatment has already shown that a manipulated cell from the patient’s immune system can offer a very high response rate for one of the worst forms of non-Hodgkin’s lymphoma.
Eventually, the company partnered with ViaCyte in its first attempt at regenerative medicine. The pair are embarking on a Phase 1/2 trial combining ViaCyte’s stem cell capability with CRISPR’s gene editing expertise. The result is expected to be a new way of treating diabetes. The approach actually repeats a study from two decades ago that used fresh pancreatic cells from carcasses. If this treatment proves to be effective, the stock must quickly gain ground to reflect CRISPR’s opportunity to disrupt the $ 28 billion human insulin market. In general, the scientific advancement of this company should make investors excited about the future.
2. Proto Labs
Manufacturing any new product has always required a lot of time and money. The equipment, molds and machines needed to make one new design are the same, whether a company makes one part or works out thousands. For this reason, manufacturing innovations have always tended to be more efficient in mass production of spare parts, as opposed to rapidly adapting to new designs.
Proto Labs put the model on its head and built an entire business to deliver custom parts at unprecedented speeds. The platform served more than 18,000 individual product designers last year.
The approach has been facilitated by the use of 3D printing, where components are created by building materials to form a design, rather than starting with many materials and removing many of them. This is both a cheaper and faster method. As an example, during the pandemic, the company was able to manufacture new components for fans and diagnostic equipment with leading throughput times.
Although Proto Labs is well positioned, its growth has been sluggish. Management recently reported full annual results for 2020, and its revenue of $ 434 million was 6% lower than in 2019. The decline was also not entirely due to COVID-19. Revenue in 2019 was only 3% above 2018. The market is getting impatient, but the new CEO of the company, Rob Bodor, hopes that a more user-friendly interface and an expansion of its offering to customers will start sales make.
The revamped user platform, called Proto Labs 2.0, launched in November for Europe and in February for the Americas. Bodor, which took over this month, said new features and functions will continue to appear during 2021. Proto Labs also recently acquired 3D Hubs, which will give the company the ability to identify manufacturing partners for work it cannot accept, and also provide more delivery times and price points for customers with different needs.
Proto Labs’ shares rose following the acquisition, a positive analyst letter and a positive guidance from the 3D printing company ExOne (NASDAQ: XONE). Unfortunately for shareholders, it fell almost 50% from its peak at the end of January. Management did not do much to help, predicting that conditions in the first quarter would be just like in 2020 and 2019.
It is understandable that shareholders will be impatient – this stock has been trading with potential for years. However, for investors with a long time horizon, an interest in Proto Labs may one day pay off. At least, that’s what Cathie Wood is counting on.
This article represents the opinion of the author, who may not be in agreement with the ‘official’ recommendation position of a Motley Fool premium advisory service. We are furry! When we question an investment thesis – even one of our own – it helps us all to think critically about investing and to make decisions that help us become smarter, happier and richer.