Cathie Wood Whittles Down 2 Positions In July

Summary

• The investor trimmed her Veracyte and AquaBounty Technologies stakes.
• Wood focuses on “innovative disruption” when picking stocks.

Catherine Wood (Trades, Portfolio) disclosed earlier this week her firm, ARK Investment Management PZN , reduced two of its positions in July.

Wood, who is the founder, chief investment officer and CEO of the New York-based firm, has made a name for herself through investing in “disruptive innovation” stocks. Implementing an iterative process that combines top-down and bottom-up research, ARK Investment seeks to invest in companies that may benefit from cross-sector innovations like artificial intelligence, robotics, energy storage, DNA sequencing and blockchain technology.

According to GuruFocus Real-Time Picks, a Premium feature, the guru trimmed her stake in Veracyte Inc. (VCYT, Financial) by 14.33% and her AquaBounty Technologies Inc AQB . (AQB, Financial) position by 8.85% on July 31.

Veracyte

The guru sold 1.09 million shares of Veracyte (VCYT, Financial), impacting the equity portfolio by -0.10%. The stock traded for an average price of $44.56 per share on the day of the transaction.

Wood now holds 6.5 million shares total of the San Francisco-based biotech company, which represent 0.58% of the equity portfolio. GuruFocus estimates she has gained 78.92% on the investment so far.

The genomic diagnostics company, which provides products and services to improve patient care against diseases like thyroid cancer, lung cancer and idiopathic pulmonary fibrosis, has a $3.05 billion market cap; its shares were trading around $42.95 on Thursday with a price-book ratio of 3 and a price-sales ratio of 16.83.

The GF Value Line VALU suggests the stock is significantly overvalued currently based on its historical ratios, past performance and future earnings projections.

GuruFocus rated Veracyte’s financial strength 7 out of 10. Although assets are building up at a faster rate than revenue is growing, the robust Altman Z-Score of 32.36 indicates the company is in good standing.

The company’s profitability did not fare as well, scoring 2 out of 10 rating even though the operating margin is expanding. The negative returns on equity, assets and capital are also outperforming over half of its competitors. Veracyte has a moderate Piotroski F-Score of 4 out of 9, which indicates business conditions are stable.

Of the gurus invested in Veracyte, Wood has the largest stake with 9.21% of outstanding shares. Ron Baron (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Paul Tudor Jones (Trades, Portfolio) also have positions in the stock.

AquaBounty Technologies

The investor sold 641,474 shares of AquaBounty Technologies (AQB, Financial), impacting the equity portfolio by -0.01%. Shares traded for an average price of $4.95 each on the day of the transaction.

She now holds 6.6 million shares of the consumer packaged goods company headquartered in Maynard, Massachusetts, accounting for 0.06% of the equity portfolio. GuruFocus data shows Wood has gained an estimated 20.85% on the investment so far.

The company, which operates innovative, land-based salmon farms that use science and technology in an attempt to solve global problems like food scarcity and climate change, has a $335.8 million market cap; its shares were trading around $4.81 on Thursday with a price-book ratio of 0.2 and a price-sales ratio of 285.96.

According to the price chart, the stock is trading below its median price-book ratio and above its median price-sales value.

AquaBounty’s financial strength was rated 5 out of 10 by GuruFocus. As a result of issuing approximately $6.04 million in new long-term debt over the past three years, the company has poor interest coverage. The Altman Z-Score of 2.3 also indicates it is under some pressure since the company has recorded losses in operating income over the past three years.

The company’s profitability scored a 1 out of 10 rating on the back of negative margins and returns that underperform a majority of industry peers. It also has a moderate Piotroski F-Score of 6 and a predictability rank of one out of five stars. Based on GuruFocus data, companies with this rank return an average of 1.1% annually over a 10-year period.

Wood is the only guru currently invested in the stock with a 9.3% stake.

Portfolio composition and performance

Over 30% of the guru’s $50.33 billion equity portfolio, which was composed of 289 stocks as of the end of the first quarter, is invested in the health care sector, followed by slightly smaller exposures to the communication services and technology spaces.

As of March 31, Wood’s top five holdings were Tesla Inc. TSLA (TSLA, Financial), Teladoc Health Inc TDOC . (TDOC, Financial), Square Inc. SQ (SQ, Financial), Roku Inc. (ROKU, Financial) and Zillow Group Inc Z . (Z, Financial).

The flagship ARK Innovation Exchange-Traded Fund (ARKK, Financial) returned 152.52% in 2020, decimating the S&P 500’s 18.4% return.

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Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Forbes