Cathie Wood has built her career on contrarian views and her company Ark Invest is known for going against the grain. Therefore, the bear market of 2022 has not done much to change its stance. In fact, Wood recently argued that the Fed’s aggressive monetary stance in its ongoing efforts to curb rising inflation is misguided. Underscoring the signs of deflation, Wood says that if it doesn’t change its stance, the Fed’s actions could lead to a repeat of the Great Depression.
“If the Fed doesn’t rotate, the setup will look more like 1929,” Wood said. “The Fed raised interest rates in 1929 to stifle financial speculation, and then in 1930, Congress passed Smoot-Hawley, imposing 50%+ tariffs on over 20,000 goods and plunging the world economy into the Great Depression.”
Meanwhile, back in the here and now, the Fed’s policies and interest rate hikes have wreaked havoc on markets and sent stocks broadly lower, leaving many stocks looking rather cheap.
So Wood went shopping, and we used the TipRanks database to find out what the analyst community had to say about two small, sub-$5 stocks her company recently acquired. As it turns out, each ticker has only received Buy ratings. Not to mention significant upside potential is also on the table.
ATAI Life Sciences (ATAI)
Wood is known to favor cutting edge companies and the first choice certainly reflects that. ATAI is at the forefront of what could be a new paradigm in the treatment of mental health disorders – testing the use of psychedelics for medical purposes.
The company’s business model is diversifying. operates through a decentralized platform that purchases and executes clinical programs with small subsidiaries formed around pipeline candidates. Everyone can access common funds, with capital allocated as needed.
After some of its early programs were rejected as unnecessary, the company’s pipeline has been reduced to 8 candidates aimed at treating depression, anxiety, schizophrenia and substance abuse.
Leading the way is PCN-101/R-ketamine, which is indicated as a treatment for treatment-resistant depression (TRD). Then there’s RL-007, which targets cognitive impairment associated with schizophrenia. Both of these drugs are currently in phase 2 studies.
Further back in development, the pipeline includes GRX-917 (deuterated etifoxine), which is being developed for generalized anxiety disorder (GAD) and for which the company recently announced positive preliminary pharmacokinetic and pharmacodynamic results from a Phase 1 study. also positive preliminary results of the single ascending dose (SAD) portion of the Phase 1 trial of KUR-101 (deuterated mitragynine) indicated for the treatment of opioid use disorder (OUD).
With shares down 64% year-to-date, Wood was in a buying mood. In the third quarter, Ark Invest sold 6,133,914 shares of ATAI, increasing its position by 280%. At the current share price, they are now worth $17.61 million.
With top-line data from the Phase 2a proof-of-concept trial of PCN-101 expected before the end of the year, Canaccord analyst Sumant Kulkarni believes the upcoming reading could dictate near-term sentiment, though the analyst also believes that those who take the long view will be rewarded in the end.
Kulkarni writes, “We think it’s important for the stock that PCN-101 hits targets. As with any neuropsychiatry trial, we are aware of the risks, but at current levels we view the dollar’s absolute downside as less than the potential upside.”
“Our bigger picture position on the stock remains the same,” the analyst continued, adding, “that is, we continue to believe that ATAI presents a potentially solid opportunity for investors (especially those with patience and/or a long-term focus) to participate in the underserved field of mental health. Along these lines, we highlight ATAI’s relatively diverse mental health-focused pipeline (with a good mix of non-psychedelic and psychedelic compounds) and the cash runway at 2025E covering some potentially important catalysts.
Kulkarni is obviously extremely bullish. along with a Buy rating, the analyst’s $27 price target leaves room for one-year gains of a staggering 868%. (To follow Kulkarni’s background, Click here)
Kulkarni’s view is not an anomaly. all current reviews – 5, in total – are positive, giving the stock a strong buy consensus. Furthermore, the average target stands at $25.60, suggesting a ~818% move higher in the 12-month time frame. (See ATAI stock forecast on TipRanks)
The next Wood option we’ll look at is a protein biomarker discovery and clinical diagnostics company. SomaLogic operates in what is known as the proteomics space. This is an emerging segment with the global protein market expected to expand by 15% annually and reach $64 billion by 2024.
SomaLogic is eyeing a large piece of that market and may have the tools to do so. The SomaScan Discovery platform can examine 7000 proteins in just 55 microliters of blood sample, far beyond the capabilities of any competitor. It has also built a strong client list, which includes Bristol-Myers Squibb, Novartis, Amgen, University of Cambridge and Stanford, among others. In addition, both FDA and NIH laboratories use its proteomics platform.
The company is relatively new to the public markets, and IPOd in September 2021 through a SPAC merger. The timing is unfortunate, as SPACS were severely out of favor in the bear market of 2022. For example, shares are down 77% since the turn of the year.
With the stock on the back, Wood apparently believes it offers good value. Ark Invest opened a new position in SomaLogic in the third quarter and acquired 11,017,672 shares. They are currently worth more than $29.6 million.
Also bullish is Stifel analyst Daniel Arias, who in the emerging proteomics space sees Somalogic as “best in class in many ways.”
“The company has a first-mover advantage thanks to an established portfolio that has been in the market for several years and has formed the basis of solid relationships with key commercial (eg Novartis and Amgen) and academic research institutions.” Arias explained.
“Quarterly ups and downs for SLGC have made model visibility difficult this year, but 4 could have some upside potential, ’23 should be another solid year of growth for the company – and we continue to see SLGC as one of the companies that are doing well – it is in a position to capitalize on an expanding protein market. With shares trading close to cash, we believe they are viewed as attractive within the mid-cap space,” the analyst added.
To that end, Arias rates SLGC shares a Buy, while the $8 price target suggests the stock could jump ~189% in the next year. (To follow Arias’ history, Click here)
Do other analysts agree with Arias? They are doing it. 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 Stock Prediction on TipRanks)
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Disclaimer: The views 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.