Why I bought Cathie Wood’s “underappreciated” Invitae stock

Cathie Wood recently said Invitae stock is “underappreciated” in her ARK Invest ETFs. Here Joe Clark explains why he is buying after Wood’s comments.

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Cathie Wood was named the best stock picker of 2020 by Bloomberg News after her ARK Innovation ETF returned over 150% in 2020. As a result of this, and her profitable calls with Tesla stock and Bitcoin, many investors watch her moves very closely.

Recently, Wood said Invitae (NYSE: NVTA), a company that offers medical genetic testing, is the most underappreciated stock in her ARK Invest ETFs. Invitae closed Friday 12th March at $42.70, finishing the week over 20% higher after the CNBC interview. Despite the move, it remains below its all-time high of $61.59 set on 14th December 2020.

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Cathie Wood’s “underappreciated” Invitae stock comments

Wood said Invitae, in the molecular diagnostics space, is probably one of the most important companies in the genomic revolution, and it is investing aggressively to become the leader in that space.

The ARK Invest founder stated that the disconnect for many peoples comes when they think of the lab testing industry, they think of Quest Diagnostics and Laboratory Corp, which she effectively believes are very mature companies, commoditised value stocks, and that Invitae is somewhat like Tesla in the automobile industry. Wood believes we will move away from one test for all medical practices and to much more personalised medicine, which will give just a few companies the lion’s share of the market.

Potential market for genetic testing

Invitae is a leader in genetic testing. It offers diagnostic predictive testing to help uncover and determine specific conditions or someone’s risks of developing certain diseases. Invitate forecasts that its total addressable market for genetic testing tops $150 billion. It highlighted the market for cancer screening and therapy selection to be the most promising, especially in older individuals.

Invitae has never turned a profit

There are some things to be aware of, though, when it comes to Invitae stock. Since it was founded in 2013, the company has never turned a profit. It reported a net loss of $608.9 million, an increase of nearly 150% year on year. In its annual report, the company stated it doesn’t expect to be profitable for quite some time as it is primarily focused on growing the business. 

Why I bought Invitae stock

Weighing everything up, I decided to start a small position in the company. Growth stocks like Invitae tend to be highly volatile, but due to what I perceive as the company’s great long-term potential, I can deal with that. For example, I would be willing to take a test if I can discover that I may be more at risk of diabetes or heart disease, so I think the market for Invitae could be massive. With its three-year revenue gain of 226.8%, I am happy to take the chance on this exciting company even though it has not yet proven its path to profitability.

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Joseph Clark owns shares in Invitae and Tesla. The Motley Fool UK does not own shares in any of the companies mentioned in this article. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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