Cathie Wood’s Ark funds have been really heating up in recent months. Perhaps her most intriguing and underrated fund is the Ark Genomics Revolution ETF (ARKG), which is packed full of extraordinary biotech innovators that could experience an AI tailwind like few other industries. Unlike the other Ark funds that have been experiencing S&P-topping returns so far this year, the ARKG has continued to drag its feet.
While the ARKG has been a relative laggard in the past few years, I do think two of the fund’s top components really stand out for investors who don’t yet have a ticket to the so-called genomic revolution. Let’s check out two names, an underperforming deep-value play in Twist Biosciences (NASDAQ:TWST) and the much hotter Natera (NASDAQ:NTRA), that look enticing.
Twist Biosciences
Twist Biosciences is a biotech firm that synthesizes DNA using its proprietary silicon-based process. Indeed, the sky seems to be the limit when it comes to the applications of such a technology. Whether we’re talking about gene editing, sequencing, or something else, there’s clear potential with the innovator. That said, it’s in a nascent field that may not be ready for an inflection point and shift into profitability.
Though Cathie Wood has given the firm a massive vote of confidence, Twist isn’t the only name in synthetic DNA. When it comes to such early-stage technologies, it can be really tough to tell which firms will emerge as winners and which ones will be forgotten. Either way, I do think Twist’s process is the source of its economic moat.
As the AI wave touches down, it will be very interesting to see what the impact will be on sales growth. It’s tough to predict a growth inflection point, but I find the firm’s involvement in various AI projects quite encouraging. With a partnership with AI-driven drug discovery firm Absci, the possibilities for Twist and the synthetic DNA space, as a whole, are exciting.
In the meantime, Twist is making fairly decent progress toward becoming a profitable company. Management sees profits on the horizon (by the end of its fiscal year 2026), as it takes steps to enhance gross margins. Indeed, if Twist can pull off the move into the green, I’d be much more willing to punch my ticket to the stock. For now, Twist is a speculative mid-cap name that could be deep with value while it’s trading at around six times price-to-sales (P/S).
Natera
For investors seeking a potentially timelier (and better-performing) play, NTRA shares could be worth a look this summer. The genetic testing firm has a handful of cancer tests and a packed pipeline of candidates that could be a boon for future growth. In the past two years, shares of NTRA have been on an unstoppable run, gaining around 200% in the last two years.
It’s not just Cathie Wood that’s taken a liking to the shares, either. Some big-name hedge funds, including Less Ainslie of Maverick Capital, have taken positions in recent quarters. Undoubtedly, it’s hard not to love the Natera growth narrative, even if you’re not a fan of the mid-cap stocks that are full of volatility. Looking into the second half, the firm is expected to pull the curtain on some new tests. As the field of early cancer detection really starts to heat up, Natera stands out as one of the best companies not only in the ARKG basket but in all of genomics.
The company isn’t yet profitable, and there’s no clear path towards achieving it. Still, the firm had positive cash flows in the first quarter, which is encouraging, given the magnitude of R&D spend to keep its product pipeline moving along. Either way, “flooring it” on growth seems to be the best move for the firm as it scratches the surface of the field of genetic testing.
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