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ARK Investment Leans Into Biotech and Telecom Holdings

Holdings grow alongside a new buy into a blank check company

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Graham Griffin
Jul 12, 2021

Summary

  • Iridium Communications boosted by 31.82%.
  • Surface Oncology and Codexis grow 6% and 10% respectively.
  • New buy into a life sciences blank check company.
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Catherine Wood (Trades, Portfolio)’s ARK Investment has revealed additions to three biotechnology and telecommunications holdings according to GuruFocus’ Real-Time Picks, a Premium feature.

ARK Investment focuses solely on offering investment solutions to capture disruptive innovation in the public equity markets. By combining top-down and bottom-up research, the firm aims to identify innovation early and capitalize on opportunities to provide long-term value to investors.

On June 30, the firm boosted its Iridium Communications Inc. (

IRDM, Financial), Codexis Inc. (CDXS, Financial) and Surface Oncology Inc. (SURF, Financial) positions and established a new position in CM Life Sciences II Inc. (CMIIU, Financial) on the same day. The portfolio saw an overall impact of 0.37% from the additions and the new buy.

Iridium Communications

The firm boosted its Iridium Communications (

IRDM, Financial) holding by 31.82% with the purchase of 3.29 million shares. On the day of the transaction, the shares traded at an average price of $39.99, down from the $43.83 per share average purchase price from the first quarter of this year. GuruFocus estimates the firm has gained a total of 14.11% on the holding since it was established in the third quarter of 2019.

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Iridium Communications offers voice and data communications services and products to businesses, international government agencies and other customers on a global basis. It is a provider of mobile voice and data communications services through a constellation of low earth-orbiting satellites. Reaching across land, sea and air, including the polar regions, Iridium's solutions are ideally suited for industries such as maritime, aviation, government/military, emergency/humanitarian services, mining, forestry, oil and gas, heavy equipment, transportation and utilities. Iridium also provides service to subscribers from the U.S. Department of Defense.

On July 12, the stock was trading at $39.54 per share with a market cap of $5.26 billion. According to the GF Value Line, the shares are trading at a significantly overvalued rating.

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GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 1 out of 10. There is currently one severe warning sign issued for a declining operating margin. The company has struggled to maintain profitability as the weighted average cost of capital has far exceeded the return on invested capital for the last decade.

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Wood’s ARK Investment is the second-largest shareholder with 10.23% of shares outstanding. BlackRock Inc. ranks first overall with 10.33% of shares outstanding and

Ron Baron (Trades, Portfolio), Vanguard Group Inc. and Capital International Investors follow behind.

Codexis

ARK Invest also added 391,109 shares to its Codexis (

CDXS, Financial) position for a 6.23% addition. The holding has grown to 6.67 million shares in under three years and GuruFocus estimates the total gain of the holding at 15.55%. On the day of the transaction, the shares traded at an average price of $22.66.

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Codexis is involved in the business of providing enzyme optimization services, commercialization of proteins and developing biocatalyst products. The firm's products and services include Screening and Evolution services, Enzymes and Screening Kits. It also develops protein engineering and biocatalyst platforms such as Codeevolver, Ketoreductases, Transminases and Imine reductases. The company operates in two business segments, namely Performance Enzymes and Novel Biotherapeutics. It generates maximum revenue from the Performance Enzymes segment.

As of July 12, the stock was trading at $21.84 per share with a market cap of $1.41 billion. The shares are trading at a modestly overvalued rating according to the GF Value Line.

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GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rank of 2 out of 10. There are currently two severe warning signs issued for a low Piotroski F-Score and a declining operating margin. The company’s cash-to-debt ratio of 5.79 ranks its lower than 61.57% of biotechnology competitors, but an Altman Z-Score of 16.23 places the company far away from bankruptcy.

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The firm is the top shareholder with 10.35% of shares outstanding. Other top shareholders include

Baillie Gifford (Trades, Portfolio), BlackRock Inc. and Casdin Capital LLC.

Surface Oncology

The firm boosted its Surface Oncology (

SURF, Financial) position for the fourth quarter in a row. The 407,165 shares that were purchased traded at an average price of $7.46 on the day of the transaction and grew the holding by 10.01%. Overall, GuruFocus estimates the firm has lost 20.94% on the holding.

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Surface Oncology is a clinical-stage immuno-oncology company. It is developing new therapies that modify the spaces in and around tumors, the tumor microenvironment and to create conditions that support and sustain anti-tumor immune responses. The company's pipeline products are SRF231, SRF373, SRF617 and SRF388. Geographically, the activities are carried out through the region of the United States.

The stock was trading at $6.93 per share with a market cap of $302.27 million. The GF Value Line shows the shares trading at a significantly overvalued rating.

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GuruFocus gives the company a financial strength rating of 7 out of 10 and a profitability rank of 1 out of 10. There is currently one severe warning sign of a Beneish M-Score of -1.41 indicating the company may manipulate its earnings. The company turned cash flows around in 2020 alongside a licensing agreement with GSK after several years of negative returns.

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ARK Investment is the top shareholder with 10.31% of shares outstanding. Other top shareholders include Atlas Venture Associates IX LLC, Vanguard Group Inc. and FMR LLC.

CM Life Sciences II

Wood’s ARK Investment also established a new holding in CM Life Sciences II (

CMIIU, Financial) on June 30. The firm purchased 2.84 million shares that traded at an average price of $13.45 per share on the day of the transaction. Overall, the purchase had a 0.08% impact on the portfolio and GuruFocus estimates the total loss of the holding at 3.33% during its short lifetime.

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CM Life Sciences II is a blank check company aimed at life sciences companies. It seeks to provide needed capital and uses a unique buy-and-build strategy for growing companies which find it hard to access public capital markets but need to scale.

On July 12, the stock was trading at $13 per share, just below its debut price of $13.45 per share in February of this year. The company has seen share prices swing several times and there is not currently enough data for a GF Value Line to be displayed.

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ARK Investment is currently listed as the top shareholder after the holding was established. Other gurus invested in CM Life Sciences II include

Michael Price (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio).

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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.
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