‘Too cheap to ignore’: Cathie Wood picks these 2 stocks under $5

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Cathie Wood has built her career on having contrary views and her firm Ark Invest has been known to go against the grain. As such, the 2022 bear market has done little to change its stance. Lately, Wood has even argued that the Fed’s aggressive monetary stance in its continued efforts to curb skyrocketing inflation is misguided. Pointing to deflationary signals, Wood says unless it changes course, the Fed’s actions could lead to a repeat of the Great Depression.

“If the Fed isn’t running, the setup will be more like 1929,” Wood said. The Fed raised rates in 1929 to quell financial speculation and then, in 1930, Congress passed Smoot-Hawley, introducing 50%+ tariffs on over 20,000 commodities and sending the world economy into the Great Depression. pushed.”

Meanwhile, back in the here and now, the Fed’s policies and rate hikes have wreaked havoc on the markets and stocks have plummeted across the board, leaving many stocks looking rather cheap.

So, Wood went shopping, and we used TipRanks’ database to find out what the analyst community has to say about two small stocks, under $5, that her company picked up recently. It turns out that each ticker only got buy ratings. Not to mention there is significant upside potential on the table as well.

ATAI Life Sciences (ATAI)

Wood is known to favor sophisticated 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 disorders – testing the use of psychedelics for medicinal purposes.

The company’s business model is differentiated; it operates through a decentralized platform that purchases and runs clinical programs with small affiliates formed around the pipeline candidates. Everyone has access to shared funds, with capital allocated as per need.

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After ditching some of its early programs that were deemed redundant, the company’s pipeline has whittled down to 8 candidates focused on treating depression, anxiety, schizophrenia, and substance abuse.

Leading the way is PCN-101/R-ketamine, indicated as therapy for treatment-resistant depression (TRD). Then there’s RL-007, which focuses on cognitive impairment associated with schizophrenia. Both drugs are currently in phase 2 trials.

Further in development, the pipeline includes GRX-917 (deuterated etifoxine), which is being developed for generalized anxiety disorder (GAD), for which the company recently announced positive preliminary pharmacokinetic and pharmacodynamic results from a phase 1 study. Positive preliminary results from the single ascending dose (SAD) portion of the phase 1 trial of KUR-101 (deuterated mitragynine), indicated for the treatment of opioid use disorder (OLD), were also recently announced.

With shares down 64% year-to-date, Wood is in a buying mood. In the third quarter, Ark Invest picked up 6,133,914 ATAI shares, increasing its position by 280%. At the current share price, these are now worth $17.61 million.

With top-line data for PCN-101’s Phase 2a proof-of-concept trial expected before the end of the year, Canaccord analyst Sumant Kulkarni thinks the upcoming readout could dictate near-term sentiment, though the analyst also thinks that those who have the long-term view will be rewarded in the end.

Kulkarni writes, “We believe it is important for the stock that PCN-101 meets targets. As with any neuropsychiatric study, we are aware of the risks, but at current levels, we consider the absolute dollar decline to be less than the potential upside.”

“Our larger stance on the stock remains the same,” the analyst continued, “that is, we continue to believe that ATAI presents a potentially solid opportunity for investors (particularly those with patience and/or a longer-term focus). to participate in the underserved mental health space. Along these lines, we point to ATAI’s relatively diverse mental health-focused pipeline (with a good mix of non-psychedelic and psychedelic compounds), and cash runway in 2025E that has a number of potentially meaningful covers catalytic converters.

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Kulkarni is clearly extremely optimistic; coupled with a buy rating, the analyst’s $27 price target allows for a whopping 868% full-year gain. (To view Kulkarni’s track record, click here)

Kulkarni’s opinion is not an anomaly; all current ratings — 5 in total — are positive, giving the stock a Strong Buy consensus rating. In addition, the average target stands at $25.60, suggesting that they will rise ~818% higher over the 12-month time frame. (See ATAI stock forecast on TipRanks)

SomaLogic (SLGC)

The next Wood pick 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 proteomics market expected to grow at a rate of 15% per year and reach $64 billion by 2024.

SomaLogic has its eye on a large portion of this market and may have the tools to do so. The SomaScan Discovery Platform can examine 7000 proteins in just 55 microL of blood sample, far beyond any competitor. It has also built a strong client list that includes Bristol-Myers Squibb, Novartis, Amgen, University of Cambridge and Stanford. In addition, both FDA and NIH labs use the proteomics platform.

The company is relatively new to the public markets, and IPOd in September 2021 via a SPAC merger. The timing is unfortunate as SPACS have fallen seriously out of favor in the 2022 bear market. The shares are down 77% since the turn of the year.

With the stock in the background, Wood apparently thinks it offers good value. Ark Invest opened a new position in SomaLogic in Q3 and gained 11,017,672 shares. These are currently worth more than $29.6 million.

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Stifel analyst Daniel Arias, who considers Somalogic “best-in-class” in several ways within the emerging proteomics space, is also optimistic.

“The company has a pioneering advantage in the market, due to an established portfolio that has been in the market for several years and has formed the basis for solid relationships with key commercial (ie, Novartis and Amgen) and academic research institutions,” Arias explained.

“Quarter ups and downs for SLGC have made model visibility difficult this year, but 4Q could have some upside, ’23 should still be a solid year of growth for the company – and we continue to see SLGC as one of the companies which is doing well -positioned to benefit from a growing proteomics market. With stocks trading near cash, we believe they are screened as attractive within the blacksmith cap space,” the analyst added.

To that end, Arias rates SLGC stock as a buy, while its $8 price target suggests the stock’s value could rise ~189% over the next year. (To view Arias’ track record, click here)

Do other analysts agree with Arias? They do. In the last three months, only Buy ratings, in fact 3, have been issued, so the consensus score is a Strong Buy. At $8, the average price target is the same as Arias’s. (See SLGC stock forecast on TipRanks)

To find great ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that unites all of TipRanks’ stock insights.

Disclaimer: The opinions expressed in this article are solely those of the recommended analyst. The content is for informational purposes only. It is very important to do your own analysis before making an investment.

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