ARK Invest founder and CEO Cathie Wood isn't letting any grass grow under her feet this September. Lately, the world's most famous growth stock investor has been in a hurry to snatch up shares of some great healthcare businesses.
The exchange-traded funds (ETFs) Wood manages added to existing positions in Pfizer (NYSE:PFE), Signify Health (NYSE:SGFY), and Teladoc Health (NYSE:TDOC) on three consecutive days this week. Let's take a closer look at why she just can't seem to get enough of these stocks.
You might think of the ARK Genomic Revolution ETF (NYSEMKT:ARKG) as a haven for biotechnology start-ups, but that isn't necessarily the case. Three times this week, Wood's added significantly to this fund's position in Pfizer, one of America's most established pharmaceutical giants.
Shares of Pfizer spiked in August after the FDA granted full approval to the COVID-19 vaccine the pharma giant developed in collaboration with BioNTech. Full FDA approval will make it easier for employers and other large organizations to implement vaccine mandates.
Since the U.S. Government has already purchased all the vaccine supply it could possibly need, delivering more doses shouldn't have any effect on Pfizer's bottom line. The cash flows it produces, though, give the big pharma company plenty of ammunition to fire at opportunities similar to the one BioNTech presented Pfizer in early 2020.
Unlike nearly every other stock in the ARK ETF universe, Pfizer pays a regular dividend. The stock offers a juicy 3.4% yield at recent prices and soaring drug sales could propel the payout much higher.
This healthcare stock made its stock market debut earlier this year and it's been beaten down around 32% since peaking in February. Clearly, Wood views the recent weakness as a bargain opportunity. On Monday, Tuesday, and Wednesday this week, she added more shares of Signify Health to her flagship ARK Innovation ETF (NYSEMKT:ARKK).
Signify's clients are generally healthcare benefits managers, including giants like UnitedHealth Group and Anthem. They hire Signify Health to help run value-based programs like Medicare Advantage.
Individual healthcare consumers in America might not feel the difference, but the Affordable Care Act has upended old fee-for-service reimbursement programs that inevitably lead to waste. These days there's a lot more incentive to produce positive long-term outcomes while spending as little as possible.
Companies built to make America's convoluted healthcare system more efficient almost always end up losing a lot of money for their investors before fizzling out. It looks like Signify Health has bucked the trend by identifying some profitable niches. The company expects around $160 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) this year.
Shares of Teladoc Health have lost half their value since they reached a peak this February. Wood clearly sees a bargain opportunity because ARK has been buying up shares of the country's leading telemedicine provider with both hands lately.
Teladoc Health is the second-largest holding in Wood's flagship ARK Innovation ETF and the largest holding in the ARK Genomic ETF. After making big purchases on Monday, Tuesday, and Wednesday, it's also a big holding in the ARK Fintech Innovation ETF (NYSEMKT:ARKF).
Teladoc Health shares have been beaten down because investors are worried about an exploding number of well-funded telehealth providers. For example, Talkspace raised $250 million going public this January.
Talkspace has put Teladoc Health's BetterHelp service under pressure, but Teladoc boasts a unique combination of digital health services that none of its smaller rivals can match. The company's currently integrating chronic care management services acquired from Livongo last year.
Employers that help their employees manage high blood pressure, diabetes, and asthma with help from Teladoc Health can save a bundle over the long run. The company has only scraped the surface of its total addressable market so don't be surprised if Wood keeps buying her favorite healthcare stock.