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Cathie Wood’s Top 15 Small-Cap Stock Picks

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·16 min read
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In this article, we discuss Cathie Wood’s top 15 small-cap stock picks. If you want to skip our detailed analysis of Wood’s history, investment philosophy, and hedge fund performance, go directly to Cathie Wood’s Top 5 Small-Cap Stock Picks.

Catherine Wood is an American millionaire investor, who founded ARK Investment Management in 2014. She serves as the chief executive officer and chief investment officer at her investment firm, with over 40 years of industry experience that has led her to focus on disruptive innovation and extensive research. Wood focuses on large-scale investments in technologically innovative sectors such as DNA sequencing, robotics, artificial intelligence, energy storage, and blockchain technology. At the end of the second quarter of 2021, Wood's 13F investment portfolio was worth $53.7 billion.

After receiving her Bachelor’s in economics and finance from the University of Southern California in 1981, Wood started her career with Jennison Associates LLC, where she remained for 18 years, serving across different roles including chief economist, equity research analyst, portfolio manager, and director. In 2000, she co-founded Tupelo Capital Management, a hedge fund where she managed about $800 million in global thematic strategies. In her illustrious career as a hedge fund manager, she then moved on to spend 12 years at AllianceBernstein Holding L.P. (NYSE:AB), as the chief investment officer of global thematic strategies with a portfolio worth over $5 billion.

In 2018, Wood established the Duddy Innovation Institute at Notre Dame Academy in Los Angeles, her alma mater.

With a personal net worth of $400 million, Wood manages a noteworthy portfolio worth over $53.7 billion for ARK Investment Management. The investment firm’s signature fund ARK Innovation ETF (NYSE:ARKK) has a net asset value of $25.52 billion as of the end of June.

The top ten holdings make up 35.8% of the portfolio, with investments concentrated in information technology, healthcare, finance, consumer discretionary, and communications sectors.

Some of the most notable stocks in Wood’s Q2 2021 portfolio include Tesla, Inc. (NASDAQ:TSLA), Roku, Inc. (NASDAQ:ROKU), Square, Inc. (NYSE:SQ), and Teladoc Health, Inc. (NYSE:TDOC).

Cathie Wood's Top 15 Small-Cap Stock Picks
Cathie Wood's Top 15 Small-Cap Stock Picks

Cathie Wood of ARK Investment Management

Why should we pay attention to Cathie Wood’s stock picks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Our Methodology

With this context in mind, here are Cathie Wood’s top 15 small-cap stock pics. We used ARK Investment Management’s 13F portfolio for the second quarter of 2021 to rank these stocks. The list was compiled according to the value of each holding in the investment portfolio. Companies with market capitalization ranging from $300 million to $3 billion were considered as small-cap stocks.

Cathie Wood’s Top 15 Small-Cap Stock Picks

15. Cerus Corporation (NASDAQ:CERS)

ARK Investment Management’s Stake Value: $123,773,000

Percentage of ARK Investment Management’s 13F Portfolio: 0.23%

Market Cap: $1.05 billion

Number of Hedge Fund Holders: 19

Ranking fifteenth on our list of Cathie Wood’s top 15 small-cap stock picks is Cerus Corporation (NASDAQ:CERS), which is a California-based company specializing in the development and deployment of important technologies and pathogen-protected blood components to blood banks, hospitals, and patients who require blood bags. The company is committed to blood safety and availability to patients for improved healthcare outcomes. Cerus Corporation (NASDAQ:CERS)’s INTERCEPT blood system aims to one day supply transfused blood components across the globe.

Wood’s ARK Investment Management owns 20.94 million shares in Cerus Corporation (NASDAQ:CERS) as of the end of the second quarter, valued at $123.7 million, and representing 0.23% of Wood’s 13F portfolio.

At the end of June, 19 hedge funds tracked by Insider Monkey held stakes in Cerus Corporation (NASDAQ:CERS), valued at $219.9 million, up from 15 in the previous quarter with stakes worth $265.5 million.

ARK Investment Management is the largest stakeholder in Cerus Corporation (NASDAQ:CERS), followed by Julian and Felix Baker’s Baker Bros. Advisors, who owns stakes worth $81 million in the corporation.

On August 3, the company announced earnings per share for the second quarter of 2021. The actual EPS was -$0.09, which exceeded analyst estimates by $0.01.

Cerus Corporation (NASDAQ:CERS) is a significant stock in Wood’s Q2 2021 portfolio, just like Tesla, Inc. (NASDAQ:TSLA), Roku, Inc. (NASDAQ:ROKU), Square, Inc. (NYSE:SQ), and Teladoc Health, Inc. (NYSE:TDOC).

14. Personalis, Inc. (NASDAQ:PSNL)

ARK Investment Management’s Stake Value: $125,032,000

Percentage of ARK Investment Management’s 13F Portfolio: 0.23%

Market Cap: $1.436 billion

Number of Hedge Fund Holders: 15

Personalis, Inc. (NASDAQ:PSNL) is the fourteenth stock on our list of Cathie Wood’s top 15 small-cap stock picks. The company provides advanced genomics sequencing and works to develop cancer vaccines and innovative cancer immunotherapies. The company’s patented tech, ACE Technology, enables complex genomic sequencing that is otherwise often impossible. The California-based Personalis, Inc. (NASDAQ:PSNL) provides genomics data to pharmaceutical companies, to aid them in immuno-oncology clinical trials, that are working diligently towards cancer immunotherapies.

Wood’s ARK Investment Management owns 4.94 million shares in Personalis, Inc. (NASDAQ:PSNL), worth $134.9 million, making up 0.25% of Wood’s 13F portfolio.

On September 20, Needham maintained a Buy rating on Personalis, Inc. (NASDAQ:PSNL), with a price target of $28.

ARK Investment Management is the leading stakeholder in Personalis, Inc. (NASDAQ:PSNL). Overall, 15 hedge funds were bullish on Personalis, Inc. (NASDAQ:PSNL) at the end of June, up from 13 in the previous quarter.

13. Nano Dimension Ltd. (NASDAQ:NNDM)

ARK Investment Management’s Stake Value: $134,906,000

Percentage of ARK Investment Management’s 13F Portfolio: 0.25%

Market Cap: $1.436 billion

Number of Hedge Fund Holders: 11

Nano Dimension Ltd. (NASDAQ:NNDM) is a provider of Additively Manufactured Electronics (AME), which is a technology employed by several industries to enable autonomous intelligent drones, cars, satellites, smartphones, and medical devices. Nano Dimension Ltd. (NASDAQ:NNDM) is well-known for its AME Technology, DragonFly LDM System, and Nanos 3D Fabrication Service. The Israel-based company has a market cap of $1.436 billion, and is the thirteenth stock on our list of Cathie Wood’s top 15 small-cap stock picks.

Wood’s ARK Investment Management owns 16.37 million shares in Nano Dimension Ltd. (NASDAQ:NNDM), worth $134.9 million, making up 0.25% of Wood’s 13F portfolio.

At the end of June, 11 hedge funds were bullish on Nano Dimension Ltd. (NASDAQ:NNDM), with stakes worth $173.9 million. This is compared to the same number of hedge funds in the previous quarter, with stakes valued at $203.1 million. ARK Investment Management is the leading stakeholder in Nano Dimension Ltd. (NASDAQ:NNDM).

12. Materialise NV (NASDAQ:MTLS)

ARK Investment Management’s Stake Value: $149,106,000

Percentage of ARK Investment Management’s 13F Portfolio: 0.27%

Market Cap: $1.206 billion

Number of Hedge Fund Holders: 14

Materialise NV (NASDAQ:MTLS) is a leading provider of 3D printing services and creative software solutions that have now become a significant part of the 3D printing industry. The Belgian company offers its customers the chance to digitally revolutionize their products, and change the future of their industry. Materialise NV (NASDAQ:MTLS)’s 3D printing services and software are utilized by the healthcare, automotive, aerospace, art and design, and consumer goods sectors worldwide. Materialise NV (NASDAQ:MTLS) is the twelfth stock on our list of Cathie Wood’s top 15 small-cap stock picks.

Wood’s ARK Investment Management owns 6.18 million shares in Materialise NV (NASDAQ:MTLS), amounting to $149.1 million, representing 0.27% of Wood’s 13F portfolio.

The company reported earnings per share of $0.08 for the second quarter on July 29, beating analysts’ consensus estimates by $0.11. Materialise NV (NASDAQ:MTLS)’s actual revenue also surpassed estimates by $2.03 million at $60.30 million.

At the end of the second quarter of 2021, 14 hedge funds tracked by Insider Monkey held stakes amounting to $201.1 million, up from 8 in the previous quarter with stakes worth $290.9 million. ARK Investment Management is the leading stakeholder in Materialise NV (NASDAQ:MTLS).

Stifel analyst Noelle Dilts initiated coverage of Materialise NV (NASDAQ:MTLS) with a Buy rating and a price target of $30 on September 2, representing 30% upside over the next year. She believes that 3D printing will enable digitalization in several industries in the near future, which means Materialise NV (NASDAQ:MTLS) is well-positioned to capitalize on market demand. The software suites provided by the company also make it a market leader in the industrial and medical sectors.

11. Codexis, Inc. (NASDAQ:CDXS)

ARK Investment Management’s Stake Value: $151,275,000

Percentage of ARK Investment Management’s 13F Portfolio: 0.28%

Market Cap: $1.831 billion

Number of Hedge Fund Holders: 16

Codexis, Inc. (NASDAQ:CDXS) is an enzyme engineering company that uses cutting edge technology to develop proteins for use in the pharmaceutical industry, fine chemicals, molecular diagnostics, and industrial enzymes. Codexis, Inc. (NASDAQ:CDXS) aims to create sustainable processes and products, accurate diagnostics, and improved patient outcomes for a better future. The company employs life science tools and tech to offer biotherapeutics that enable diagnostic innovations. Codexis, Inc. (NASDAQ:CDXS) ranks eleventh on our list of Cathie Wood’s top 15 small-cap stock picks.

Wood’s ARK Investment Management owns 6.67 million shares in Codexis, Inc. (NASDAQ:CDXS), valued at $151.2 million, and representing 0.28% of Wood’s 13F portfolio.

Out of the elite hedge funds tracked by Insider Monkey, 16 were long Codexis, Inc. (NASDAQ:CDXS) at the end of June, up from 13 in the previous quarter. ARK Investment Management is the biggest stakeholder in Codexis, Inc. (NASDAQ:CDXS).

The company announced earnings per share of -$0.01 on August 5 for the second quarter, beating analysts’ consensus estimates by $0.11. The actual revenue for Codexis, Inc. (NASDAQ:CDXS) was $25.45 million, exceeding forecasted revenue by $7.14 million.

On October 15, H.C. Wainwright analyst Swayampakula Ramakanth reiterated a Buy rating on Codexis, Inc. (NASDAQ:CDXS) and raised the price target to $33 from $28. He explained that Pfizer Inc. (NYSE:PFE) had purchased an enzyme from Codexis, Inc. (NASDAQ:CDXS) that would be used for the clinical trials of an oral Covid antiviral therapeutic candidate. If the drug is approved, Pfizer Inc. (NYSE:PFE) has placed a bulk order for the ongoing trial and initial launch, which would generate mega sales. Starting 2023, the Pfizer Inc. (NYSE:PFE) enzyme agreement could generate more than $20 million in revenue for Codexis, Inc. (NASDAQ:CDXS).

10. Castle Biosciences, Inc. (NASDAQ:CSTL)

ARK Investment Management’s Stake Value: $185,203,000

Percentage of ARK Investment Management’s 13F Portfolio: 0.34%

Market Cap: $1.6 billion

Number of Hedge Fund Holders: 14

Castle Biosciences, Inc. (NASDAQ:CSTL) specializes in developing diagnostic and prognostic tests for dermatologic cancers. These tests provide genomic information with utmost accuracy, and recognize the specific tumors for proper treatment. Castle Biosciences, Inc. (NASDAQ:CSTL)’s genomic tests also predict the risk of cancer recurrence, sentinel lymph node positivity, and metastasis. Castle Biosciences, Inc. (NASDAQ:CSTL) is the tenth stock on our list of Cathie Wood’s top 15 small-cap stock picks.

Wood’s ARK Investment Management owns 2.52 million shares in Castle Biosciences, Inc. (NASDAQ:CSTL), valued at $185.2 million, and making up 0.34% of Wood’s 13F portfolio.

Out of the 873 hedge funds monitored by Insider Monkey, 14 funds were bullish on Castle Biosciences, Inc. (NASDAQ:CSTL) at the end of June, down from 17 in the previous quarter. The leading stakeholder in Castle Biosciences, Inc. (NASDAQ:CSTL) is ARK Investment Management.

On September 3, Canaccord analyst Kyle Mikson kept a Buy rating on the shares and raised the price target to $52 from $47. Mikson stated that Castle Biosciences, Inc. (NASDAQ:CSTL) has a bright future ahead after the launch of its DecisionDx-SCC test, which will result in Medicare coverage for Castle Biosciences, Inc. (NASDAQ:CSTL).

9. NanoString Technologies, Inc. (NASDAQ:NSTG)

ARK Investment Management’s Stake Value: $193,588,000

Percentage of ARK Investment Management’s 13F Portfolio: 0.36%

Market Cap: $1.995 billion

Number of Hedge Fund Holders: 25

The ninth stock on our list of Cathie Wood’s top 15 small-cap stock picks is NanoString Technologies, Inc. (NASDAQ:NSTG), which is a pioneer in the field of spatial biology, allowing scientists to study multiple expressions of genes and proteins in the natural context of tissue structure in three dimensions. It is one of the most notable biotech stocks in Wood’s portfolio.

Wood’s ARK Investment Management owns 2.98 million shares in NanoString Technologies, Inc. (NASDAQ:NSTG), worth $193.58 million, representing 0.36% of Wood’s 13F portfolio.

On August 4, the company announced its earnings for the second quarter. NanoString Technologies, Inc. (NASDAQ:NSTG) reported earnings per share of -$0.41, beating analyst estimates by $0.05. The actual revenue presented for the company was $33.86 million, exceeding estimated revenue by $1.56 million.

Dan Brennan, an analyst at Cowen, lowered the price target on NanoString Technologies, Inc. (NASDAQ:NSTG)’s shares to $65 from $75, but kept an Outperform rating on the stock.

At the end of the second quarter of 2021, 25 hedge funds in Insider Monkey’s database reported owning stakes in NanoString Technologies, Inc. (NASDAQ:NSTG) worth $773.8 million. This is compared to the same number of hedge funds in the previous quarter, with stakes valued at $627.3 million. ARK Investment Management holds the largest stake in NanoString Technologies, Inc. (NASDAQ:NSTG).

8. Stratasys Ltd. (NASDAQ:SSYS)

ARK Investment Management’s Stake Value: $229,434,000

Percentage of ARK Investment Management’s 13F Portfolio: 0.42%

Market Cap: $1.8 billion

Number of Hedge Fund Holders: 21

Stratasys Ltd. (NASDAQ:SSYS) is the eighth stock on our list of Cathie Wood’s top 15 small-cap stock picks. The company is an Israel-based market leader in 3D printing and 3D production services, serving the aerospace, medical, tech, and automotive sectors with their best-in-class printers, materials, and end-to-end support.

Wood’s ARK Investment Management owns 8.87 million shares in Stratasys Ltd. (NASDAQ:SSYS), amounting to $229.4 million, and making up 0.42% of Wood’s 13F portfolio.

At the end of June, ARK Investment Management was the leading stakeholder in Stratasys Ltd. (NASDAQ:SSYS). Overall, 21 hedge funds were bullish on Stratasys Ltd. (NASDAQ:SSYS), down from 24 in the previous quarter.

Greg Palm, an analyst from Craig-Hallum, kept a Hold rating on the stock on September 2, raising the price target to $27, primarily after Stratasys Ltd. (NASDAQ:SSYS) secured a $20 million contract for printers and support services from the Department of Defense.

Stratasys Ltd. (NASDAQ:SSYS) is a significant stock in Wood’s Q2 2021 portfolio, just like Tesla, Inc. (NASDAQ:TSLA), Roku, Inc. (NASDAQ:ROKU), Square, Inc. (NYSE:SQ), and Teladoc Health, Inc. (NYSE:TDOC).

Alger Spectra Fund, by the investment firm Alger, mentioned Stratasys Ltd. (NASDAQ:SSYS) in their Q1 2021 investor letter. Here is what they said:

“Short position Stratasys also contributed to performance. Stratasys is one of the larger 3D printing companies. While additive manufacturing (3D printing) is a revolutionary concept, it has only seen its primary adoption for manufacturing prototypes and test parts, not high-volume end-use parts. Unfortunately for incumbents like Stratasys, additive manufacturing has continued to attract capital and dozens of new entrants have emerged with new technologies targeting specific applications. Industry pioneers like Stratasys have seen key patents expire and have lost market share to new competition. As a result of these factors, Stratasys has not grown for five years. Some industry participants believe that Stratasys’ plastic extrusion technology is simply too slow to be an acceptable solution for higher volume manufacturing. The short position contributed to portfolio returns when Stratasys’ shares declined due to year-over-year revenue contraction, continuing market share losses, a talent exodus, the issuance of new shares via a secondary offering, and no significant progress on developing new opportunities in promising additive verticals like metal and dental.”

7. Seres Therapeutics, Inc. (NASDAQ:MCRB)

ARK Investment Management’s Stake Value: $231,659,000

Percentage of ARK Investment Management’s 13F Portfolio: 0.43%

Market Cap: $578.744 million

Number of Hedge Fund Holders: 16

Seres Therapeutics, Inc. (NASDAQ:MCRB) is a biotechnology company that is backed by strong research, and is actively working towards revolutionizing the treatment for a wide range of diseases by modulating the function of the human microbiome. Seres Therapeutics, Inc. (NASDAQ:MCRB) translates the insights from the microbiomes to create a unique range of medicines to combat diseases. Two of its products are currently in the last stages of clinical trials, that are meant to treat and prevent diseases in the form of oral capsules. Seres Therapeutics, Inc. (NASDAQ:MCRB) is the seventh stock on our extensive list of Cathie Wood’s top 15 small-cap stock picks.

Wood’s ARK Investment Management owns 9.71 million shares in Seres Therapeutics, Inc. (NASDAQ:MCRB), valued at $231.6 million, representing 0.43% of Wood’s 13F portfolio.

Insider Monkey’s extensive hedge fund database suggests that 16 hedge funds held stakes in Seres Therapeutics, Inc. (NASDAQ:MCRB) at the end of June, down from 19 in the previous quarter. ARK Investment Management is the leading stakeholder in the company.

Mark Breidenbach, an Oppenheimer analyst, reiterated an Outperform rating on the stock on August 3, while lowering the price target from $18 to $16.

6. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS)

ARK Investment Management’s Stake Value: $237,767,000

Percentage of ARK Investment Management’s 13F Portfolio: 0.44%

Market Cap: $2.787 billion

Number of Hedge Fund Holders: 18

Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) develops and deploys transformative, innovative, and affordable technology, platforms, and systems for the United States National Security and related customers, allies, and commercial enterprises. The company focuses on unmanned systems, satellite communications, warfare, cybersecurity, microwave electronics, combat systems, and missile defense.

Wood’s ARK Investment Management owns 8.34 million shares in Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS), valued at $237.7 million, and making up 0.44% of Wood’s 13F portfolio.

According to the hedge funds tracked by Insider Monkey, 18 funds were long Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) at the end of June, up from 16 in the previous quarter.

On October 15, Truist analyst Michael Ciarmoli lowered the price target from $26 to $24, and kept a Hold rating on the shares, citing the aerospace and defense sectors' lack of catalysts, supply chain hindrances, inflation, and the uncertain budget for defense as factors behind the rating.

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Disclosure: None. Cathie Wood's Top 15 Small-Cap Stock Picks is originally published on Insider Monkey.