Even after some recent positive trading sessions, the stock markets are still registering heavy losses this year. The S&P is down 18%, and the NASDAQ remains in bear territory with a 26% year-to-date loss.
But these broad-based market losses have also opened up opportunities, as many stocks have fallen for no fault of their own. Some of the Street’s most legendary investors are not shying away from buying in, even in this bearish environment. Andreas Halvorsen, a former Tiger Cub and the billionaire head of the Viking Global Investors hedge fund, is one of them, and has been going all-in on several stocks with high upside potential.
Halvorsen, who’s trading acumen has built Viking into a $47 billion giant, has followed something of a blanket strategy in building his fund. Viking covers some 1,000 publicly trading firms, and uses ‘thoughtful risk-taking’ to generate compelling returns for investors. And in recent weeks, Halvorsen has bought heavily into two high-risk, high-reward stocks.
According to TipRanks’ database, these are stocks with Buy ratings, and offering investors triple-digit upside potentials. We can take a closer look at them, and at the analyst commentary, to find out what else may have brought them to Halvorsen’s attention.
Celldex Therapeutics (CLDX)
The first Halvorsen pick we’ll look at is Celldex, a biopharmaceutical firm working on new treatments for devastating disease conditions that lack adequate existing treatment. Specifically, Celldex is using monoclonal and bispecific antibodies to create targeted therapies that will engage the patients’ immune systems for great effect against cancers and inflammatory diseases.
Celldex has three general research tracks – oncology, inflammatory, and bispecific – featuring five drug candidates. Three of the candidates are in clinical trials, and two in preclinical research stages. The inflammatory track is subject of most of the current research, with the leading drug candidate, barzolvolimab (CDX-0159) being tested in no fewer than 4 clinical trials. These trials are testing the drug against several conditions, including chronic inducible urticaria, chronic spontaneous urticaria (CSU), prurigo nodularis, and eosinophilic esophagitis.
The second of those conditions, CSU, is relatively one of the company’s most advanced trials. In two recent announcements, Celldex released interim data on the Phase 1b trial, which indicated a ‘rapid, profound and durable responses across multiple dosing groups with favorable safety profile.’ These results led to the announced initiation of a Phase 2 study, with the first patients dosed last month.
Turning to Halvorsen’s holdings in CLDX, we find that his Viking Global Investors fund owned 1,846,647 shares at the end of 1Q22. According to regulatory filings, Halvorsen has since picked up another 519,738 shares, and as of May 31 this year, the fund owns a total of 2,366,385 shares in Celldex. At current stock prices, this stake is worth more than $66.38 million. Halvorsen’s holding gives his hedge a 5.1% ownership in the biotech company.
RCelldex has also caught the attention of SVB analyst Thomas Smith, who points out the clinical trial successes of barzolvolimab as the key to this company: “These [CSU] data reinforce our view that barzolvolimab, with its unique mast cell-depleting mechanism of action, is tracking toward a differentiated profile that could unlock a significant commercial opportunity in treating chronic urticarias and mast cell-driven diseases broadly.”
“We continue to see a blockbuster opportunity for barzolvolimab in chronic urticarias and other mast cell-driven diseases based on a potentially differentiated profile that has featured unprecedented efficacy in CIndU patients utilizing a single 3.0mg/kg dose,” the analyst added.
It should be unsurprising, then, that Smith rates CLDX an Outperform (i.e. Buy). Not to mention his $68 price target puts the upside potential at 162%. (To watch Smith’s track record, click here)
There is some evidence here that Wall Street generally is in agreement with the bullish view on Celldex. The stock has picked up 4 recent analyst reviews – and they are unanimous that this is a stock to buy, giving CLDX its Strong Buy consensus rating. The shares are priced at $25.94, and their average target of $66.50 implies a robust upside of 156% from current levels. (See Celldex stock forecast on TipRanks)
Ginkgo Bioworks Holdings (DNA)
For the second Halvorsen pick, we’ll turn to a truly unique niche in the biotech world: the development of designer microorganisms, living cells with applications in a wide range of scientific and industrial sectors. Ginkgo bills itself as ‘the organism company,’ and has built a reputation as the go-to company for designer cell technology. Ginkgo’s engineered cells are used in areas from food, agriculture, and waste reclamation, to health, therapeutics, and medicines.
This truly unique company has been publicly traded for less than a year. Ginkgo entered the public markets last September, through a SPAC business combination with Soaring Eagle Acquisition Corporation. The combo saw the DNA ticker start trading on September 17, at $11.15 per share, and Ginkgo realized $1.6 billion in proceeds from the transaction. However, since the stock hit the public domain, the shares have fallen 71%.
At the same time, Ginkgo has posted solid increases in its revenue totals. The company has released four quarterly financial reports since it went public, and has seen revenues increase in the last three of those. The most recent quarter, 1Q22, showed $168 million at the top line; this was up 282% from the year-ago quarter. The growth was powered by the addition of 11 new cell programs to the company’s proprietary Foundry platform, an increase of 175% year-over-year.
On top of that recorded growth, Ginkgo has also revised its full-year 2022 revenue guidance, setting a new target of $375 million to $390 million. The new guidance represents an increase of 15% at the midpoint. The company also has plans to conduct a series of merger and acquisition moves during the coming year, and to enter a collaboration with Bayer, which will include access to Bayer’s collection of agricultural strains. Ginkgo boasts cash reserves of $1.5 billion to support its expansionary moves.
In another important announcement, Ginkgo in June made public the achievement of its third productivity milestone in its existing agreement with Cronos Group. The agreement is for the production of eight cultured cannabinoids, to expand Cronos’ lineup of commercial cannabis products.
Clearly, Halvorsen likes what he sees in this company. Viking owned over 51 million shares of the company at the end of 1Q22, and by May 31 had acquired an additional 64,028,984 shares to increase its total holding to 115,084,128 shares of DNA. This gives Halvorsen’s firm a 9.7% ownership stake in Ginkgo, which is currently valued at $372.87 million.
Cowen analyst Steven Mah is also impressed with Ginkgo, and sees the company’s ability to enter productive partnerships as the key to its success.
“Milestone achievements by Ginkgo are a key performance indicator and serve as validation of its platform. We believe that investor skepticism regarding the near-term revenue opportunity that R&D sharing economy business models present have been pressuring valuations. We believe these milestones showcase Ginkgo’s leading competitive positioning… With an expanding number of partnerships, we view the success in the Cronos partnership as a potential read-through for other near-term revenue opportunities vs current sentiment of downstream value realization far into the future,” Mah explained.
Overall, Mah rates DNA shares an Outperform (i.e. Buy) and his $12 price target implies it has room for an impressive 270% upside in the year ahead. (To watch Mah’s track record, click here)
Wall Street’s analysts have put up 5 recent reviews of Ginkgo’s stock, including 4 to Buy and 1 to Sell, giving the stock its Moderate Buy consensus rating. Share are trading for $3.24 and their $7.17 average price target suggests that they have a 121% upside ahead of them. (See Ginkgo stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
