Cathie Wood has become one of the investing world's most popular figures over the last year -- and for good reason. The founder and CEO of ARK Invest has helped put together a collection of actively managed exchange-traded funds (ETFs) that have absolutely crushed the market over the stretch, and she's shown a penchant for identifying innovative, tech-focused companies that have gone on to record huge gains.
With ARK funds putting up such incredible performance, we asked three Motley Fool contributors to dive into the list of individual stocks that Wood's company is backing and pick out some favorites. Read on for a look at three companies held in ARK funds that could be primed for massive wins.
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A revolution at the intersection of healthcare and tech
Keith Noonan (Teladoc Health): Think of all the time the average person has spent traveling to and from doctor's offices and flipping through magazines in waiting rooms. Some visits to medical centers obviously require in-person care, but imagine all of the potential time saved and convenience added if more appointments were conducted virtually.
Teladoc Health (TDOC -1.97%) is making that a reality and changing the face of healthcare -- connecting patients with doctors through video conferencing and other software support services. The company also stands as one of the largest combined holdings across Wood's ARK funds, and its stock has the makings of a long-term winner.
Teladoc currently trades down roughly 37.5% from the 52-week high that it hit in February. The decline is partially the result of some broader pullback in stay-at-home stock valuations, but Amazon announcing plans to expand its teleconference health service business has been the bigger catalyst behind the sell-off. Amazon is certainly a resource-rich competitor, but the tech and e-commerce giant's entrance into telehealth probably won't end Teladoc's growth story.
The virtual health services category is growing rapidly and should easily support multiple winners. Spurred on by social-distancing conditions, Teladoc managed to grow its revenue 98% last year. People will be making more in-person visits to the doctor as pandemic-related restrictions ease, but the long-term growth for teleconference health services is just getting started. And the company's recent acquisition of preventative and chronic care specialist Livongo will help boost sales this year and drive growth down the line.
Teladoc has a first-mover advantage in a category that has explosive potential, and virtual health services can provide both major quality of life improvements for patients who have difficulty traveling and greater convenience across the overall healthcare industry. With Teladoc trading well off its recent highs and offering big upside, risk-tolerant investors could see impressive returns from the stock.
A below-the-radar EV stock
Jamal Carnette (Magna International): At $3.5 billion in assets under management, the ARK Autonomous Technology & Robotics ETF (ARKQ -0.40%) tends to get overlooked outside of its significant Tesla stake. Despite Wood's reputation as a pure growth investor, tucked into its holdings are some value stocks, including ARK's 2% stake in automotive manufacturing company Magna International (MGA 0.17%).
Last year was difficult for the company: Sales dipped 17% to $32.7 billion mostly because of the pandemic. Analysts are bullish on the company and expect growth to resume, forecasting $40.6 billion in revenue this year. Despite the return to growth, shares still trade at only 12 times forward earnings and 0.8 times sales, both metrics less than half of the greater S&P 500.
The bulk of Magna's revenue is as a traditional automotive supplier with expertise in contract manufacturing and parts like body exteriors and powertrains. Magna has a long track record of partnership success with Ford and General Motors, and analysts expect revenue to increase with increased economic activity.
However, it's likely Wood is looking beyond the current year and to Magna's future opportunities. The company is quickly becoming an innovator in electric powertrains, announcing a major joint venture with LG Electronics and landing a significant deal with EV company Fisker to manufacture its electric Ocean SUV last year.
The LG/Magna joint venture appears to be on the cusp of a groundbreaking win. Speculation is the companies are on the verge of inking a deal to handle the initial production for Apple's clandestine electric car project nicknamed Titan. Magna is quickly becoming a critical supplier to electric vehicle companies and should benefit from the growth of electric vehicles, regardless of which company's name is on the hood.
The e-commerce innovator
Joe Tenebruso (Shopify): Shopify (SHOP 0.15%) is a top-10 holding for Wood in the ARK Innovation ETF (ARKK -1.68%) and rightfully so. Retail sales are rapidly shifting online -- and Shopify is helping more than a million merchants around the world adapt to this massive global trend.
Shopify lies at the center of e-commerce and entrepreneurship. It provides top-tier online retail software at prices that are affordable to individual entrepreneurs and small businesses, with plans that start as low as $9 per month. Services include payment processing, fulfillment, shipping, business financing, and a host of other e-commerce solutions.
Shopify's sales have boomed during the coronavirus pandemic along with those of its merchant customers. Its revenue rocketed 86% to $2.9 billion in 2020, as gross merchandise volume (GMV) -- essentially, the total dollar amount of sales merchants generated on its commerce platform -- surged 96%, to $119.6 billion.
Moreover, Shopify's profitability is rapidly improving as it scales its operations. Its adjusted operating income soared nearly tenfold to $437.4 million, as its adjusted operating margin improved to 15%, up from 3% in 2019.
Best of all, Shopify has tremendous room for expansion still ahead. E-commerce sales in the U.S. and many other nations still comprise less than 20% of total retail sales. Yet these percentages are rising steadily, and if they ever approach the level at which China stands today -- with online retail sales accounting for more than half of total retail sales -- Shopify's revenue and profits could continue to grow exponentially over the next decade.
