Investing in Dogecoin (DOGE 0.71%) would have been one of the best financial moves you could have made over the last year. The cryptocurrency's price per token soared roughly 10,260% across the stretch, but there could be better alternatives for growth-focused investors going forward. If you're willing to take on risk in pursuit of explosive returns, it's worth taking a look at companies backed by Cathie Wood's hugely successful ARK Invest firm.
We asked three Motley Fool contributors to weigh the prospects of Dogecoin against ARK's exchange-traded funds (ETFs) and their individual components, and they've identified three stock picks they believe will outperform the cryptocurrency. Read on to see why they think Teladoc Health (TDOC 4.88%), Skillz (SKLZ 1.61%), and Ark Innovation ETF (ARKK 3.36%) will deliver better returns than Dogecoin.
Tap into a big growth trend in healthcare
Keith Noonan (Teladoc): Dogecoin's performance over the last year has been nothing short of incredible, and I tip my hat to everyone who has scored strong performance with the cryptocurrency thus far. As impressive as the crypto token's performance has been recently, I also think most investors should still be cautious about its long-term prospects.
Dogecoin has gotten a boost from general momentum in the overall cryptocurrency space and shout-outs from Tesla (NASDAQ: TSLA) CEO Elon Musk, but pricing momentum alone shouldn't be taken as an indicator of strong future returns. At the end of the day, I struggle to come up with any fundamental case for why the price of Dogecoin should go up, and there are plenty of other cryptocurrencies that offer similar or superior features and functionality.
Speculation on cryptocurrencies has yielded huge returns for some investors, but I typically prefer stocks that are backed by solid businesses when I'm looking for big growth opportunities. In that mold, I see a lot of long-term promise in virtual health services provider Teladoc. The company is providing a platform that allows patients to consult with doctors over live-streaming, and its services could continue to power a major shift in the healthcare space.
Teladoc's revenue climbed roughly 98% year over year in 2020, and it looks like more strong sales growth should follow. While sales undoubtedly got a big boost last year from social-distancing conditions related to the coronavirus pandemic, it looks like continued user growth and the company's acquisition of digital health specialist Livongo will power another year of strong growth. Teladoc is guiding for sales between $1.95 billion and $2 billion -- representing annual growth of 80.5% at the midpoint of the target. I see a strong growth outlook here, whereas what comes next for Dogecoin is much more difficult to predict.
And while Dogecoin has recently surged to new heights, Teladoc still trades at a substantial discount from its own recent valuation peak. The virtual health services company's share price reached a record of $308 per share in February, but it now trades down roughly 41% from that level. Dogecoin's gains are astounding considering that the cryptocurrency was started as something of a joke back in 2013, but I think Teladoc looks like a better bet going forward.
Find the road less traveled
James Brumley (Skillz): I'm all for borrowing investment ideas from known gurus like Wood. The thing is, a lot of her new stock picks are older names that have already been driven up by well-known stories. Square (NYSE: SQ) and Tesla come to mind. An investor would be better served not mirroring every single buy and sell her Ark Invest funds make, but rather, waiting for that one odd new name nobody's heard of.
That pick came Wednesday when the ARK Innovation ETF added a small position in beaten-down shares of video game software company Skillz (SKLZ 1.61%). Never heard of it? That's the point. The trading crowd isn't clamoring to own a stake -- at least not yet.
The elevator pitch is simple enough. Skillz lets mobile game developers connect players to one another, ultimately facilitating what qualifies as casual esports events. If you've played Tether Studios' Solitaire Cube or won some cash in a Color Ring tournament, then you've unknowingly utilized Skillz's digital know-how. These casual gaming tournaments aren't as splashy as better-known esports leagues like League of Legends or Counter Strike, but there's certainly a growing market for casual gaming competitions. Skillz is expected to enjoy revenue growth of 60% this year, which in turn should begin its progress toward profitability rather than away from it.
The big takeaway for investors is this isn't a pick most would have come across if they were just looking for a familiar name to trade. You have to check under the obscure rocks too.
Just follow the queen of speculation
David Butler (Ark Innovation ETF): Those interested in Dogecoin clearly have an appetite for risk. If you want investment exposure to speculative, future-oriented investments, you don't even need a particular stock. Just buy Wood's ARK Innovation ETF. It might not be as exciting as Dogecoin, but its performance is grounded in something more tangible and understandable than the flurry of cryptocurrencies. It's based on the performance of companies.
Wood goes after the businesses at the purported forefront of new industries. If you have it in your head that you want to invest in the future, just invest in her fund. She has several to choose from, but the simple ARK Innovation ETF is all you need. Its holdings include Tesla, Square, Teladoc Health, Zoom (NASDAQ: ZM), and Zillow (NASDAQ: Z).
If your appetite is for big gains, Wood's strategy has offered it. Over the last year, the ARK Innovation ETF has delivered 177% in returns, with a five-year average of 46.35% annually. Of course, that's not on par with what Dogecoin has delivered recently, but the risk is extremely reduced. There's nothing wrong with playing around with some crypto, but you definitely don't want the majority of your eggs in that basket.
Diversify your aggressive investments by getting into some ETFs like those managed by Cathie Wood.