Superstar investor Cathie Wood is known for her winning stock picks. I'm talking about companies you can count on for performance over the long term. Wood's biggest funds have delivered gains of 180% or more over the past five years. That's compared with a 105% increase for the S&P 500 Index.
So, it's a good idea to watch what the founder of Ark Invest is buying. Wood favors growth and innovation -- companies with the power to transform and take leadership in their industries. The following three Cathie Wood favorites do come with a certain degree of risk. But if they're successful in the coming years, rewards could be big.
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1. Teladoc
Online medical visits surged during the early days of the pandemic. And Teladoc Health (TDOC -0.07%) benefited -- from a revenue and share price perspective. But the past year hasn't been great for Teladoc shares. The problem? Some investors worry demand for such services will fall post pandemic. And another concern is Teladoc's widening losses. The company's net loss has deepened following acquisitions -- such as the Livongo operation in 2020.
These concerns look overdone. Especially if we take a long-term view. Analysts predict the overall telehealth market will continue to grow in the double digits. And Teladoc's performance supports this. The company's membership has been steadily growing. And its online medical visits continue to climb even in this stage of the pandemic -- when general business has returned to normal and patients can opt for in-office appointments if they prefer. In the third quarter, for example, visits rose 37% to 3.9 million. And revenue per member is growing as people enroll in multiple programs. Many of these programs exist thanks to Teladoc's acquisition of Livongo, a specialist in the virtual management of chronic conditions.
Today, Teladoc shares look like a bargain. They're trading at about six times sales, down from more than 24 in 2020. This leaves plenty of room for long-term gains.
2. CRISPR Therapeutics
CRISPR Therapeutics (CRSP -1.35%) is a clinical stage biotech company so it doesn't yet have product revenue. But that may be about to change. CRISPR works in the area of gene editing. This involves correcting disease-causing genes. The company has partnered with commercial stage company Vertex Pharmaceuticals on the development of a gene-editing treatment for blood disorders.
The companies have reported positive clinical trial data on the candidate -- CTX001 -- and say they may be ready to file for regulatory approval by the end of this year. The potential product is a one-time curative treatment for sickle cell disease and beta thalassemia. Both disorders currently have limited treatment options. So CTX001 could be a game changer. CRISPR has eight other gene editing candidates in various treatment areas in the pipeline. And this means CTX001 could be just the beginning for CRISPR.
As for share price performance, it doesn't reflect this growth potential. The stock lost 50% last year and is down 10% so far this year. Of course, drug development always involves risks. Any potential bad news from clinical trials could seriously hurt the stock. But if all goes well for CTX001 and the candidate reaches commercialization, CRISPR may skyrocket.
3. Coinbase
If you want to bet on cryptocurrency without buying cryptocurrency, Coinbase Global (COIN -5.10%) may be the way to go. This cryptocurrency exchange giant has generated enormous levels of revenue and profit over the past two years. Cryptocurrency transactions account for most of Coinbase's revenue. So, its performance is linked to the popularity of cryptocurrency investing. That means revenue comes in weaker when the crypto market loses some steam. For example, revenue totaled $1.2 billion in the third quarter of last year, down from $2 billion in the second quarter.
But, if like Cathie Wood, you're bullish on cryptocurrency leader Bitcoin (or the crypto market in general), you'll put more focus on Coinbase's future prospects than on quarter-to-quarter fluctuations. In the most recent letter to shareholders, the company even said Coinbase is a "long-term investment in the growth of the cryptoeconomy." The crypto market reached $3 trillion for the first time last year. And thousands of cryptocurrencies have launched in recent years. So, there is reason to be optimistic.
And if you are optimistic about the crypto market, you'll find Coinbase shares particularly cheap right now. They're trading at about 20 times trailing 12-month earnings. That's down from more than 100 last spring. If cryptocurrency bulls are right about the future of this industry, Coinbase could climb significantly from here -- and deliver bigger gains than the market.
