Cathie Wood is pretty transparent as a fund manager. The CEO and co-founder of Ark Invest publishes what she buys and sells for the firm's family of exchange-traded funds (ETFs) at the end of every trading day. That gives the investing community a glimpse into the thought processes of a person who has arguably become one of the best-known growth fund managers of our time.
On Monday, she added to her existing stakes in Shopify (SHOP 0.23%), Twilio (TWLO -1.49%), and Teladoc (TDOC -1.52%). So what does Wood see now in these three fast-growing companies?
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Shopify
It's hard to fathom the degree to which some of the mightiest growth stocks have fallen. Shopify stock has now lost 74% of its value since peaking just five months ago. The popular e-commerce platform is still growing, but its heady pace is slowing. Revenue went from soaring by 86% in 2020 to 57% growth last year. The deceleration is even more noticeable when one focuses on 2021's individual quarterly reports.
Year-over-year top-line growth clocked in at 110%, 57%, 46%, and 41% through the four quarters of 2021, respectively. But is Shopify really roughly a quarter of the company it was when the shares were peaking in November? Most companies would love to be growing at a 41% clip.
Shopify is an e-tail giant. It gives merchants of all sizes the ability to sell through their own digital storefronts, but its services don't end there. The company also provides its clients with seamless integration into social media apps where fans and friends can promote products and services.
Despite the swooning stock price, Shopify is about to undergo a 10-for-1 stock split. Commonly, companies announcing stock splits shoot higher prior to those events. Shopify, though, has been a dud ahead of the June split -- a transition that will also feature some moves designed to help beef up the company's corporate governance. Shopify will deliver fresh quarterly results on May 5, and Wood could be trying to bulk up her position in the out-of-favor stock beforehand, in case this next report shows that the company is turning things around.
Twilio
The next time you're waiting for a delivery driver to show up with your chicken tikka masala, recognize that when the delivery app lets you know your food has arrived, you can probably thank Twilio for the notification. Twilio is the top dog when it comes to in-app communications. Many leading developers lean on it to provide two-way communication options that can be accessed without having to leave their mobile applications.
It's a booming business. Revenue climbed 54% in the company's latest quarter. Acquisitions are padding that growth, but even if you back out those purchases, as well as the 2020 bump in election season revenue, it has achieved a respectable organic growth rate of 39%.
Twilio is another former market darling that has been pummeled in recent months. The stock has fallen by 72% since hitting an all-time high in February 2021. A combination of slowing organic revenue growth, a lack of profitability, and shrinking valuation multiples are weighing on Twilio. However, it still serves a critical role in making your smartphone smarter, and you don't want to bet against that trend.
Teladoc
If Shopify and Twilio investors are smarting, Teladoc gets the "hold my virtual stethoscope" clincher with its slide. The telehealth leader has plunged by 80% since peaking around the time that Twilio did in early 2021.
Teladoc's business naturally soared in 2020 when the pandemic made traditional in-person consultations with doctors, therapists, and other medical professionals much more challenging. Its ability to connect patients with online consultations was a win-win-win situation amid the COVID-19 crisis. Patients could receive the medical attention they needed from the safety of their homes. Medical specialists were able to generate incremental revenue by assisting patients who didn't have to be local. Insurance companies and employers were able to save on healthcare costs and improve the productivity of their employees.
Investors have moved on from Teladoc's stock now that in-person medical consultations once again feel like a fairly safe option for most patients, but a lot of people apparently still like the convenience of using its service. In its latest quarter, its revenue rose by 45% year over year, fueled largely by a 41% increase in virtual visits. The business model is holding up a lot better than the stock, and Wood may be holding out for a positive surprise when Teladoc reports first-quarter results on Wednesday.
Shopify, Twilio, and Teladoc have all seen their shares fall by at least 72% since peaking last year. Yet they continue to be strong growth stocks, cranking out impressive double-digit percentage revenue gains. Wood seems to have the right idea here.
