The co-founder and CEO of Ark Invest, Cathie Wood, is closely watched by investors who are interested in growth stocks. And while high-growth companies didn't exactly deliver fantastic results in 2022, that doesn't mean investors should ignore them.
In fact, there are three great companies that Wood's firm recently purchased that investors should add to their buy list: Tesla (TSLA 3.48%), Adobe (ADBE 1.71%), and Roku (ROKU 3.70%). Here's why.
Image source: Getty Images.
1. Tesla
Tesla's stock has been on a wild ride lately, thanks to CEO Elon Musk's headline-making moves at Twitter and because the electric vehicle (EV) industry is facing some hurdles right now. But while Tesla's share price is down 61% over the past year, there are still plenty of reasons why Wood is bullish on this EV stock.
For one, the company recently reported its 2022 vehicle deliveries, which were up by 40% from the previous year to 1.31 million. Not only does that show that Tesla knows how to successfully increase its production and deliveries, but it's even more impressive when you consider that the company faced supply chain issues and rising costs last year.
NASDAQ: TSLA
Key Data Points
And, unlike many EV start-ups, Tesla's revenue and earnings are both growing. The company's sales increased 56% in the third quarter to $21.4 billion and net income doubled to $3.3 billion. Investors will get an even clearer picture of how Tesla is doing when the company reports fourth-quarter results on Jan. 25.
With a price-to-earnings ratio of 41, Tesla's stock isn't cheap. But investors looking for a profitable EV company that's on pace to produce 2 million vehicles in 2023 should follow Wood to the checkout counter with this stock.
2. Adobe
Adobe's share price fell along with many other tech stocks over the past year, but Wood is still bullish on this software-as-a-service company, and for good reason.
First, the company's 2022 sales increased by 15% on a constant currency basis to $17.6 billion in 2022 and its non-GAAP (adjusted) bottom line grew 7% to $6.5 billion. Management is optimistic about 2023, too, expecting sales to rise 9% to $19.2 billion, a 13% increase from the previous year.
NASDAQ: ADBE
Key Data Points
Some investors may be worried that a potential economic slowdown could drag tech stocks down further, but Adobe's in-demand services aren't likely to be axed as much by consumers if a recession comes along. A recent Gartner survey found that companies worldwide expect to increase their software spending by 11% in 2023 compared to the previous year. Gartner said that information technology spending is "recession-proof" and that companies are increasing spending on digital business initiatives, rather than cutting back. That doesn't mean Adobe stock is a hands-down winner, but it does mean that the company could likely weather any economic storm that comes along.
Adobe's shares trade for a slight premium right now, with its price-to-earnings ratio of 34 higher than the tech sector average of 25, but (besides a short dip a few months ago), Adobe's P/E ratio is lower than it's been in more than five years.
3. Roku
And finally, investors may want to consider snatching up shares of Roku's video streaming platform. Skeptics will point to Roku's 69% share price drop over the past 12 months, but there are a few reasons why the company's recent share price slide is presenting investors with a good buying opportunity.
First, Roku's active accounts reached a milestone of 70 million in the fourth quarter, which was up 16% from the year-ago quarter. While that's impressive enough on its own, it's also noteworthy because it marks three consecutive quarters of account growth.
NASDAQ: ROKU
Key Data Points
Second, Roku users spend more time streaming video on its platform than ever before. Streaming hours soared 23% to 23.9 billion in the quarter. That's an important metric because it shows that even after lockdowns and social distancing restrictions have gone away, Roku users are still committed to using the platform.
And finally, when you combine all of this current growth with the fact that Roku's price-to-sales ratio is just 2.2 right now -- compared to a P/S ratio of 8.6 this time last year -- the stock is much cheaper than it has been in the recent past.
These stocks will need some time to bounce back
Investors will need to be patient with these stocks as the market continues to react to high inflation and a potential recession. But with their current growth and their long-term potential, these stocks that Cathie Wood recently purchased could make a nice addition to your portfolio as well.
