We don't know exactly when the next bull market will arrive, but there's reason to be optimistic it's on the way. Bear markets, like the one that started last year, always transition into times of market growth. And we've already seen markets rally and some growth stocks take off this year.
Superstar investor Cathie Wood is well prepared for the next bull market because she favors innovative companies that generally excel in these sorts of environments. Wood's Ark Innovation ETF has outperformed the broader market so far this year, but she might see her flagship fund really take off in a bull market as investors favor high-growth companies. Let's check out two Wood favorites that could skyrocket.
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1. Tesla
Tesla (TSLA -1.11%) is Wood's third-biggest holding, and the top investor has spoken extensively about the electric vehicle (EV) maker's long-term potential. Yes, the company's growth slowed in the recent quarter amid headwinds such as a weakened economy, the company's increase in investments, and the negative effect of foreign currencies on earnings.
But these problems are temporary, and Tesla's long-term story remains promising. It's important to consider what the EV giant has accomplished so far and then consider its prospects.
Tesla is focused on per-vehicle profitability, and this year it is working to make that a long-term reality. The company is reducing costs, increasing investments in areas such as artificial intelligence, and generally working to improve production efficiency.
This is weighing on earnings in the near term (for example, net income fell in the quarter), but the efforts should pay off over time. Meanwhile, the company posted double-digit gains in the quarter in energy generation and storage revenue as well as services revenue.
Importantly, Tesla's cash position has increased by double digits to more than $26 billion, providing a solid balance sheet to support growth and maintain its leadership in the EV market.
The company has many ambitions, including the release of its Cybertruck this year and ongoing work on self-driving technology. And its efforts on cost and efficiency are likely to help it march along the pathway toward those goals while delivering earnings growth -- something a bull market is sure to like.
2. Teladoc Health
Shares of Teladoc Health (TDOC -2.40%) have struggled over the past couple of years as investors worried about the telemedicine company's lack of profitability so far. But Teladoc has taken some major steps since the start of the year to focus on reaching profitability, and these efforts are starting to bear fruit.
The telemedicine player cut jobs and office locations, improved efficiency, and set out to balance revenue growth with its quest for profit. Teladoc offers integrated-care memberships through employers and organizations, and it operates a mental health service, BetterHelp, marketed directly to potential patients.
In the most recent quarter, earnings met or surpassed management's forecasts, with chronic-care programs driving gains. That is a key growth area because about half of Americans suffer from at least one chronic illness.
Teladoc also made progress thanks to its commitment to a "whole person" approach, offering members primary care, specialists, and mental-health care. And the company gained 4 million members from rivals in the quarter, a sign the competitive landscape isn't too much of a headwind.
The company also announced a new effort -- an operational review of its business -- to ensure the quality of its portfolio of services and to perfect its cost structure. Teladoc hopes this will help it along the road to profitability and lift the struggling share price as a result.
Teladoc shares might not take off overnight. But once they get going, they could skyrocket thanks to the efforts I mentioned here as well as the company's leadership in this high-growth market. That's why it's an excellent Cathie Wood stock to buy now and hold for the long term.
