Cathie Wood Goes Bargain Hunting: 3 Stocks She Just Bought
Cathie Wood is quite transparent as a fund manager. The CEO and co-founder of Ark Invest publishes what she buys and sells for the company’s family of exchange-traded funds (ETFs) at the end of each trading day. It gives the investment community insight into the thought processes of a person who has become arguably one of the most well-known growth fund managers of our time.
On Monday, it added to its existing holdings in Shopify (STORE -4.64%), Twilio (TWLO -5.40%)and Teladoc (TDOC -2.86%). So what does Wood see now in these three fast-growing companies?
It’s hard to imagine how much some of the most powerful growth stocks have fallen. Shopify stock has now lost 74% of its value since peaking just five months ago. The popular e-commerce platform continues to grow, but its breakneck pace is slowing. Revenues have gone from an 86% increase in 2020 to a 57% growth last year. The deceleration is even more noticeable when focusing on individual 2021 quarterly reports.
Year-over-year revenue growth hit 110%, 57%, 46%, and 41%, respectively, in the four quarters of 2021. But is Shopify really about a quarter? of the company she represented when the shares peaked in November? Most companies would like to see 41% growth.
Shopify is an e-commerce giant. It gives merchants of all sizes the ability to sell through their own digital storefronts, but its services don’t stop there. The company also offers its customers seamless integration into social media apps where fans and friends can promote products and services.
Despite the stock price swooning, Shopify is about to undergo a 10-to-1 stock split. Typically, companies announcing stock splits surge ahead of these events. Shopify, however, was a misfire before the June split — a transition that will also feature measures designed to help strengthen the company’s corporate governance. Shopify will report new quarterly results on May 5, and Wood may try to bolster its position in the disadvantaged stock ahead of time, in case this upcoming report shows the company is turning things around.
Next time you’re waiting for a delivery driver to show up with your chicken tikka masala, know that when the delivery app lets you know your food has arrived, you can probably thank Twilio for the notification. Twilio is top dog when it comes to in-app communications. Many leading developers rely on it to provide accessible two-way communication options without having to leave their mobile apps.
It is a booming business. Revenue soared 54% in the company’s latest quarter. Acquisitions amplify that growth, but even if you cancel out those purchases, plus the revenue boost from the 2020 election season, it achieved a respectable organic growth rate of 39%.
Twilio is another former market darling who has been clubbed in recent months. The stock has fallen 72% since hitting an all-time high in February 2021. A combination of slowing organic revenue growth, lack of profitability and declining valuation multiples are weighing on Twilio. However, it still plays a vital role in making your smartphone smarter, and you don’t want to bet against this trend.
If Shopify and Twilio investors are smart, Teladoc gets the “Hold my virtual stethoscope” clincher with its slide. The telehealth leader has plunged 80% since peaking around the time Twilio did in early 2021.
Teladoc’s business understandably skyrocketed in 2020 when the pandemic made traditional in-person consultations with doctors, therapists, and other medical professionals much more difficult. Its ability to connect patients with online consultations was a win-win-win situation amid the COVID-19 crisis. Patients could receive the medical care they needed from the safety of their homes. Specialist doctors were able to generate additional income by helping patients who did not need to be on site. Insurance companies and employers have been able to save on health care costs and improve the productivity of their employees.
Investors have dumped Teladoc stock now that in-person doctor visits again feel like a fairly safe option for most patients, but plenty of people apparently still like the convenience of using its service. In its most recent quarter, its revenue grew 45% year over year, fueled in large part by a 41% increase in virtual tours. The business model is holding up much better than the stock, and Wood could expect 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 last year’s peak. Yet they continue to be high-growth stocks, delivering impressive double-digit percentage earnings gains. Wood seems to have the right idea here.