Cathie Wood is one of the biggest names in investing right now. It’s not hard to see why. Over the last year, her ARK Innovation ETF has returned 144% for investors.
Here, I’m going to highlight two Wood-owned stocks I’d buy for my own portfolio today. Both have done well over the last year. However, I also believe they’ve a lot of growth ahead.
A top Cathie Wood stock
The reason I’m bullish here is I expect the virtual healthcare industry to grow substantially in the years ahead. Ultimately, telemedicine is a win for both patients and healthcare companies. For patients, it’s more convenient. Meanwhile, for healthcare professionals, it’s far more time-effective. According to Mordor Intelligence, the global virtual healthcare market will roughly triple between now and 2026.
TDOC posted a strong set of fourth-quarter and full-year 2020 results last week. For Q4, revenue was up 145% year-on-year to $383m with total visits up 139% to 3m. For the full year, revenue was up 98% year-on-year to $1,094m with total visits up 156% to 10.6m. Adjusted EBITDA for the full year was $126.8m compared to $31.8m for 2019.
There are some risks to be aware of here. One is the valuation. Currently, TDOC has a market-cap of $33bn which equates to a forward-looking price-to-sales ratio of about 17. That’s a high valuation. If future results are disappointing, the shares could fall. The company is also facing competition from the likes of CVS Health.
Overall, however, I think the long-term story here is very attractive. I see the recent share price weakness as a buying opportunity.
An e-commerce powerhouse
Another Wood stock I’m excited about is e-commerce platform Shopify (NYSE: SHOP). The business makes it easy for merchants to build digital storefronts and manage their online operations. Shopify is currently a top 10 holding in both the ARK Innovation ETF and the ARK Fintech Innovation ETF.
The reason I like SHOP is that I expect the e-commerce industry to get much much bigger in the years ahead. By 2027, the global market is set to be worth around $10trn, up from around $4trn in 2020, driven by escalating mobile usage. This market growth should benefit Shopify.
Recent Q4 and full-year results here were impressive. Revenue for Q4 was up 94% to $978m while full-year revenue was up 86% to $2.3bn. The company did warn, however, that sales growth could moderate in 2021 as some consumer spending moves back to retail stores.
Like TDOC, Shopify is an expensive stock. Currently, it has a market-cap of $157bn and sports a price-to-sales ratio of 38. So, there’s certainly some valuation risk here. Another risk to consider is competition in the e-commerce space. Recently, Amazon acquired Selz, a company that also helps businesses launch their own online stores. This suggests Amazon is planning to compete more directly with SHOP.
Given the high valuation, this isn’t a growth stock I’d load up on. However, after the recent share price pullback, I’d be happy to buy a small position for my portfolio.
Edward Sheldon owns shares in Amazon, Teladoc Health and Shopify. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon, Shopify, and Teladoc Health and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.