Cathie Wood, the stock picker with near-super hero status as the head of ARK Invest, says investors should see the performance dip this year for her trademark fund as an opportunity — not a flop.
Shares in the disruption and growth-focused ARK Innovation ETF are down more than 20% in 2021. In a Dec. 17 blog post, Wood characterizes the slide as innovation stocks entering “deep value territory.”
She expects a significant rebound, with ARK’s investments in key disruptive technologies potentially delivering a 30% to 40% compound annual rate of return over the next five years.
Wood wrote that “only one other time in ARK’s history, at the end of 2018, has our research suggested such an optimistic growth potential over the next five-years.”
She championed three tech companies — let’s see if they offer investors more than a discount.
You might even decide to grab one with some of your extra cash.
Zoom exploded into public consciousness in 2020, quickly becoming many individuals’ and businesses’ preferred method of safely distanced communication. But investors have backtracked at lightning speed since October 2020. Zoom’s stock has shed an eye-watering 65% of its value since then.
Here’s the thing, though: Zoom is still crushing it.
Annualized revenue during the third quarter of 2021 was $4.2 billion, or 58.4% higher than in Q2 2020, back when Zoom was just breaking through.
Wood doesn’t see Zoom as some flash-in-the-pan meme stock; she sees it as a transformative enterprise communications solution that’s here to stay.
The company says it’s focused on future growth projects over stock price — a video-engagement center for direct company-to-customer communications; Zoom Whiteboard for collaboration; live translation and transcription services; and a partnership with Oculus, the virtual reality system maker owned by Facebook.
If tech stocks are too volatile for your taste, remember that you can build a diverse portfolio with your spare pennies.
DocuSign is another company that has changed how business is done worldwide.
The pandemic amplified the need for contactless, remote signatures, a technology DocuSign dominated before COVID first arrived. It’s now widespread. B2B services provider Enlyft says more than 13,000 companies use DocuSign.
And yet, the company’s stock is getting hammered. After peaking at $310.05 in September, the share price fell to $135.09 on Dec. 3 — a 56.4% drop.
Analysts interpreted the decline as a reaction to the company’s muted growth projection for Q4, but its Q3 was a success. Revenue and earnings per share both outdid estimates. DocuSign’s annualized revenue during the quarter was a healthy $2.2 billion.
Like Zoom, DocuSign is building out its offerings to help maintain growth. For example, its Agreement Cloud provides negotiation tools, AI-driven analytics and activity tracking capabilities.
Teladoc, a leader in virtual care and telehealth, rode into 2021 with the kind of momentum investors love to see. But it’s been downhill since February.
Teladoc shares are trading for around $94 a piece. That’s about 68% less than they were fetching in early February.
As with Zoom and DocuSign, there are questions around whether Teladoc can keep growing at a pace worth betting on. If people grow more comfortable receiving health care virtually, it should lead to wins for the company.
Teladoc’s third quarter revenue, $522 million, was 81% higher than the same period a year ago. Total client visits topped 3.9 million for the quarter, 37% more than in Q3 2020.
Is Teladoc a “deep value” like Wood says? Time will tell. It is fairly cheap though.
If uncertainty isn’t for you
Cathie Wood has helped make investors a lot of money. (Up until this year, anyway.) But predicting the future isn’t something she, or any other investor, has figured out.
Could innovative tech investments lead to massive gains? Sure. They could also flame out. That kind of uncertainty is baked into this kind of investing.
If you’re more comfortable with a more reliable, long-term hold, fine art might be more your speed.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.