Contrarian thinker

Cathie Wood has shown herself to be unafraid of going against popular investing opinion. In fact, she’s gone on record as saying that the “most exciting times” are when she’s on the receiving end of criticism. Her controversial early investment in US electric vehicle pioneer Tesla is a great example of this. 

As one might have guessed, the fund benefited hugely from this early call when Tesla multi-bagged in value last year. Since then, it’s come off the boil (fuelling further criticism of Wood’s strategy). However, it’s still the top holding in ARK Innovation.

Wood’s conviction is something I’ve tried to apply to my own investing. While I still don’t feel comfortable holding stock in Tesla directly, I do think it’s important to regularly evaluate the consensus view on any stock. In fact, this is essential if I’m to beat the market. I can’t generate better results than the herd if I’m doing exactly the same thing as the herd. Of course, stock-picking also raises the potential for me to underperform as well. 

Embrace disruption

The world is in a constant state of flux. Everything changes and nothing lasts. Rather than fight back against this, Cathie Wood embraces it. Linking in with her purchase of Tesla, she is a huge fan of disruptive companies — those that shake the foundations of an industry and change it for the better. As she puts it: “In a world driven by disruption, be on the right side of change.“

Although I can’t say that all of the stocks I own are disruptive, I do recognise the importance of looking ahead rather than in the rearview mirror. After all, a company’s past performance is no guarantee of future returns. It’s not hard to come up with examples that are now shadows of their former selves. Think mobile phone makers Nokia and Blackberry being impacted by the arrival of Apple.

So, when I’m investing in a specific stock, I regularly ask: “Will this company still be around in 5-10 years and, if so, will it be worth more than it currently is?” If I’m not at least cautiously optimistic, I don’t buy. 

Expect market corrections

Despite being very bullish on technological progress, Wood is experienced enough to know that the fund’s value, and stock markets in general, will never go up in a straight line. In fact, the former is down 10% in the last six months. Regardless of the reason, she knows that downturns are inevitable and, again, embraces them, saying: “Corrections are good, they keep us all humble.” 

Cathie Wood walks the walk too. When Tesla slumped back in February, she bought more of the stock. I’ve tried to do the same with my own investments, particularly during the coronavirus crisis.

This isn’t easy. However, I try to remind myself that, despite being volatile, equities have delivered the best gains of any asset class over the long term. This is the risk/reward trade-off. It’s one I — and clearly Cathie Wood — think is worth signing up for.

The post How I’d invest £5,000 using lessons from Cathie Wood appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Apple and Tesla. The Motley Fool UK has recommended BlackBerry and has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. 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.

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

One Wood stock I like a lot is Teladoc Health (NYSE: TDOC). The leading provider of virtual healthcare services is currently the fourth largest position in the ARK Innovation ETF.

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.

The post 2 Cathie Wood ARK stocks I’d buy today appeared first on The Twelfth Magpie.

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• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
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• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

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.

At the moment, most UK stockbrokers don’t offer the ARK Invest ETFs unfortunately. This means it’s generally not possible for UK investors to invest directly in these funds. That said, it is possible to invest in most of the publicly-listed stocks held within the ARK ETFs. With that in mind, here’s a look at three ARK stocks I’d buy for my ISA today.

A tech powerhouse

One ARK stock I’m very bullish on is tech giant Alphabet (NASDAQ: GOOG), the owner of Google and YouTube. It’s currently the sixth largest holding in the ARK Autonomous Technology & Robotics ETF.

There are a few reasons I’m bullish on Alphabet. Firstly, it’s one of the biggest players in the digital advertising space. The online advertising market was valued at around $304bn in 2019 and is expected to reach $980bn by 2025. This means there’s significant growth potential here.

Secondly, the company has plenty of growth potential in other exciting areas such as streaming, cloud, and autonomous vehicles.

Another thing I like about Alphabet is that its valuation isn’t excessive. Its forward-looking P/E ratio is only about 28. At that valuation, I think the stock offers a fantastic risk/reward proposition. I’ve made it one of my largest holdings.

An online shopping champion

The next ARK stock I like is Shopify (NYSE: SHOP). It’s held in a few different ARK ETFs. Shopify is a leading player in the e-commerce space. Globally, more than one million merchants rely on its platform to sell their goods online. E-commerce is one of the growth themes I’m most excited about in 2021 and I see SHOP as a great way to gain exposure to the theme.

Shopify’s revenues are booming at the moment. For 2020, revenue is expected to come in at around $2.85bn, up from $1.07bn in 2018. Analysts currently expect revenue of $3.75bn and $5.09bn for FY2021 and FY2022 respectively.

Shopify shares aren’t cheap. The company’s market cap is over $100bn now and its forward-looking P/E ratio is over 300. This adds risk to the investment case. However, I believe the long-term growth story here is very attractive.

An under-the-radar ARK stock

Finally, the third ARK stock I’d buy right now is Okta (NASDAQ: OKTA). It’s held in the ARK Next Generation Internet ETF.

Okta is an under-the-radar company that provides identity management solutions. Its cloud-based solutions help companies secure their most critical resources while enabling employees to work remotely. Currently, Okta has nearly 10,000 customers including the likes of Zurich, Renault, and The Motley Fool!

Okta’s revenues have surged in recent years as businesses have rushed to protect themselves from cybercrime. Last year, sales came in at $586m, up from $257m two years earlier. Looking ahead, analysts expect sales of $823m for the year ending January 2021 and $1.07bn for the year after. 

This stock isn’t cheap. It trades on a price-to-sales ratio of about 30, which adds risk to the investment case. However, cybersecurity is a massive theme that has enormous growth potential going forward. So, I think this ARK stock is worth the risk.

The post 3 ‘ARK Invest’ stocks I’d buy for my ISA today appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in Alphabet, Shopify, and Okta. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (C shares), Okta, and Shopify. 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.