Cathie Wood's ARK Invest group of exchange-traded funds lost substantial value in 2021, but it's not hard to see why. The famed stock investor's funds are heavily invested in growth stocks, and there has been a steady flight of money out of high-flying growth stocks into value stocks in recent months.
Cathie Wood, however, remains unperturbed and continues to buy shares in disruptive companies. Wood has, in fact, often stressed, especially during volatile times like these, how ARK Invest invests with a five-year investment horizon in mind and how it takes advantage of market corrections to buy strong conviction stocks. Given the long-term focus and the underlying growth catalysts, here are three solid Cathie Wood stocks that could deliver big returns over time.
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Shopify (NYSE: SHOP) shares have been hammered and are down a whopping 41% in 2022 alone so far, as of this writing. Aside from the broader market pressures, critics have also raised concerns about decelerating growth at Shopify. The thing is, e-commerce boomed during the COVID-19 pandemic as more people bought goods and services online, and many fear Shopify may not be able to sustain its growth momentum as the world returns to normalcy. Granted, Shopify said last quarter it expects revenue in 2021 to grow at a slower pace as compared with 2020, but that still doesn't justify the sharp drop in the stock price.
The pandemic is far from over, and even otherwise, e-commerce is a secular trend as the convenience of online shopping isn't going to wane. For its part, Shopify has built a niche within the e-commerce industry by focusing on entrepreneurs and small businesses and enabling them to set up and manage online shops. The response to Shopify's products and services so far has been nothing short of phenomenal -- its merchant count crossed 1.7 million and its gross merchandize value, or total value of sales, crossed $400 billion in the third quarter.
Shopify's hunger to innovate, upgrade, and provide merchants with more facilities and features works hugely in its favor. To give you some examples, Shopify has tie-ups with nearly every social media platform, has its own logistics arm, and recently launched cross-border e-commerce services as well as a money management product for merchants. Shopify is doing a lot more to attract more merchants and corner a larger share of the e-commerce market. With Shopify all set to report its fourth-year numbers and provide guidance for 2022 in mid-February, it's a stock you'd want to watch closely.
A multibillion-dollar market with massive growth potential
Teladoc Health (NYSE: TDOC) is another compelling Cathie Wood stock that's been butchered lately – the virtual healthcare stock has halved in just the past three months. The fears are similar to but deeper than those attached with Shopify -- the COVID-19 pandemic hugely boosted the telehealth industry, and the market isn't sure how much Teladoc can grow as patients start visiting doctors and hospitals in-person again.
Again, the fears are overdone and Teladoc's prospects underappreciated. Teladoc was a first-mover in the industry and is now the world's largest telehealth company. Importantly, Teladoc doesn't just offer virtual primary care but also specializes in chronic disease management, an area it entered after its big-ticket acquisition of Livongo in 2020. To expand its reach, Teladoc is now partnering with large health plan carriers and recently struck a partnership with the National Labor Alliance of Health Care Coalitions, the largest alliance of labor unions.
Now to put some numbers to Teladoc's growth, it clocked an estimated 18 million visits and is estimated to have grown its revenue by nearly 85% to $2 billion in 2021. Sure, 2022 may not be as great for the company as 2021 in terms of revenue growth, but Teladoc still expects to grow revenue by compound annual rates of 25%-30% between 2021 and 2024, which means its annual revenue could cross $4 billion by 2024. Teladoc's total addressable market in the U.S. alone is worth hundreds of billions of dollars, and that alone means Teladoc's growth story may have only just started.
Cathie Wood is a fan of EVs, and the largest EV manufacturer
Given how Tesla (NASDAQ: TSLA) is the largest stock ARK Invest owns across all funds, Cathie Wood is evidently a big fan of the electric-vehicle (EV) giant. She's not wrong to be bullish about the largest EV maker in the world.
Tesla just delivered stellar numbers for its fourth quarter, reporting a 71% surge in vehicle deliveries and 65% jump in revenue year over year. It was a record quarter, with Tesla's operating profit margin almost tripling year over year to 14.7%. Tesla delivered a record number of 936,000 vehicles in 2021 despite the semiconductor chip supply crunch, and ended the quarter with $17.6 billion in cash and cash equivalents.
Those are massive numbers for a company that delivered its first car barely 13 years ago, and yet, Tesla's growth potential is as strong as ever. Now there are several EV makers out there with promising technologies and cars, but Tesla has mastered what matters most in a complicated and capital-intensive industry like EV manufacturing -- large-scale production and the ability to add capacity to meet demand. Most importantly, Tesla also makes a profit, which is a huge milestone in the EV industry.
Tesla is now not only expanding production capacity at existing factories but also trying to set up new manufacturing facilities including a gigafactory in Berlin so it can sell German-made vehicles in Europe in the near future. Tesla has the expertise, money, and resources to convert its big plans into reality even as demand for EVs is expected to rise exponentially in the coming years. Combined, the two factors could prove to be the biggest growth drivers for Tesla's stock price.
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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool owns and recommends Shopify, Teladoc Health, and Tesla. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.