Celebrity investor Cathie Wood grabbed public attention last year, and for good reason. The flagship of his company exchange traded fund, ETF Arche Innovation, has skyrocketed 149% in 2020. The pandemic has actually propelled many of its large portfolios, which focus on companies that use innovative technologies to disrupt traditional industries.
As an individual investor looking to increase your returns, you can gain exposure to some of Cathie Wood’s best stocks by investing directly in their stocks. Let’s find out why DocuSign (NASDAQ: DOCU), JD.com (NASDAQ: JD), and Roku (NASDAQ: ROKU) have been identified by a team of Motley Fool contributors as companies with excellent long-term prospects that may well give you early retirement.
Commit to strong growth
Eric Volkman (DocuSign): DocuSign, the leading digital signature specialist, is a company that could really well prepare an investor for their retirement years. As the world becomes more and more e-connected, DocuSign will be there to generate revenue from its services.
Many investors were keenly aware of this during the pandemic, which was the highlight for work-from-home situations (and therefore considered the same for remote digital signing of documents). As a result, DocuSign has achieved the highest price levels in its short history.
Recently, however, the hope that we will soon overtake the delta variant to largely escape the epidemic has plagued DocuSign’s stock. It has come down from those high price points as investors turn to companies they think are best positioned for the recovery.
I think this opens up a good opportunity to buy DocuSign at what ultimately turns out to be a cheap price. Why? Because the strong growth of online document signing services is not just a trend in the era of the pandemic.
During the stay-at-home era, many users discovered them for the first time and are now well aware of their usefulness and saving of resources. Demand for those offered by DocuSign is expected to increase, if at all, even as we start to return to the office – maybe even more, given that we’ll likely be busier there.
We can fully expect continued double-digit growth from DocuSign. The company managed to grow its revenue by 50% year-over-year to nearly $ 512 million in the second quarter of fiscal 2022, which exceeded the growth rate of the same quarter from last year.
DocuSign is a young company offering services that are only just starting to gain popularity, so it continues to land in the red by GAAP standards. But if we get down to the non-GAAP (adjusted) numbers, the company enjoys pretty healthy profitability. Net income for this quarter increased significantly to nearly $ 98 million for the quarter, from $ 34.8 million a year ago.
Zooming out into all of 2022, DocuSign is targeting annual revenue growth of at least 43%, which roughly matches analysts’ average estimate. The company did not provide any earnings forecast, but given the propulsive momentum, we can also expect further improvement in this item.
The world is full of bureaucracy, and we will never stop signing our names on the dotted line. What is changing is that the process is increasingly done online. And very often, the company that provides the digital means to do this is DocuSign.
Cathie’s favorite Chinese action?
Jeremy bowman (JD.com): Cathie Wood made headlines in July when ARK Invest gave up much of its holdings in Chinese equities following the bloodshed in Chinese tutoring companies like TAL Education Group and New Oriental Education Group after Beijing said these companies should become non-profit organizations.
At the time, Wood argued that Chinese stocks were experiencing a “valuation reset,” adding, “From a valuation point of view, these stocks have gone down and again, from a valuation point of view, they will probably remain declining “.
However, Wood did an about-face in August, plunging back into JD.com after the e-commerce company released a strong second quarter earnings report. Wood says Bloomberg of his renewed optimism on the Chinese market: âI am not pessimistic about China in the longer term because I think it is a very entrepreneurial company.
JD has been a popular choice for ARK Invest in recent weeks, as it now owns around 2.5 million shares of JD in its funds worth around $ 200 million.
It’s easy to see why Wood loves JD. As the largest online and general retailer in China, the company is both delivering strong growth and entering a huge market. China is both the world’s largest e-commerce and retail market and is expected to be the world’s largest economy over the next 10-20 years.
JD grew 26% to $ 39.3 billion in its most recent quarter, and its revenue mix is ââgradually shifting to higher-margin service companies like logistics and its third-party market. In direct retail, it is also diversifying beyond its origins as a retailer of electronics and home appliances to general merchandise, including consumables like groceries and pharmacy, operating a vast addressable market. JD has built an extensive warehouse network that rivals Amazon, and has also developed cutting-edge logistics technology, including a fully automated warehouse with just four employees and autonomous vehicles that deliver packages.
With this kind of technology, a large market to enter, and a solid history of growth, it’s easy to see why JD is one of Wood’s favorite Chinese stocks.
Control the entertainment experience in the living room
Neil patel (Roku): It should come as no surprise to anyone that streaming video entertainment is becoming more and more popular, a trend that has been further propelled by the pandemic. The United States, for example, is only expected to have 60 million homes wired in 2025. That’s down from nearly 100 million in 2015, and Roku is shaping up to be the biggest beneficiary of this cut change. As the third largest stake in Cathie Wood’s Ark Innovation ETF, this rolling action has the chance to really make a difference for her company’s portfolio (and yours).
What really sets Roku apart is that the content service doesn’t matter, either. Netflix, Walt disneyfrom Disney +, or Amazon Prime, ends up having the most followers. Roku will win no matter what.
Founder and CEO Anthony Wood has essentially built a three-sided platform business that connects the aforementioned content companies with viewers who want to access all of their favorite shows and movies in one place. And organizations looking to target those customers with ads are also coming to Roku to attract audiences they can’t reach on traditional TV. Therefore, Roku’s competitive strength lies in its powerful network effects, where adding more users increases value for others.
People tend to stream content primarily to TVs, which directly benefits Roku. More than a third of new smart TVs sold in the United States come with Roku’s software already built-in. As consumers continue to move away from their outdated, expensive, and unfriendly video streaming cable subscriptions, Roku will continue to thrive. With 55.1 million active accounts that streamed 17.4 billion hours of content in the last quarter, Roku is increasingly becoming the leading TV operating system control our living rooms in a streaming world.
Revenues for the most recent quarter jumped 81% year-on-year, and management expects sales for the current quarter to be 51% higher than in the third quarter of 2020. This demonstrates the remarkable growth this business has achieved. $ 43 billion business is still recording. Roku’s price-to-earnings and futures price-to-sell ratios of 247 and 15, respectively, certainly don’t scream at first glance. But consider the fact that there are just over a billion cable TV subscriptions around the world today. This means that Roku still has a huge opportunity globally to gain more active accounts on its platform as people cut the cord and embrace streaming.
As the company continues to implement the strategic game plan that has worked so well domestically in international markets, expect Roku’s stock price – and your retirement savings – to rise further. over time.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.