Do you have $500? Consider These 3 Cathie Wood Bargain Stocks
If we play a word association game – and Cathie Wood’s name comes up – you’re likely to respond with a growth investment. Wood is the CEO, co-founder and principal stock picker of the ARK Invest family of exchange-traded funds. It’s a haven for disruptors with sky-high aspirations and even loftier valuations.
There’s still value to be had if you dig deep into Wood’s collection of investments. caterpillar ( CAT -1.98% ), Teladoc Health ( DOC 3.67% )and Roku ( ROKU 2.54% ) are three stocks that are trading at premium prices. If you have $500 to invest in growth stocks, Wood is a good one to watch after his portfolio was pounded last year. You might want to find a broker that lets you buy fractional shares to get the most out of your $500, but let’s take a closer look at these three great deals in Wood’s funds.
You may not think of Caterpillar as a prototype lumber stock. The world’s largest maker of construction and mining equipment doesn’t have to be disruptive. However, demand is strong for Caterpillar products. It’s a game of infrastructure in a world that needs to be built or rebuilt. It is a timely game about mining as well as gas engines and turbines.
The caterpillar grows. Sales were up 23% in its latest quarter and 22% for all of last year. Net income is also climbing nicely, and blue chip stocks are now trading at less than 20 times projected earnings this year and less than 17 times next year’s target. Caterpillar is a slot machine, and it returns a good part of it to its shareholders. It returned $5 billion to its investors last year through stock buybacks and its 2% yield. Despite the highly cyclical nature of Caterpillar’s business, it’s a dividend aristocrat, enjoying 27 straight years of rising payouts.
The future of healthcare is on sale. You won’t find dividend payouts or even positive earnings here, but the stock exhibits all the symptoms of a cheap stock. Shares of telehealth specialist Teladoc are trading 77% below their peak in February last year. Providing virtual medical care became common in 2020 when we couldn’t visit doctors, therapists, or medical experts in person. Teladoc Health allows anyone to use a phone, PC, tablet or other video device for consultation.
Competition is intensifying in this space now that it is viable, but Teladoc continues to grow. Revenue grew 45% in its most recent quarter, fueled in large part by a 41% increase in the number of virtual tours conducted. Teladoc is still a few years out of the red, but with rising earnings and falling shares, it now trades for less than six times trailing earnings. The higher multiple may not seem cheap, but it’s a bargain for a game-changing healthcare technology.
Roku is another old growth title that has fallen hard. The video streaming pioneer is now trading 74% below last summer’s all-time high. Roku has struggled these days with supply chain constraints and rising content costs, but it continues to be a hit with people spending more time in their living room streaming popular video services. .
Roku is the leading streaming platform in the United States, Canada and Mexico. It recently surpassed 60 million active accounts, averaging more than three hours per day per user on the platform. Average revenue per user is skyrocketing – up 43% from last year – as marketers try to reach the captive audience that is becoming harder to reach.
The growth does not stop. Analysts see revenue roughly tripling over the next five years, and by then analysts see Roku earning more than $4 per share. He can probably get there faster if he can keep evolving. Caterpillar, Teladoc and Roku are high-growth stocks with healthy double-digit revenue gains and years of upside. They trade at bargain prices.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.