One of the best growth investors of the past decade, Cathie Wood is often regarded as among the most underrated investors. She is incredibly growth-focused in her investment arguments, and presents interesting data to back up her surprisingly astute claims. Accordingly, many disregard her view that innovation means everything and valuations are less important, particularly in this market. Thus, there’s little appetite for Cathie Wood stocks right now, at least among most seasoned investors.
That said, the central thesis behind her firm, ARK Invest (NASDAQ:ARKK), is to provide actively managed exchange-traded funds focused on disruptive innovation. Given the rise in growth stocks over the past decade, Wood rose to fame, generating an impressive net worth.
Interestingly, Cathie Wood’s idea of ETF investing generally differs from the widespread norms. Her focus on disruptive innovation leads to investments in high-impact innovative areas such as robotics, AI, and blockchain. Wood’s high-profile moon shot price targets typically make headlines, such as her previous $7,000 pre-split price target for Tesla (NASDAQ:TSLA). Indeed, most investors know Cathie Wood to be a prominent Tesla bull, to this day.
That said, there are three other Cathie Wood stocks I think are worth considering right now. Each of these is likely a better bet than Tesla over the next five years.
| ZM | Zoom Video | $78.31 |
| TDOC | Teladoc | $27.25 |
| SQ | Block | $62.51 |
Zoom (ZM)
One of the big laggards of 2022, Zoom Video (NASDAQ:ZM) is down 55% on a year-to-date basis alone. From its peak, this number is much more dramatic.
Of course, most software growth stocks are still struggling. This move isn’t isolated, with the iShares Expanded Tech-Software ETF (BATS:IGV) down more than 30% this year.
However, Zoom’s pandemic-friendly business model is what’s troubled investors in this company. The main question many looking at Zoom stock have is whether this business model can succeed five or 10 years from now.
I think the answer is yes. This is a company that’s transitioned away from its high-growth days to a still-profitable existence right now. Indeed, the ability for Zoom to hoard $5.5 billion in cash on its balance sheet as of July 31 is impressive in its own right. This cash provides a nice buffer for long-term investors, and signals how profitable Zoom has been in recent years.
Now, the company reported mixed July-quarter results, with guidance falling short of Wall Street expectations due to weak consumer and small business sales. Zoom’s updated fiscal 2023 revenue guidance is for 7% year-over-year growth, down from 11% previously. Good, but not great.
That said, 7% growth, on a relatively high base built due to the pandemic, is actually quite impressive. Given the fact that Zoom is profitable, this is one of the Cathie Wood stocks I think is worth putting on the buy list right now.
Teladoc (TDOC)
Teladoc (NYSE:TDOC) is among the more prominent Cathie Wood stocks that I’ve also got on my buy list. Part of the bull thesis for Teladoc is relatively simple; this is a U.S.-based virtual healthcare company.
In times like these, defensive sectors like healthcare are the way to go. Sure, Teladoc is very tech-heavy. However, in recent weeks, Teladoc has been a relative outperformer as investors search for safety.
The company’s recent earnings also support the idea that Teladoc can not only survive, but thrive, over the long term. In the company’s most recent quarter, Teladoc reported revenues of $611.4 million. This represents a year-over-year change of 17.2%. The company outperformed consensus EPS estimates in each of the previous four quarters. It also outperformed consensus revenue estimates three times.
Teladoc’s consensus sales estimate for the current quarter of $631.83 million represents a 14% YOY increase. This shows the company’s strong revenue growth potential in the year ahead. It also predicts revenue for the fourth quarter to be between $625 million and $640 million, with a fourth-quarter net loss of 10 cents to 40 cents per share, compared to a loss of 26 cents per share a year ago.
Sure, there’s always the potential this stock could drop more from here. But as far as defensive Cathie Wood stocks are concerned (if there is such a thing), Teladoc is among the best-positioned right now.
Block (SQ)
Formerly known as Square, Block (NYSE:SQ) is another stock that has landed in Cathie Wood’s basket in 2022. Block’s gross profit was $1.57 billion, up 38% from $1.13 billion in the prior year. That exceeded the $1.53 billion forecast on Wall Street.
The company claimed in a letter to shareholders that its business had experienced strong growth despite warnings from other payment companies. Impending slowdowns due to macroeconomic effects continue to plague the industry, with many peers downgrading their outlooks.
However, Block’s performance has been quite notable of late. The company’s Cash App division reported a $774 million gross profit, up 51% from the previous year. Furthermore, over 18 million people actively used the company’s Cash debit card in September, up 40% from the same month last year.
The dual-class share structure of Square gives insiders more voting power. Moreover, Square is expanding its merchant offerings. As per a report by UBS, in December, only 34% of Square’s gross payment volume mix was made up of merchants with an annual payment volume of less than $125,000. This was down from 57% in 2016.
As the company’s merchant base continues to grow in a diversified manner, there’s a lot to like about the profitability profile of this business over the long term. Thus, on any significant pullbacks, I think this stock is worth considering.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.