We recently compiled a list of the 10 Best Stocks to Buy and Hold For 5 Years According to Cathie Wood. In this article, we are going to take a look at where Teladoc Health, Inc. (NYSE:TDOC) stands against the other stocks.
As the saying goes, time and tide wait for nobody. This also holds true for Wall Street, where not only are fortunes made in a blink of an eye, but things can take a 180 degree turn the next moment. The same appears to be true for Cathie Wood of Ark Investment. While most hedge funds focus on creating balanced portfolios that seek to leverage all kinds of stocks, Wood’s firm chooses to focus exclusively on high growth sectors that it believes will disrupt the future. Wood is one of Tesla’s biggest bulls, and her insights have proven to be correct as the electric vehicle maker has defied all predictions of doom and gloom and managed to deliver hundreds of thousands of vehicles globally.
Since Insider Monkey tracks hedge fund data and investments to provide readers with the best stock picks, we’ve been following Wood for quite some time now. We took a look at her long term stocks as part of our coverage of 10 Best Stocks To Buy and Hold For 5 Years According To ARK’s Cathie Wood in 2021. Back then, Wood was a celebrity as her high-profile bets on the technology industry were paying off as the sector surged due to the booming demand in tech resulting from lock downs and stay at home mandates. Wood’s fund returned 20% in 2020, and it led to a long interview with Bloomberg. In this talk, she stressed that Ark’s investment horizon was five years, so any temporary corrections left her unfazed since the firm was in for the long haul. She added that while big ticket technology names were good stocks, the goal of her firm was to identify the next FANGs (now FAANG), and one sector that was ripe for growth was the DNA sector. Other sectors that she highlighted were ripe for growth in 2021 were artificial intelligence, energy storage, robotics, and blockchain.
Fast forwarding to 2024, let’s see how her top stocks have performed since then. Focusing exclusively on her top ten stocks back then and as of the first quarter of this year, only four stocks remain on the list. The rest have either been relegated to lower weights in the portfolio or have been eliminated altogether. The four stocks that remain have displayed mixed performance since the start of 2021. The worst performer has lost 86% since then, while the others are down by 73% to 39%. However, since these stocks are nevertheless still a part of Ark’s portfolio, it’s clear that Wood’s is convinced of their potential to disrupt the market and is holding on to them with this belief.
As for the stocks that were eliminated, several of these have bled more than 80% since then, while one has lost all of its value and been de listed from the NASDAQ exchange. Other stocks have also lost more than 90% of their value since 2021, and given that these belong to sectors such as telehealth and online education, it’s understandable since these sectors posted unbelievable gains during the era of lock downs but failed to retain investor interest once the situation normalized. Finally, none of the stocks that were part of Cathie Wood’s top stocks in 2021 have posted returns since then.
Shifting gears, investing in 2024 has seen the stock market divided into technology and non technology sectors. Even within the former, it’s mainly artificial intelligence and associated stocks that have delivered strong returns. So, Wood, whose firm targets high growth and disruptive stocks, has continued to struggle this year too. Ark Invest’s flagship ARKK fund is down 16.7% year to date, while tech heavy stock indexes are up by almost 20%. Disruptive companies require easy credit and robust business spending – both of which struggle in a high interest rate environment.
However, not all of Cathie Wood’s 2024 stock picks have suffered. Some of the strongest performers belong to social media, cloud-based advertising, financial services, molecular testing, and counter terrorism data analytics services. These stocks are up by 48%, 36%, 83%, 76%, and 52% year to date. On the flip side, some sectors that have struggled are biotechnology and software as a service (SaaS). Cathie Wood’s biotechnology stocks have lost anywhere between 86% to 64%, while her SaaS pick has bled 58%.
The last couple of years have been hard for growth stocks that are not part of the booming semiconductor industry. This is because of high interest rates, which not only damped investor risk appetite but also made it difficult for these firms to invest in growth. Since Wood is a pure play growth investor at heart, it’s unsurprising that her stocks have also suffered during this period. Ark’s latest investment portfolio was worth $14.4 billion as of March 2024 end, and given that some investors are optimistic that the Fed might finally start to cut interest rates soon, we decided to do a follow up piece and take a look at the top Cathie Wood stocks during Q4 2020 and see how they have performed since then. When reading about these stocks, readers are also advised to remember that the market of 2024 is a complete 180 degrees from the market of 2020 as back then interest rates were low and Internet and personal computing stocks were booming.
Our Methodology
For our list of the best Cathie Wood stocks to buy and hold for five years, we scanned her Q4 2020 SEC filings and picked out the top ten stocks in which her firm had invested the most. Then, their performance since then was evaluated.
We also mentioned the number of hedge funds that had bought these stocks during the same filing period. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A doctor wearing a face mask and lab coat providing remote medical advice via video chat.
Teladoc Health, Inc. (NYSE:TDOC)
Ark Investment’s Q4 2020 Investment Stake: $1.5 billion
Number of Q1 2024 Hedge Fund Investors: 31
Share Price Performance Since 2020 End: -95.11%
Teladoc Health, Inc. (NYSE:TDOC) is a virtual health services provider that enables users to seek medical help online. Ark Investment acquired a $3.6 million stake in the firm in Q1 2018. This grew to an all time high of $2.6 billion in Q2 2021, and it sits at $242 million as of Q1 2024 end. Teladoc Health, Inc. (NYSE:TDOC)’s shares are down 95% since the start of 2021. The coronavirus boom made the stock trade at 20x its revenue, and from $1 billion in 2020 end sales doubled to $2 billion at the close of 2021. However, since then revenue growth has slowed down and between 2022 and 2023, Teladoc Health, Inc. (NYSE:TDOC)’s revenue grew by just 8%. The firm expects revenue to sit at $2.6 billion by the end of this year for flat growth. Teladoc Health, Inc. (NYSE:TDOC)’s first quarter results came with a downward guidance revision which reduced 2024 revenue to $2.63 billion from $2.67 billion and operating income to $362 million from $367 million.
Teladoc Health, Inc. (NYSE:TDOC) offers its services to consumers through its mental health platform BetterHelp and its broader Integrated Care platform. BetterHelp accounted for $1.1 billion of Teladoc Health, Inc. (NYSE:TDOC)’s $2.4 billion in revenue during the full year 2023, but the platform is struggling to attract customers. During the Q4 2023 earnings call management shared:
Turning to the BetterHelp segment, Revenue was $276 million in the fourth quarter, while adjusted EBITDA was $58 million. BetterHelp margins expanded 210 basis points over the prior year’s fourth quarter, which helped drive year-over-year adjusted EBITDA growth of 11% despite lower revenue.
While we’re pleased to deliver double-digit adjusted EBITDA growth at BetterHelp both for the quarter and the full year, revenue and margins were below our expectations in the quarter as we saw lower yields on marketing spend. Specifically, we experienced returns on our social media advertising spend that were below target in the second half of the year, which was a departure relative to the first half. We’ll speak to guidance in a moment, but our BetterHelp outlook assumes the lower yields experienced in certain channels in the second half of 2023 will persist and as a result will impact our year-over-year growth rates in the first half of 2024.
Overall TDOC ranks 4th on our list of the best stocks to buy and hold for 5 years according to Cathie Wood. You can visit 10 Best Stocks to Buy and Hold For 5 Years According to Cathie Wood to see the other stocks that are on hedge funds’ radar. While we acknowledge the potential of TDOC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TDOC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
