Cathie Wood is known for her focus on disruptive technology. Her firm, Ark Invest, invests in high-growth tech stocks for its exchange-traded funds (ETFs), each with a specific focus.
Not surprisingly, Ark stocks outperform in bull markets, but they often come with a lot of risk. Generally speaking, buying an ETF gives you exposure to a group of stocks and reduces your overall risk. But when most stocks are risky, that’s not necessarily the case, and Cathie Wood’s ETFs stand out in that regard.
But even if Ark Invest’s ETFs are too disruptive for your taste, you might still want to consider some of its picks. Roku (NASDAQ: ROKU) And Free Market (NASDAQ: MELI) are two great candidates and could be part of a millionaire’s portfolio.
1. Roku: Streaming at its best – and cheapest
Roku stock continues to fall this year despite reporting strong growth and improved efficiency. Somehow, the market isn’t seeing its story right now, which means you can buy it for a steal.
What’s so great about Roku?
There are a lot of companies that far exceeded demand when the pandemic started. They fall into two categories: those that were able to regroup and get back in line with changing demand, and those that weren’t. Roku is firmly in the former camp, and that was on display in Q2 2024.
Roku has two complementary segments. It sells streaming hardware and is the largest device seller in the country. Anyone who buys a device gets an account that puts them into the Roku system and they’re set up to stream Roku’s own free channels, as well as any channels the viewer subscribes to if it has a deal with Roku. The other segment is the advertising business, which drives the free channels.
The hardware business accounts for just 15% of total revenue and is grossly unprofitable, but it is an important part of the overall model and is driving growth in the advertising business. Overall profitability is improving. In the second quarter, Roku generated $317.9 million in free cash flow, up from $100.8 million a year ago. Net losses narrowed to $34 million from $108 million.
Roku has huge long-term growth drivers. Viewers are increasingly turning to streaming, and they need devices like Roku to help them do that. In the first quarter of 2024, for example, Roku’s streaming hours grew 23% year over year, while broadcast hours declined 13%, according to Nielsen.
With its market-leading position and constantly new and improved devices, Roku has an advantage. It’s also shown that it can streamline costs without sacrificing growth, which is what profitable scale is all about.
Roku shares are down 40% this year alone. It can’t seem to rest, even as revenue grows in both units and it inches closer to net profit.
If Roku continues to do well — and it appears it can — the stock should eventually catch up. If you buy Roku stock today, you should eventually see big gains that could contribute to millionaire status.
2. MercadoLibre: much more than e-commerce
Unlike Roku, MercadoLibre is earning investors’ trust because of its stellar growth, strong profitability, and seemingly limitless potential. Shares of MercadoLibre are up about 20% this year as the e-commerce and fintech company continues to soar despite global inflation. And they’re not just rising, the rates are accelerating, hitting their highest levels since 2021 in the second quarter of 2024.
Gross merchandise volume (GMV) in the e-commerce business increased 20% year-on-year, or 83% currency neutral. Total payment volume in the fintech business increased 36%. Revenue increased 42% to $5.1 billion and net income more than doubled to $531 million.
Although MercadoLibre serves a population of over 500 million people, its turnover is only 0.3% of Amazon‘s. It’s not an exact comparison, since both companies do more than e-commerce, but it gives you an idea of ​​the possibilities. Their markets are also underpenetrated in e-commerce. Put that together and it’s a recipe for long-term high growth, which is exactly what’s happening at MercadoLibre.
The company continues to add new users to its e-commerce platform, and these shoppers are becoming increasingly active. In fintech, it now offers digital payments, credit cards, investment products and more, and is the top platform in three of its fourth-largest markets.
As if e-commerce and fintech companies weren’t enough, MercadoLibre isn’t letting the advertising opportunity pass them by. It has increased its market share of digital advertising and is now the third largest digital advertiser in its regions.
MercadoLibre has rewarded investors many times over, but there is so much more to tap into. You can buy MercadoLibre shares today to boost your holdings and help you become a millionaire over time.
Should You Invest $1,000 in Roku Now?
Before you buy shares in Roku, here are some things to consider:
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has positions in MercadoLibre. The Motley Fool has positions in and recommends Amazon, MercadoLibre, and Roku. The Motley Fool has a disclosure policy.
2 Cathie Wood Stocks That Can Make You a Millionaire was originally published by The Motley Fool
