Many people played “follow the leader” when they were in elementary school. And many apply the basic premise of that game to various activities, including investing. When there is a chance to make or lose a lot of money, it pays to at least consider the opinions of those who are considered experts in the field. That may mean paying attention to what the most successful investors are doing.
Cathie Wood, CEO of Ark Invest, is one of those highly respected investors whose opinions carry considerable weight. A look inside her asset management firm’s portfolios can yield excellent insights. Let’s take a look at two Cathie Wood stocks that look like strong picks for the coming decade: Roku (NASDAQ: ROKU) And Adyen (OTC: ADYE.Y).
1. Roku
To say Roku isn’t keeping up with the current market would be an understatement. The company’s shares are down 36% this year. Roku is facing a number of headwinds. Revenue growth isn’t as impressive as it used to be, average revenue per user is stagnant, and the streaming giant still isn’t consistently profitable.
That said, Roku has plenty of things going its way. It remains the leader in the connected TV (CTV) market, with a 48% share of the pie in the first quarter. No other company even comes close (the next best was 11%), and that’s saying something when you look at Roku’s competitors. They include Amazon and Samsung.
Roku’s deepening ecosystem is likely helping it maintain its lead in the industry. It closed the first quarter with 81.6 million connected households, up 14% year over year. Roku benefits from the network effect. The more households in its ecosystem, the more attractive it becomes to streaming companies and advertisers.
And while the company’s revenue growth isn’t as strong as it used to be, there’s still a lot of potential for Roku. Cable is dying. Streaming is on the rise. The transition will take many, many years. That’s why streaming platforms have been growing like crazy over the past few years. It’s hard to keep track of how many there are now, though it’s pretty clear that Netflix remains one of the undisputed leaders.
But whoever wins out, Roku will benefit because it’s not competing directly with Netflix. The platform offers consumers access to only the most prominent streaming channels in one convenient place. And since advertising revenue follows viewers to streaming channels, Roku will benefit.
The growing ecosystem should also do wonders for margins (selling its namesake streaming devices isn’t exactly profitable). So expect revenue to continue to grow, margins to improve, and Roku to eventually become consistently profitable. In my opinion, now’s a good time to invest in the streaming giant while its stock is falling.
2. Adyen
Adyen is a fintech specialist headquartered in the Netherlands. The platform combines various services that are typically offered by two or more separate institutions. Adyen is an acquirer that also provides payment gateways (the online version of point-of-sale systems), payment processing and risk management services, all in one integrated platform. Adyen’s services are particularly useful for multinationals that would otherwise rely on different providers for these services in different regions.
While Adyen’s financial results have been quite strong, they have lagged investor expectations in recent quarters. This is especially problematic because the company decided to squeeze its margins and profits by spending money on expansion plans and hiring more employees, while many other companies did the opposite amid economic troubles. As a result, Adyen has not performed well on the stock market recently. That said, the company should be able to recover and deliver solid returns in the long run.
Consider that in the first quarter, the company’s revenue of €438 million ($470 million) was up 21% year-on-year. Processed volume of €297.8 billion ($319.6 billion) was up 46% compared to the same period last year. While Adyen’s growth rate has slowed somewhat, it’s not exactly in a bad position. Few fintechs worldwide can match or surpass its payment volume.
Furthermore, Adyen benefits from a strong moat. Businesses rely on its services to process and accept payments in their day-to-day operations. That’s not something they want to disrupt, which gives Adyen high switching costs.
Finally, the fintech giant still has plenty of room to grow, particularly in North America, where revenue is growing faster than any other region. Adyen should remain a leader in the fintech industry for a long time to come, and long-term growth-focused investors will likely find what they’re looking for in this company.
Should You Invest $1,000 in Roku Now?
Before you buy shares in Roku, here are some things to consider:
The Motley Fool Stock Advisor team of analysts has just identified what they think is the 10 best stocks for investors to buy now… and Roku wasn’t one of them. The 10 stocks that made the cut could deliver monster returns in the years to come.
Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $786,046!*
Stock Advisor offers investors an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks each month. The Stock Advisor has service more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns as of July 2, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Prosper Junior Bakiny has positions in Amazon and Roku. The Motley Fool has positions in and recommends Adyen, Amazon, Netflix, and Roku. The Motley Fool has a disclosure policy.
2 Cathie Wood Stocks to Buy and Hold for 10 Years was originally published by The Motley Fool
