2022 was a forgettable year for financial markets. That also included several of the most popular innovative stocks. In fact, those cutting-edge stocks, usually favored by maverick stock-picker Cathie Wood, were down more than 50% last year. Naturally, against a backdrop of ballooning interest and inflation rates, few, if any, would’ve favored innovative stocks.
The turn of events last year favored profitable businesses with defensive low-growth strategies. However, as evidenced by the stock market resurgence of late, these stocks will continue outperforming their counterparts over the long term. For example, Cathie Woods believes that long-term profitability and stock market performance of the so-called ‘profitless tech’ companies outperform those that favor a more share-holder-friendly approach. By the way, the ARK Innovation ETF (NYSEARCA:ARKK) is up a healthy 20% so far this year, pointing to a strong upside potential ahead for cutting edge stocks.
| MSFT | Microsoft | $288.06 |
| NVDA | Nvidia | $276.22 |
| CGNX | Cognex | $49.26 |
| SNSR | Global X Internet of Things ETF | $32.52 |
| TSLA | Tesla | $184.79 |
| IRTC | iRhythm Technologies | $131.94 |
| ON | ON Semiconductor | $79.12 |
Innovative Stocks: Microsoft (MSFT)
Tech giant Microsoft (NASDAQ:MSFT) never ceases to amaze with its ability to tap into the most powerful up-and-coming technology trends. It’s certainly beaten others to the punch with its foray into the burgeoning artificial intelligence space in hopes of significantly growing its market share in the search business.
Given Microsoft’s massive investments in OpenAI, AI will be a key driving force for its business as we advance. Moreover, it has already incorporated the wildly popular AI chatbot, ChatGPT into its Bing search engine. Plus, the impact of ChatGPT is already being felt, with Bing topping 100 million users recently.
Furthermore, Microsoft’s Azure cloud platform offers multiple AI and machine learning resources, including cognitive, bot, and machine learning services. Additionally, the company is expected to integrate advanced AI functionalities into its core products, such as its Office software suite. Therefore, you can best believe that Microsoft remains one of the most cutting-edge stocks to invest in at this time.
Innovative Stocks: Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) is a semiconductor titan, which usually makes the list of the most disruptive stocks. Its cutting-edge microchips are the lifeblood of a myriad of applications, ranging from video game consoles and cloud computing behemoths to quantum computers and intuitive AI chatbots. It continues to push the boundaries of innovation, rewarding its shareholders along the way. In the past three years, NVDA stock has grown its returns by a whopping 269%. Take it back to the 10-year mark, and you have it yielding over 8,300% returns making it a tantalizing prospect for investors seeking long-term returns.
Its robust partnership with OpenAI’s trailblazing ChatGPT chatbot is a testament to the quality of its offerings. By leveraging Nvidia’s unrivaled chips, OpenAI has honed its extensive language models to the peak of its abilities. Furthermore, Nvidia’s ambitious DGX Cloud platform is democratizing the development of AI tools, opening up new avenues for investments in the sector.
Innovative Stocks: Cognex (CGNX)
Cognex (NASDAQ:CGNX) is one of the top players in the emerging manufacturing AI niche, a market set for dumbfounding growth over the next several years. According to research firm Vantage Market Research, the manufacturing AI sphere could skyrocket to $61.9 billion in value by 2030, a 51% bump from 2022 levels. The machine vision systems provider uses AI to automate tedious manufacturing tasks effectively. Growth rates have been remarkable over the past five years, averaging over 10% top-line expansion.
However, the company has been facing some headwinds of late due to reduced spending by its major e-commerce customers, including Amazon (NASDAQ:AMZN). Nevertheless, its long-term growth potential remains intact, with the trend toward manufacturing automation not slowing down anytime soon. The need for more blue-collar workers will inevitably lead to higher investments in manufacturing robots, a trend benefitting Cognex
Global X Internet of Things ETF (SNSR)
The Internet of Things (IoT) concept has blown up in the past few years, effectively revolutionizing our lives. From smart homes to autonomous cars, the possibilities are endless. Layer that up with 5G technology, and the potential for innovation in the IoT space will likely go through the roof. Investors looking to capitalize on this trend would want to wager on an exchange-traded fund such as the Global X Internet of Things ETF (NASDAQ:SNSR).
The fund provides exposure to a swath of businesses involved in developing smart homes, autonomous vehicles, industrial automation, and other technologies. By investing in SNSR, investors can access a wide portfolio of companies with massive growth potential in the IoT space. Furthermore, it comes with a relatively low expense ratio of 0.68%, having grown over 62% in value in the past three years. On top of that, its trailing twelve-month dividend growth rate is at an eye-catching 42%, over 100% higher than the sector median.
Tesla (TSLA)
In the ever-evolving equity market landscape, EV pioneer Tesla (NASDAQ:TSLA) stands out as a dazzling exemplar of success. While 2022 was incredibly bumpy for growth stocks, with TSLA stock taking a 43% hit, 2023 has taken a sharp turn in favor of the bulls. TSLA shares have skyrocketed by over 60% this year, with no end to the momentum in sight.
Tesla’s strategic move to slash prices on its Model S and Model X vehicles was initially frowned upon by market analysts. Yet, the electric automaker quickly proved the naysayers wrong, with its customers warmly embracing the cuts. Its first quarter performance is a testament to that notion, with it delivering nearly 423,000 vehicles, up from the previous quarter’s 405,000. Though it represents a deceleration from the prior-year period, its overall direction remains positive, considering the weaknesses in the macro environment. Its resilience in the face of adversity is a testament to its unwavering strength and penchant for innovating.
iRhythm Technologies (IRTC)
iRhythm Technologies (NASDAQ:IRTC) has flown under-the-radar despite being a hyper-growth stock over the past several years. Its innovative Zio heart rate monitor has helped post stellar quarterly results over the years, with 5-year average top-line growth at 35%. Its rock-solid performance is expected to continue, with its management forecasting 16% to 18% sales growth this year. By 2027, its management expects sales to be top $1 billion.
The Zio heart rate monitor has proven to be incredibly effective in detecting irregularities in heart rhythm and has helped prevent hospitalizations, major cardiac events, and deaths. Despite operating in an unconducive environment, its sales grew spectacularly 27% last year, with roughly 68.5% gross margins. Additionally, its shares are trading attractively at 9.8 times sales, 22% below its five-year average. Tipranks analysts forecast almost a 10% upside from current price levels.
ON Semiconductor (ON)
ON Semiconductor (NASDAQ:ON) is another tech juggernaut that is effectively charging ahead on the electrifying highway of automotive innovation. Its unique combination of intelligent sensing and power solutions carved out its niche in the fast-evolving electric vehicle space. Moreover, it remains one of the biggest needle-movers in the next-gen Advanced Driver-Assistance Systems (ADAS). Its top-tier image sensors propel the industry forward, fueling the need for more safety, regulatory support, and rising consumer demand.
Diversification is at the heart of ON Semiconductor’s success, spreading its tentacles across multiple lucrative realms, including vehicle electrification, industrial automation, 5G, and cloud infrastructure. The past year has seen phenomenal growth across both lines, further underscored by its rock-solid balance sheet, brimming with a staggering $2.95 billion in cash equivalents. Additionally, the stock trades at a hefty discount to its historical average, offering a strong upside ahead.
