I disagree with Cathie Wood’s stock picks much if not most of the time. For example, I believe that her huge bullishness on Bitcoin (BTC-USD) is completely misplaced, given the clear opposition of the U.S. government and most large American banks to cryptos. And I also think that her optimism about Tesla (NASDAQ:TSLA) is overdone in light of the stock’s high valuation and tough competition. Finally, I believe that Wood’s embrace of the metaverse is unwarranted since the technology has been around for decades and hasn’t made much of a splash. But on the other hand, I do like a relatively small percentage of Wood’s picks. So, for those looking for the best Cathie Wood stocks, here are my two cents.
Zoom Video (ZM)
After being dramatically overvalued during the pandemic, Zoom Video (NASDAQ:ZM) now appears to be significantly undervalued. Specifically, the shares are changing hands at a forward price-to-earnings ratio of just 16.6x. That’s well below the average price-earnings ratio of the S&P 500, which currently stands at 25.8x.
Yet analysts, on average, expect the company’s earnings per share to jump a healthy 6.8% this year to $4.67.
The mean forecast, however, calls for Zoom’s EPS to decline next year to $4.54.
I think that this forecast is overly conservative and likely reflects the prevailing view that the work-from-home trend is likely poised to dissipate and will at least stagnate.
But that theory appears to be misplaced, as a recent study found that “most U.S. executives… expect the number of hybrid and remote workers to increase” by 2.2% and 1%, respectively, between 2023 and 2028.
Meanwhile, the company is intensively working to expand its business in Asia, and that initiative could bear fruit by next year.
What’s more, on the leisure side of the equation, I expect the travel boom to ease next year, and I think there’s a good chance that many more tech-savvy consumers will, as a result, use Zoom to connect with their friends and family who live far away from them.
Exact Sciences (EXAS)
After Exact Sciences (NASDAQ:EXAS) reported very favorable data on its new colon cancer screening product, investment bank Canaccord Genuity predicted that EXAS could eventually obtain at least a 50% share of all colon cancer screenings.
Exact Sciences has said that there is currently a “backlog” of people waiting for colonoscopies, and the company’s colon cancer screening product could help improve that situation. Indeed, one of my family members recently had to wait three months before receiving a colonoscopy that she requested.
Moreover, as I noted in a previous column, “Baylor Scott & White, a primary care organization (and hospital owner) in Texas, “will administer approximately 50,000 Multi-Cancer Early Detection tests (from EXAS) to (its) patients.”
Baylor is a huge healthcare organization, so its willingness to utilize Exact Sciences’ test bodes well for the test’s adoption by other such entities. As a result, I’m very bullish on the test’s outlook.
Roku (ROKU)
As the popularity of streaming continues to grow rapidly, Roku’s (NASDAQ:ROKU) top line keeps increasing quite quickly. (That’s not surprising since Roku is by far the most popular operating system for streaming TVs at this point).
Last quarter, the company’s top line jumped 11% versus the same period a year earlier to $847 million, while its gross profit climbed 7% year-over-year to $378 million. Also noteworthy is that the company’s streaming hours increased by 4.4 billion hours year-over-year to 25.1 billion hours.
In its Q2 Shareholder Letter, Roku noted that “While Q2 Platform revenue exceeded our expectations, the macro environment continued to create uncertainty with the total U.S. advertising market flat (year-over-year) in Q2.
However, the company reported that the ad spending of some sectors, including “consumer packaging and health and wellness,” rebounded in Q2. As fears of a recession in the U.S. ease going forward, I expect more sectors’ ad spending to climb.
Finally, I expect Roku to benefit significantly both from more companies’ realization that streaming is rapidly gaining market share and continued tough competition among paid streaming channels. The latter channels tend to advertise a great deal on Roku.
On the date of publication, Larry Ramer held a long position in EXAS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
