Many people played the game of “follow the leader” when they were in elementary school. And many apply the basic principle of this game to various activities, including investing. When there is a risk of making or losing a lot of money, it is useful to at least consider the opinion of those who are considered experts in the field. This may mean paying attention to what the most successful investors are doing.
Cathie Wood, CEO of Ark Invest, is part of this group of highly regarded investors whose opinions carry considerable weight. A look at her investment management firm’s portfolios can provide some great insights. In fact, let’s look at two of Cathie Wood’s stocks that appear to be solid picks for the next decade: Year (NASDAQ: ROKU) And Adyen (FOR SALE: ADYE.Y).
1 year
To say that Roku isn’t keeping pace with the current market would be an understatement. The company’s stock is down 36% this year. Roku faces several headwinds. Revenue growth isn’t as impressive as it once was, average revenue per user is stagnant, and the streaming specialist still isn’t consistently profitable.
That said, Roku also has a lot going for it. It remains the leader in the connected TV (CTV) market, with a 48% share in the first quarter. No other company comes close (the next best was at 11%), and that’s saying something considering Roku’s competitors. Among them: Amazon and Samsung.
Roku’s growing ecosystem is likely helping it maintain its lead in the industry. It ended the first quarter with 81.6 million connected homes, a 14% increase from a year earlier. Roku benefits from network effectThe more homes it has in its ecosystem, the more attractive it becomes to streaming companies and advertisers.
And even though the company’s revenue growth isn’t as strong as it used to be, Roku still has huge potential. Cable TV is slowly disappearing. Streaming is booming. The transition won’t be complete for many years. That’s why streaming platforms have been growing like weeds in recent years. It’s hard to know how many there are today, though it’s pretty clear that Netflix remains one of the undisputed leaders.
But no matter who wins, Roku will come out on top because it doesn’t compete directly with Netflix. Its platform simply lets consumers access the most important streaming channels in one convenient place. And since ad revenue follow viewers on the streaming channels, Roku will benefit.
Its growing ecosystem should also do wonders for its margins (selling its namesake streaming devices isn’t particularly profitable), so expect revenue to continue to grow, margins to improve, and eventually Roku to become consistently profitable. In my opinion, now is a good time to invest in the streaming giant while its stock is down.
2. Adyen
Adyen is a fintech specialist headquartered in the Netherlands. Its platform combines multiple services 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 on a single, integrated platform. Adyen’s services are particularly useful for multinationals that otherwise have to rely on different providers for these services in different regions.
While Adyen’s financial results are pretty good, they haven’t met investor expectations in recent quarters. This is especially problematic because the company has decided to squeeze its margins and bottom line by spending money on expansion plans and hiring more employees, while many other companies have done the exact opposite due to the economic downturn. This is why Adyen hasn’t performed well in the stock market recently. That said, it should be able to bounce back and provide solid returns over the long term.
In the first quarter, the company’s revenue increased 21% year-over-year, with revenue of €438 million ($470 million). Its processed volume of €297.8 billion ($319.6 billion) increased 46% year-over-year. While Adyen’s growth rate has slowed somewhat, it’s not a bad situation. Few fintechs in the world can match or exceed the company’s payment volume.
Additionally, Adyen has a significant competitive advantage. Businesses rely on its services to process and accept payments as part of their daily operations. It’s not something they’ll want to disrupt, leading to high switching costs for Adyen.
Finally, the fintech giant still has plenty of room to grow, especially in North America, where its revenue is growing faster than in any other region. Adyen should remain a leader in the fintech space for a long time, and investors focused on long-term growth will likely find what they’re looking for in this company.
Should You Invest $1,000 in Roku Right Now?
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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. 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 You Can Buy and Hold for 10 Years was originally published by The Motley Fool
