Overlook Dogecoin: 3 Cathie Wooden Investments That May Ship Superior Returns – Motley Idiot
Despite the retreat from the last heights, Dogecoin‘s (CRYPTO: DOGE) The price per token has increased nearly 6,900% since the start of the year. Not a single stock that Cathie Woods growth-oriented company ARK Invest holds has come close to matching these returns.
Like Dogecoin, many of the stocks held in ARK’s ETFs are risky investments that could generate explosive profits. There are important distinctions to be made when categorizing risk, however, and even risk-tolerant investors can be better off with high-quality growth stocks than speculative cryptocurrencies.
With that in mind, we asked three Motley Fool employees to identify a growth-oriented investment supported by the ARK team that is prepared to outperform Dogecoin. Read on to see why they think these alternatives are better buys.
Sometimes it pays to hug your comfort zone
Keith Noonan: I like to take my hat off to those who have made big profits with Dogecoin. At the same time, I’m not particularly inclined to join Team Doge, and I think its current assessment creates the conditions for a dizzying retreat.
There is nothing wrong with the token’s incredible winnings this year. However I try, I just can’t bring myself to dwell on an asset that seems to be swaying wildly when it comes to tweets and media appearances from Elon Musk. It is good practice to never invest more than you are ready to lose – and not invest in things you are uncomfortable with.
In the age of meme stocks, social media-powered short squeezes, and growing crowds showing almost fanatical devotion to their favorite cryptocurrencies, it’s impossible to rule out another big run for Dogecoin. I am struggling to come up with a reasonable justification for the token’s gains to date, however, and will happily stick with growth stocks for my high-risk, rewarding investment games.
Within this form, Teladoc health (NYSE: TDOC) stands out as a stock in the broader ARK portfolio that still has tremendous potential for long-term growth. The company offers video conferencing consultations with doctors and other health professionals, paving the way for less time driving to offices and flipping through magazines in waiting rooms. Teladoc’s service also enables patients with limited mobility and other medical conditions to meet with healthcare professionals from the comfort of their own home.
Teladoc offers real value and appears to be in the early stages of capitalizing on a huge long-term growth opportunity. I just don’t see that with Dogecoin. Will Teladoc stock ever rise 6,900% in less than a year? Probably not. However, I think it will bring big returns for investors and I have very little concern that it will lose 90% (or more) of its current value within a year.
Willingness to take risks just for the sake of risk? No thanks.
James Brumley: You know, most investors understand that the economy – and therefore the market – is cyclical. We can see it. We can even plan it.
What is much less obvious is that investor psychology is also cyclical. We are starting the phases after the recession and the bear market with hope, but also with great caution. As time and stocks go, we get bolder.
Where we are in the current psyche cycle has just passed the point where investors are willing to take almost any risk for the right return, and right at the beginning of the phase where investors take big risks just to take risks. … without really weighing the rewards. I believe Dogecoin and other cryptos not only fit that description, but are largely the result of the demand for risky prospects.
We have certainly seen it before. Ridiculous dot-com reviews of the late 90s and the packing of subprime mortgage loans into salable bundles in 2007 are some of the prime examples of such mania. Pot stocks, solar stocks, oil stocks, and gold stocks all provide great examples of mini-bubbles that spurred big bets that didn’t involve big questions like, “Is there any realistic reason to believe these Investment can generate and maintain profits? ” Cryptocurrencies fall into this latter category of risk-taking manias. Everyone wants them, but other than because they are increasing, no one can really tell why they are worth the risk.
And to be clear, not every high risk is a bad risk. Cathie Woods ARK funds own a lot square (NYSE: SQ) and year (NASDAQ: ROKU), both of which are risky as there is no barrier to entry into their already crowded market. But there is clear consumer demand for both companies’ products, and there are solid reasons to believe that both companies will maintain their market leadership and generate real revenue that adds value. That’s not even a discussion you can pretend with Dogecoin. From those two names, I think Roku is the best bet on a risk / reward basis.
A better growth machine with fewer memes
Daniel Fölber: Cathie Wood’s funds are known for delivering explosive growth potential through breakthrough technology. To her credit, Wood and her team have been open about the risks of making such a bold value proposition – the greatest being volatility – which is simply the price of entry into what ARK believes are market-leading returns.
Whether you agree or disagree with Cathie Wood, her investment philosophy is at least understandable. And while I turn my head around the potential of Bitcoin (CRYPTO: BTC) and ether, I can’t find any logical explanation that supports the rise of Dogecoin.
ARK Invest is a firm believer in Bitcoin and states that “Bitcoin offers one of the most compelling risk-return profiles among assets”. In fact, it was the # 1 most talked-about topic of the company’s Big Ideas 2021 presentation.
ARK’s optimism is based on the belief that more and more companies will have Bitcoin on their balance sheets instead of cash. Not only would this provide an inflation hedge, but it could also be used as an alternative currency to the US dollar. According to ARK research, the price of Bitcoin could rise by $ 40,000 if all companies in the S&P 500 should transfer 1% of their cash in Bitcoin.
Aside from the “store of value” argument, ARK believes Bitcoin is being used by regulators, banks, fintech companies like Square and. gains in credibility PayPal, as well as an alternative asset class for institutional investors. In conclusion, ARK sees Bitcoin becoming more mainstream and that should help its value increase in value over time.
Unlike Dogecoin, Bitcoin has intricate advantages that make it a truly remarkable commodity. As with most of Wood’s ideas, Bitcoin is likely to experience insane volatility for the foreseeable future. But for investors who can take the turmoil, it could be a great idea worth exploring.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.