SQ, TDOC, VRTX: Cathie Wood is optimistic about doubling stocks

When Cathie Wood buys stocks, investors will follow her to buy, which seems to be the latest trend in the investment world.

In the popular saying, following Cathie Wood, there is money to be made. Even some time ago due to the rise in U.S. Treasury yields, technology stocks plummeted, and ARK funds suffered a frantic sell-off. Wood is still as stable as a mountain, and he issued a statement saying that everything was as early as we expected and was better than we expected. Technology stocks are a good time to buy bottoms and increase positions. Today, I will analyze Cathie Wood's heavy holdings from the company's fundamentals and future market prospects. Can it double in the long run?

Square (ranked first in ARKK's innovative technology ETF)

The financial technology giant Square is a revolutionary stock in the financial industry, breaking the traditional payment industry. Square is known for its seller ecosystem, which provides small businesses with point-of-sale solutions and analytical tools. In return, Square collects merchant fees as revenue from the gross payment volume (Gross Payment Volume, GPV) of the network. Between 2012 and 2019, this GPV soared from US$6.5 billion to US$106.2 billion. Although GPV may decline in 2020 due to the epidemic, the compound annual growth rate from 2012 to 2019 is 49%, indicating that it will return to its previous level in 2021.

It is worth noting that the Square seller ecosystem has been very effective in attracting larger merchants in recent years. Merchants with an average annual GPV of at least US$125,000 in the third quarter of 2020 accounted for 61% of the total GPV. Because this is a merchant fee-driven business, so more large companies use the platform to make Square make more money. Cash App had more than 36 million active users in the fourth quarter, an increase of 50% over the same period last year. Square is also gradually increasing the features available on the Cash App, making it more and more popular for individuals to conduct a wide range of financial transactions.

Of course, Square's peer-to-peer payment platform Cash App provides the largest amount of business. As millennials promote more digital payment methods, the monthly active user base of Cash App has surged (7 million at the end of 2017 and 30 million by mid-2020). Cash App provides Square with a variety of income collection methods, including payment transfer fees, merchant fees, investment, and bitcoin exchange fees. Cash App should become the main driver of the company's gross profit in 2021.

Overall, Square is a value growth stock. The company's current market value is about 103 billion US dollars, which is equivalent to 196 times PE and 7.8 times PS.

Square achieved initial success by providing payment processing services for small and medium businesses. Over time, the company expanded its products and services to include point-of-sale software, e-commerce platforms, payroll services, business debit cards, etc. Starting this month, Square now also operates a federally chartered bank. This opened the door for Square to provide small business loans to its customers.

The current transition from cash to digital payment is still in its infancy. Square is expected to grow through its sellers and Cash App ecosystem, and in the process will bring substantial benefits to investors.

Teladoc Health (Leader in Telemedicine)

Due to the epidemic, the development of telemedicine has made real progress in 2020. Teladoc Health is one of the biggest winners. Its stock price soared by nearly 140%.

However, so far, TDOC is still in the early stages of telemedicine. According to data, after the epidemic is over, the annual telemedicine market in the United States will grow to about 250 billion US dollars. If the international market is added, this number will be even greater, and TDOC will be less than 30 billion US dollars. There is still enough space.

TDOC should be the biggest beneficiary among them. Although Amazon announced plans to launch Amazon Care telemedicine services to its American employees this summer. Amazon also intends to provide the service to other companies later in 2021 to participate in the competition in the telemedicine market. But Mu Ji disagrees, thinking that Amazon will not pose a threat to TDOC. Continue to increase TDOC.

Sister Mu believes that TDOC is the global leader in virtual care. So far, more than 40% of Fortune 500 companies use TDOC's services, and it provides more comprehensive products than its competitors. The most important thing is that the growth prospects of TDOC are very broad, and the development space of telemedicine is large enough. Coupled with TDOC's acquisition of Livongo Health, which operates a digital health platform that can help individuals manage chronic diseases, which creates a huge cross-selling opportunity.

Vertex Pharmaceuticals

ARK Genomic Revolution ETF ranked sixth

Vertex Pharmaceuticals (VRTX) is currently the strongest performer among all the top stocks of Wood's ETF. Large biotech companies do not have any competitors in their core markets. Vertex's four approved cystic fibrosis drugs are the only drugs that treat the underlying cause of genetic diseases.

Vertex also uses its expertise to target other rare genetic diseases. It expects to report the key results of a Phase 2 study evaluating VX-864 in the treatment of liver disease alpha-1 antitrypsin deficiency in the next few months. The company's product line also includes candidates for rare blood diseases β thalassemia and sickle cell disease and rare kidney disease focal segmental glomerulosclerosis.

And Vertex has the potential to change conventional treatment methods, and this treatment has just entered Phase 1/2 research. If the cell therapy VX-880 succeeds in clinical trials, it may be able to enable type 1 diabetes patients to live independently of insulin.

Vertex has a cash reserve of 6.6 billion U.S. dollars and plans to use it to recruit mid- and late-stage candidates to further strengthen its product line. In the next few years, this biotech stock will continue to be a big winner. In the long run, both financial technology and telemedicine are closely related to people’s lives. These are the general trends in which people’s living habits are being reshaped and the new trends in future technological development. These general trends may be in the next few decades. In the span, change the global social, economic, and political landscape. It is believed that investors will continue to benefit from these changes and generate high returns.

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Capital Flows Tracking Weekly

Release: January 27, 2021 The weekly Capital Flows estimate the industry's total, based on the report covering more than 98% of mutual fund and ETF assets. Collect actual mutual fund net new cash flows and ETF net issuance together monthly; therefore, there is a discrepancy between these weekly estimates and monthly flows. The data from the previous few weeks reflect revisions due to data adjustments, reclassifications, and changes in the number of fund reports. Mutual fund data represents the estimated value of net new cash flows, that is, new sales minus redemptions plus net exchanges, while exchange-traded fund (ETF) data represents net issuance, that is, net issuance minus total Redemption amount. This series does not include data on mutual funds that primarily invest in other mutual funds and ETFs that primarily invest in other ETFs.

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