You don’t need a lot of money to assemble a portfolio these days. Zero-commission-fee trading and the ability to buy fractional shares at a growing number of brokerages make it easy to build a diversified collection of stocks when you have as little as $500 to invest. The low barrier also makes it easy to cherry-pick from the market’s most popular top stock investors, including Ark Invest’s Cathie Wood.
The CEO, co-founder, and stock picker of the Ark Invest family of exchange-traded funds (ETFs) has admittedly had a challenging run since her blowout performance in 2020, but this also means that there are some surprising bargains to be found in her portfolios. Roku (ROKU -2.58%), Deere & Company (DE 7.04%), and General Motors (GM 1.70%) are three of her holdings that I think are bargains right now.
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Roku
Roku has never been as popular as it is right now as a platform. It had 61.3 million active accounts on its platform by the end of March, and it’s an engaged audience with users averaging nearly four hours a day cradling their Roku remotes as they stream various services through the market-leading operating system.
Roku’s growth is impressive, as average revenue per user has risen 34% over the past year, and that’s stacked on top of the 14% year-over-year gain in active accounts. The stock has been treated like a canceled pilot TV show lately, plunging more than 80% since peaking last summer.
Roku shares are exchanging hands for a modest four times revenue. This is a stock that was routinely trading at a double-digit top-line multiple. Profitability has been spotty. Roku doesn’t have the low P/E ratio you’ll find in the other two names on this list. However, Roku has a cash-rich balance sheet with more than enough liquidity to get through any setbacks or initiatives to invest in growth.
Deere
Wall Street went Deere hunting last week. Shares of the global giant in agricultural, commercial, and construction equipment took a 14% hit on Friday after the company posted mixed quarterly results and lowered its operating cash flow guidance for the entire fiscal year. It wasn’t a perfect report, but it does make the valuation argument for Deere even more attractive.
The stock trades at just 14 times its earnings guidance for fiscal 2022. Deere is also well positioned to continue growing as countries improve their infrastructure and beef up their potential to produce agricultural harvests. Every quarter won’t be yield a bumper crop, but Deere’s long-term growth potential makes it a compelling buy on dips.
General Motors
The largest holding across all of Wood’s ETFs through most of the past year has been Tesla, but it’s not the only automaker in her portfolio. At the other end of the growth spectrum you will find General Motors driving its way into Wood’s portfolio.
Unlike Tesla with its lofty multiples, GM is cheap by most measuring sticks. GM is trading for just six times trailing earnings. Tesla’s P/E ratio is 15 times higher at 90. The disparity only grows if you look at the other end of the income statement, as Tesla’s revenue multiple is 11 against GM at a mere 0.4 on a trailing basis. The gap starts to narrow if you approach each automaker’s enterprise value instead of market cap. GM is highly leveraged. There is still a huge valuation difference between the two companies.
Tesla naturally has growth, momentum, and a commanding lead in the electric vehicles market. It’s also widely assumed that Tesla is the leader in self-driving cars, but GM’s Cruise platform is starting to turn heads in the automotive community. GM’s debt is substantial, and it hasn’t resumed the quarterly dividends it suspended in early 2020. It’s still an attractively priced automotive stock with a stronger position in next-gen vehicle tech than you probably think.
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