Cathie Wood is known for her focus on disruptive technology. Her company, Ark Invest, invests in high-growth tech stocks for its exchange-traded funds (ETF), each of which has a specific focus.
Not surprisingly, Ark's stocks tend to do better in bull markets but often come with a lot of risk. In general, buying an ETF gives you exposure to a group of stocks and reduces your overall risk. But when most of the stocks are risky, that isn't necessarily the case, and Cathie Wood's ETFs stand out in that respect.
However, even if Ark Invest's ETFs are too disruptive for your taste, you might want to consider some of her picks. Roku (NASDAQ: ROKU) and MercadoLibre (NASDAQ: MELI) are two great candidates and could be part of a millionaire-maker portfolio.
1. Roku: Streaming at its best -- and cheapest
Roku stock continues to fall this year despite reporting strong growth and improving efficiency. Somehow, the market isn't seeing its story right now, which means you can buy it at a bargain price.
What's so great about Roku?
There are a bunch of companies that overshot with meeting demand when the pandemic started. They fall into two categories: those that have been able to regroup and get back in line with changing demand, and those that haven't. Roku is solidly in the former camp, and that was on display in the 2024 second quarter.
Roku has two segments that complement each other. It sells streaming hardware and is the top device seller in the country. Everyone who buys a device gets an account that brings them into the Roku system, and they're set up to stream Roku's own free channels, as well as any channel to which the viewer subscribes if it has a deal with Roku. The other segment is its ad business, which powers its free channels.
The hardware business only accounts for about 15% of total sales and isn't profitable on a gross basis , but it's an important element of the whole model, driving growth in the ad business. Overall profitability is improving. In the second quarter, Roku generated $317.9 million in free cash flow, up from $100.8 million last year. The net loss narrowed from $108 million to $34 million.
Roku has huge long-term growth drivers. Viewers are moving to streaming more and more and they need devices like Roku's to make that happen. For example, in the 2024 first quarter, Roku streaming hours increased 23% year over year, while broadcast viewing fell 13%, according to Nielsen.
With its top spot and constantly new and improved devices, Roku has an edge. It's also demonstrating the ability to streamline costs without cutting into growth, which is what profitable scaling is all about.
Roku stock is down 40% this year alone. It can't seem to catch a break, even though it's increasing sales in both of its units and moving closer to net profit.
If Roku continues to perform well -- and it's showing that it can -- the stock will have to catch up eventually. If you buy Roku stock today, it should eventually reward you with high gains that could contribute to millionaire status.
2. MercadoLibre: Much more than e-commerce
Unlike Roku, MercadoLibre is earning investor confidence for its outstanding growth, strong profitability, and seemingly limitless opportunities. MercadoLibre stock is up about 20% this year as its e-commerce and fintech businesses continue to soar despite global inflation. And they're not just soaring -- rates are accelerating and were at their highest levels since 2021 in the 2024 second quarter.
Gross merchandise volume (GMV) in the e-commerce business increased 20% year over year, or 83% currency neutral. Total payment volume in the fintech business increased 36%. Revenue increased 42% to $5.1 billion, and net income more than doubled to $531 million.
Even though MercadoLibre serves a population of more than 500 million people, its revenue is only 0.3% of Amazon 's. It's not an exact comparison, since both companies do more than e-commerce, but it gives you an idea of the opportunity. Its markets are also underpenetrated in e-commerce. Put this together, and it's a recipe for long-term high growth, which is exactly what's been happening at MercadoLibre.
The company keeps adding new users to its e-commerce platform, and these shoppers are increasingly active. In fintech, it now offers digital payments, credit cards, investing products, and more, and it's the top platform in three of its fourth largest markets.
As if the e-commerce and fintech businesses weren't enough, MercadoLibre isn't letting the advertising opportunity slip by. It has increased its market share of digital ads and is now the third-largest digital advertiser in its regions.
MercadoLibre has already rewarded investors many times over, but there's so much more to tap into. You can still buy MercadoLibre stock today to supercharge your holdings and help you become a millionaire over time.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jennifer Saibil has positions in MercadoLibre. The Motley Fool has positions in and recommends Amazon, MercadoLibre, and Roku. The Motley Fool has a disclosure policy .
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