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3 Growth Stocks That Will Beat Cathie Wood’s Ark Innovation ETF This Year

  • Xpeng (XPEV) is growing rapidly, and its EVs are very strong technologically.

  • Stem’s (STEM) sales are rapidly increasing, and it is getting a boost from the renewable energy revolution.

  • InMode’s (INMD) revenue are also jumping, the valuation of INMD stock is very attractive, and the company should benefit from increased travel.

Cathie Wood became very well-known because the growth stocks that she owned soared in the second half of 2020 and early 2021. But at that time, nearly all growth stocks were rallying. Since February 2021, Wood’s picks in general and her flagship Ark Innovation ETF (NYSEARCA:ARKK) in particular have not done very well. ARKK stock, for example, is at less than half of its 52-week high.

Frankly, I’m not surprised by this development, as I was very bearish on many of Wood’s picks, including Teladoc (NYSE:TDOC), Palantir (NYSE:PLTR), Coinbase (NASDAQ:COIN) and Workhorse (NASDAQ:WKHS) even when they were flying high.

Given Wood’s poor performance since early 2021 and my pessimistic view of some of her past stock picks, I urge investors to avoid her ETFs, including Ark Innovation and instead buy the shares of high-quality companies that are delivering good results, highly leveraged to very strong trends and at least approaching profitability. Any of these stocks could easily beat the Ark Innovation ETF in 2022.

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

XPEV

Xpeng

$26.87

STEM

Stem

$10.06

INMD

InMode

$31.78

Xpeng

Xpeng logo and P7 model in store XPEV stock
Xpeng logo and P7 model in store XPEV stock

Source: Andy Feng / Shutterstock.com

The Chinese electric vehicle maker is growing very rapidly and posting strong financial results. In March 2022, Xpeng’s (NYSE:XPEV) deliveries soared more than 200% year-over-year.

Moreover, in the first quarter, its deliveries jumped 159% YOY to over 34,561 EVs. And in the previous quarter, its revenue rose nearly 200% YOY to $1.28 billion. For all of 2021, the automaker’s deliveries climbed more than 260%. In 2023, analysts, on average, expect the automaker to report a per-share loss of 41 cents, versus their mean estimate of a $1.05 per-share loss this year.

Research firm Ping An Securities anticipates that the automaker will be profitable “by 2024.”

As I’ve pointed out in past columns, Xpeng is a leader in advanced driver assistance systems, and it has already expanded to a few countries in northern Europe.

Stem

image of a hand holding a bright light bulb outdoors with trees in the background
image of a hand holding a bright light bulb outdoors with trees in the background

Source: Shutterstock

In the fourth quarter, the company’s bookings soared an incredible 400% versus the same period a year earlier to $217 million, while its revenue jumped 251% YOY to $127 million. Its “contracted backlog” climbed to an all-time high of $449 million. And importantly, Stem’s (NYSE:STEM) net loss fell to $34 million in Q4 from over $100 million during the year-ago period. Analysts, on average, expect the company’s per-share loss to narrow to just 23 cents next year from 61 cents in 2022.

With the use of battery energy storage poised to soar in upcoming years, in conjunction with the greatly increased use of intermittent, renewable energy, the demand for Stem’s artificial intelligence, which maximizes the efficiency of batteries, is also poised to jump. And, judging by the company’s huge growth in Q4, that trend is obviously already taking hold.

Meanwhile, very encouragingly, on March 18, one of the company’s directors bought about $1.1 million of STEM stock.

InMode

Various graphical representations of medical imagery are shown in front of a doctor using a tablet computer.
Various graphical representations of medical imagery are shown in front of a doctor using a tablet computer.

Source: Shutterstock / PopTika

The company’s technology enables medical procedures that traditionally require surgery to be done non-invasively in doctors’ offices. It specializes in enabling cosmetic procedures to be done in doctors’ office and noninvasively.

InMode (NASDAQ:INMD) should benefit from the increased travel that’s expected to occur in the coming months. In particular, many people who saw few of their peers and relatives in the last two years are going to be doing much more socializing, likely making them more anxious about their appearance.

In Q4, InMode’s revenue jumped 47% YOY to $111 million, and its earnings per share came in at 64 cents.

For its fiscal 2022, the company predicts that its gross margin will have an impressive 84% to 86%, while its income from operations, excluding certain items, will be $199 million to $204 million, versus $167 million last year. InMode expects its FY22 EPS to come in at $2.06 to $2.11, up from $1.92 last year. At the midpoint of its FY22 EPS guidance, INMD stock is trading at a forward price-earnings ratio of just 17.

On the date of publication, Larry Ramer held long positions in XPEV, STEM and INMD.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.

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