With inflation zooming to a multidecade high in June, blue chip stocks, not growth stocks, are in high demand. Savvy investors who know their history, however, recognize that market downturns ease and stocks climb agastocks, including those sitting in Cathie Wood's exchange-traded funds (ETFs), especially have the potential to provide market-beating returns in the long run.
But which names to choose? There are hundreds of tickers found in Cathie Wood's ARK ETFs. Let's simplify the possible selections by taking a look at three names, Joby Aviation(NYSE: JOBY), MagnaInternational(NYSE: MGA), and NanoDimension(NASDAQ: NNDM), that can provide whopping returns that outpace the overall market.
1. Joby Aviation
Occupying space in the ARK Space and Innovation ETF, Joby is working to revolutionize how people move from place to place. Using electric-powered aircraft that take off vertically, Joby will provide a novel type of ridesharing service to customers that allows four passengers to travel up to 150 miles. Having recently received an important certification (Part 135 Air Carrier Certificate) from the Federal Aviation Administration in May, Joby expects to commence operations of its air taxi service in 2024. But it's not only in the U.S. where Joby hopes to take flight; the company is also in communication with regulatory agencies in the United Kingdom, South Korea, and Japan.
It'll be a couple of years before the company starts generating revenue, so it's important to gauge how well the company is capitalized. To this end, Joby is flying high. As of the end of the first quarter 2022, the company had no debt and $1.2 billion in cash and short-term investments. During this period, it used $72.3 million in net cash for operating activities and purchases of property and equipment. It seems quite possible, therefore, that investors will not face share dilution, nor will Joby take on debt to keep the lights on as it prepares to take flight.
2. Magna International
Taking a more conventional approach to transportation, Magna is focused on the automotive industry -- but not just gas-guzzlers. The company is also sharply focused on providing parts for electric vehicles (EVs) as well as conventionally powered automobiles, illustrating why the stock is parked in the ARK Autonomous Technology and Robotics ETF.
Management foresees significant growth from the company's electric powertrain offerings over the next five years. Electric powertrains include components that power an electric vehicle, such as the motor, driveshaft and transmission. Whereas Magna reported electric powertrain sales of about $300 million in 2021, management projects 2027 revenue will be approximately $4.5 billion, representing a compound annual growth rate (CAGR) of more than 15%. Battery enclosures offer another key driver for growth over the next five years. Forecast to accelerate sharply through 2027, battery enclosures sales are expected to rise at a more than 30% CAGR from 2021 to 2027 when it's projected to total more than $1.5 billion. Highlighting how they're in high demand, Magna's battery enclosures can be found under the hood of the Ford F-150 Lightning, which has the hearts of prospective drivers racing with excitement.
Besides EVs, Magna recognizes its advanced driver assistance systems (ADAS) business as a significant growth opportunity. Including camera systems and driver and occupant monitoring systems, the ADAS business is expected to soar at a more than 20% CAGR from 2021 to 2027.
3. Nano Dimension
Nano Dimension is another Cathie Wood stock that could provide large returns. In fact, the company is so high on Wood's list that it appears in two funds: the ARK Autonomous Technology and Robotics ETF as well as the ARK Next Generation Internet ETF. What's the big idea with Nano Dimension? The company specializes in 3D printing, otherwise known as additive manufacturing, and with its DragonFly IV model, customers have the ability to print their own semiconductors as well as other high-performance electronic devices. The company recently took a step toward expanding its suite of 3D printing solutions with the acquisition of Formatec, an additive manufacturing business focusing on both ceramic and metal printing.
There are a number of 3D stock opportunities available to investors, but Nano Dimension distinguishes itself from other companies as a leader in electronics and additive manufacturing (AME). Opinions vary on the size of the AME market. For example, in 2017, the global 3D printed electronics market ranged from $137 million to $176 million, and is expected to reach between $2.4 billion and $3.9 billion by 2026. Whatever the exact figure may be, experts agree that the market is poised for rampant growth. Research firm IDTechEx, for example, estimates that the AME market will soar to $3.5 billion in 2032.
What's a growth investor to do?
Those looking for a high-growth ticker yet unwilling to take on too much risk may want to hitch a ride with Magna. The business is well established and generates ample free cash flow -- an annual average of $1.9 billion over the past three years. On the other hand, investors who are looking for more speculative opportunities should consider digging deeper into Joby and Nano Dimension for the potential to lock in market-beating returns.
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