Talking Stocks: Teladoc Health (TDOC)
Updated: Jun 23
Everything started going up...and it just didn't stop.
It's one thing when a particular company or industry (e.g. tech) starts getting overvalued - but when almost everything from tiny, unknown penny stocks to the big blue chips starts skyrocketing, we'd much prefer sticking with a few solid stock picks and then keeping cash on the side for a rainy day.
And that's exactly what happened last week.
Stocks - especially tech companies - were rattled to an extent that prices have become slightly more attractive for new investments.
That's why I started investing more in some of the companies we've mentioned on Talking Stocks before...along with another one that I'd like to introduce to you today:
Teladoc in Two Sentences.
This is a company that can schedule and perform your regular doctors' appointments - non-critical normal checkups, therapy, medical consulting, more serious chronic issues, and more - all online.
It serves over 12,000 companies and has north of 51 million members: all of whom are paying for not only high-quality medical attention, but also the online convenience that comes with it.
Let's get into why this stock is worth looking into from an investment perspective.
The Telehealth industry is forecasted to grow almost 38% each year, which means that TDOC has the best of both worlds.
It's working in a necessary part of the economy (healthcare) but it's also focused on the innovative, fast-growing side. That's important because the companies we invest in need to have a decent level of growth if we're looking for good returns.
Think of it as a box with a balloon inside of it. If the balloon (a company) is growing well, but the box (an industry) is small and tightly surrounds it, the company is likely not going to be able to reach a size where it can start making great returns for investors.
That's why we want a situation where the balloon and the box are expanding together. If an industry is forecasted to grow well, it's likely that the main companies inside it will commensurately grow too: and this is exactly what we're seeing with Teladoc:
Cash and Debt.
Cash and Debt levels are important to look at because you want to know:
If everything went to hell, would this company be able to ride out the storm or not?
Luckily for us, TDOC has an extremely low level of debt relative to all tech companies and its cash holdings (of around $800 million) means that it has a runway of just above 3 years.
In other words, if all revenues completely stopped and the company was unable to borrow any money, they could still survive around 3 years whilst being fully operational.
So we've got a company in a fast-growing industry that also has the financial ability to continue prospering in that market. Great, but how do we make sure that we've got this analysis right?
Taking a look at the investors in a company and the forecasts that investment firms have placed on a stock is also a good way of determining a company's potential. It can't be the only type of analysis you do, but if you see that a stock's industry is good and its finances are solid, it definitely helps to see that other, reputable people also share your outlook.
Here are some of the big names backing Teladoc Health:
Cathie Wood was one of the most successful investors of 2020, growing her assets under management (AUM) from roughly $3 billion to north of $34 billion in the space of a year. The reason?
Big investments in Tesla, Square, and you guessed it: Teladoc Health.
TDOC is her 4th biggest position in her flagship Innovation ETF (ARKK), and it's likely that she's bought even more Teladoc stock after last week's drop.
And she's not the only one. According to Simply Wall St, almost all the major investors of TDOC bought substantially in recent weeks (Change column below ⬇️).
This tells us that the big players in the game are likely bullish on the stock, providing even further reason to put Teladoc Health on your radar.
Certainly, we need to consider that this is still a fast-growing technology company, so it'll be vulnerable to sharp drops here and there as well as a lack of profitability over the next few years —
But if you're looking for a solid play for the future and you're ready to incur a little volatility, this is one of the places I'd bet my capital (and I am!).
I'll see you next week for some recommendations on the best investing books in the game.
Until then, take some time to research TDOC on your own and let me know what you think 👋
If you'd like to start investing in stocks, here's a link to the platform I use ⬇️
*67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.