Investors were taken on a historic adventure last year. With the reference S&P 500 gaining 16%, most investors ended the year in the green. Yet they also suffered the fastest bear market decline of at least 30% on record, as well as the fastest rally in history.
A Trump barely blinked in the face of adversity.
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Bitcoin has skyrocketed, but it’s a flawed investment
Over the past year, bitcoin – the world’s largest cryptocurrency – has quadrupled in value. Enthusiasts point to the scarcity and usefulness of bitcoin as the reasons for its outperformance.
Bitcoin is limited to a lifetime circulation of 21 million tokens. Currently approaching 18.6 million, it will be the year 2140 before all Bitcoin tokens have been mined. As the US central bank continues to grow the outstanding money supply, bitcoin is seen as a safe haven against dollar deflation.
Bitcoin has also seen increased use as a medium of exchange. More than 5,000 bitcoin ATMs have been placed around the world, with more than 15,100 businesses (2,300 in the US) now accepting bitcoin as a method of payment, according to Fundera.
Yet bitcoin is also full of flaws. For example, scarcity and utility are in contradiction and are not complementary. Even with bitcoin divisible to eight decimal places, there simply aren’t enough tokens to make it a viable replacement for fiat currencies – especially with many tokens held by investors with no intention of putting them into circulation. If Bitcoin wants large-scale utility, consensus will need to be reached to increase the number of tokens.
One could even argue that bitcoin is not really rare at all. Although it has a perceived cap of 21 million tokens, that limit exists only by consensus. There is nothing concrete about the Bitcoin cap.
These innovative companies can revolve around bitcoin in 2021
I believe there are other investments that could far outperform bitcoin in 2021. If you’re looking to avoid the smelly bitcoin volatility and buy a handful of big companies, these are the three unstoppable stocks to consider adding.
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Teladoc Health
No matter what happens with the 2019 Coronavirus Disease (COVID-19) pandemic in 2021, it will be another great year for the predominantly defensive, but fast-growing health sector. Few, if any, health stocks offer a more immediate and long-term rise than the virtual health giant Teladoc Health (NYSE: TDOC).
As you can imagine, Teladoc has been one of the main beneficiaries of the pandemic. Doctors wanted to keep potentially sick and at-risk patients out of their practices, so they relied on virtual visits more than ever. Teladoc saw its cumulative number of virtual tours more than triple between early April and late September.
However, this is a lasting trend, even after the pandemic. Virtual tours are billed at a lower rate than office visits, meaning health insurers will increasingly promote them. In addition, improved ease of access to physicians can lead to better patient care and a reduction in the incidence of costly chronic diseases. It also doesn’t hurt that virtual visits are more convenient for patients and doctors.
This year will also be the first time that Teladoc and Livongo Health will operate as a single entity. Teladoc bought applied health signals company Livongo in a cash and stock transaction that closed in early November. Livongo’s business model provides helpful advice for people with chronic illnesses. These nudges induce lasting changes in behavior. Although it accounts for just over 1% of the US diabetes market, Livongo has become profitable on a recurring basis prior to its acquisition.
Now under the Teladoc umbrella, Livongo is free to expand into new indications, such as hypertension and weight management, and to cross-sell within the Teladoc network. In short, the sales of this company could double several times during this decade.
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Cresco Laboratories
Another unstoppable stock that can generate superior gains over bitcoin in 2021 is the US multi-state cannabis operator (MSO). Cresco Laboratories (OTC: CRLBF).
Suddenly the American pot industry has more catalysts than it can count. In less than a week, Joe Biden will be sworn in as the 46th President of the United States. Meanwhile, on January 5, the people of Georgia narrowly voted the two Democratic Party candidates for the US Senate. Assuming lawmakers vote on party principles, Democrats will have a narrow majority in both houses of Congress over the next two years. This means that a path for federal legalization or reform of cannabis banks now exists.
But Cresco Labs doesn’t need congressional action to have a great year. First, the company is making significant strides on the retail front. Although it only holds 29 retail licenses in total (at the lower end of the spectrum, compared to other billion dollar MSOs), 10 of the company’s 20 operating dispensaries are in Illinois. The Land of Lincoln is a limited license state, which means that companies that maximize their retail presence (currently a maximum of 10 stores) should be able to absorb a significant share of the entertainment market.
Perhaps even more impressive is Cresco Labs’ wholesale operations. While wholesale is a lower margin segment than retail, Cresco more than makes up for these lower margins with exceptional volume. Following its acquisition of Origin House a year ago, Cresco came into possession of Origin’s highly lucrative cannabis distribution license in California. This gave the company access to nearly 600 dispensaries throughout the Golden State. As California, the world’s largest marijuana market in terms of annual sales, works through red tape and opens new dispensaries, Cresco’s wholesale opportunity will only grow.
Cresco still looks like a bargain in the American cannabis space.
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Growth Equity Investors Can Also Trust Social Media Succession Pinterest (NYSE: PINS) in 2021.
Like Teladoc, Pinterest has been a direct beneficiary of the pandemic. People stuck at home spent more time online and on their phones. Pinterest had experienced average annual user growth of 30% between 2017 and 2019, but saw an even greater increase in 2020. Pinterest also increased its business over the summer, when a handful of top companies plan boycotted Facebook on its advertising practices.
Pinterest is designed to be successful long after the pandemic is over. Most of the company’s new users are overseas. While the average revenue per international user is much lower than that of US users, the rapidly growing number of active Pinterest users per month has little difficulty in attracting new ad dollars in these overseas markets. The ability to double the average revenue per international user several times over this decade is precisely why Pinterest’s growth rate is phenomenal.
Pinterest is also in the perfect position to take advantage of the rapidly growing ecommerce space. With business users willingly sharing the things, places, and services that interest them, all Pinterest has to do is connect small businesses with these motivated consumers. The company has stepped up its use of video to build user loyalty. He also partnered with Shopify to give more opportunities to small businesses.
Look for Pinterest to deliver a booster performance to its stellar 2020 of the current year.
