This has been a trying year for Wall Street and the investment community. While volatility is always present in the stock market, the fluctuations we have seen this year are far beyond historical norms. For example, the uncertainty caused by coronavirus disease 2019 (COVID-19) initially sent the benchmark S&P 500 34% drop in less than five weeks. In some context, it took the S&P 500 on average 11 months to drop 30% in previous bear markets.
But not all assets have been crushed by concerns over COVID-19. The most popular cryptocurrency on the planet, bitcoin, has been virtually unstoppable this year. As of the early afternoon of Wednesday, November 18, bitcoin was up 148% year-to-date, which is considerably better than the year-to-date return of 10% for the S&P 500. broad based.
Why the resurgence of bitcoin? There is no obvious answer. Since bitcoin is not tied to a fiat currency or has traditional fundamental metrics that investors can criticize, its price movements are almost always driven by emotions.
What I can comfortably say is that bitcoin is a potentially dangerous (if not terrible) long-term investment. The market value of all bitcoin currently in circulation is $ 328.3 billion, which is paltry compared to the global gross domestic product of $ 81 trillion in 2017. In addition, around 40% of all bitcoin holders don’t use their digital tokens – they just sit on them for investment purposes. This means that the utility of Bitcoin is minimal in the real world. Wider adoption at the retail level is extremely unlikely.
Bitcoin also lacks scarcity. While physical materials like gold can be really scarce (i.e. we can only mine gold that we find on Earth), the perceived scarcity of bitcoin is a product of software programming. He can, in theory, see his number of tokens increased.
I firmly believe that investors should ditch bitcoin and invest their money in innovative growth stocks. These companies have tangible fundamentals, substance behind their financial reports, and real products.
Here are three growth stocks that can revolve around cryptocurrency.
It may not be the fastest growing industry of this decade, but there’s no doubt that cybersecurity will be the safest double-digit growth trend of the 2020s. That’s why the cloud native cybersecurity stock CrowdStrike holdings (NASDAQ: CRWD) is a much smarter long-term investment opportunity than bitcoin.
Cybersecurity is now a basic service. Hackers and bots don’t care if the economy is in recession or if a business is in trouble. With the pandemic forcing businesses online and, in many cases, the cloud, these businesses have no choice but to seek out on-premise or third-party security solutions to protect their sensitive data.
Built in the cloud, CrowdStrike’s Falcon platform is significantly less expensive than on-premises cloud security solutions. It is also found to be faster and smarter at detecting threats. That’s because Falcon relies on artificial intelligence to evaluate over 3 trillion events every week.
The beauty of CrowdStrike’s subscription model is that it is designed to adapt to the growth of its customers. In the first quarter of fiscal 2018, just 9% of the company’s customers had subscribed to at least four cloud modules. But in the fiscal second quarter of 2021 (13 quarters later), 57% of its customers had at least four cloud module subscriptions. Scalability and increased spending from existing customers helped CrowdStrike meet its long-term adjusted gross margin target on subscriptions of between 75% and 80%.
Cybersecurity appears to be a sure-fire winner for patient investors, and CrowdStrike is expected to be one of the top performers in the industry.
US-focused marijuana stocks also have a good chance of outperforming emotional cryptocurrencies like bitcoin over the long term. I would suggest investors consider a multi-state operator Cresco Laboratories (OTC: CRLBF).
Although it’s listed on the over the counter (OTC) exchange and not on a major exchange in the United States, don’t worry. Cresco cannot participate in a major exchange just because cannabis is illegal at the federal level. While OTC-listed stocks don’t have the best reputation, Cresco is an exception to this rule.
The first of two business models that will drive growth for Cresco Labs is its retail operations. Almost half of its operational dispensaries are located in Illinois. The Land of Lincoln opened for recreational weed sales on January 1, 2020 and is expected to grow into a market capable of generating over $ 1 billion in annual sales by 2024.
The second and arguably most exciting opportunity for Cresco is its wholesale segment. In January 2020, Cresco acquired Origin House as part of an all-share deal. While most of the pot inventory transactions were in capacity, this buyout involved Cresco Labs getting the cannabis distribution license from Origin House in California. Closing the deal allowed Cresco to place its products in more than 575 dispensaries in the country’s most lucrative state for the sale of weeds. In the recently completed third quarter, Cresco racked up industry leading wholesale revenue of $ 90.5 million.
With a real chance of achieving recurring profitability in 2021 and possibly reaching $ 1 billion in sales by 2022 or 2023, Cresco Labs is a much smarter buy than bitcoin.
Megacap stocks can also be growth stocks. Just because the backbone of social media Facebook (NASDAQ: FB) has a market capitalization of $ 775 billion doesn’t mean its growth rate has slowed. In fact, I’m pretty convinced that Facebook can spin circles around Bitcoin.
Facebook ended September with 2.74 billion monthly active users and 3.21 billion monthly active family users, up about 40 million and 70 million from the end of June, respectively. These family plans include other owned sites, such as Instagram and WhatsApp. Advertisers fully understand that there is no platform on this planet that allows them to target eyeballs. This gives Facebook exceptional ad pricing power, even during a pandemic.
Facebook hasn’t even played its full card game yet. It monetizes Facebook and Instagram through ads, but not Facebook Messenger and WhatsApp. These are four of the six most visited social platforms in the world, and Facebook has only tapped the keg, so to speak, on only two of them. There is a real opportunity for Facebook to double its sales and cash flow over the next four years if it introduces ads or revenue channels on WhatsApp or Facebook Messenger.
The company also has the option of expanding its revenue base. So far, ads represent 99% of Facebook sales. However, Facebook has ways to expand into the payments space, or it could become a popular content streaming destination in the years to come.
The choice between owning Bitcoin and Facebook shares is obvious: Facebook all the way.