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The stock market has long been the privileged creator of wealth. While other investment vehicles, like bonds or gold, have performed better over short periods of time, no asset class has generated better average annual returns than stocks over the long term.
However, the emergence of cryptocurrencies is changing this way of thinking. After seeing Bitcoin (CRYPTO: BTC) drop from $ 1 to $ 40,000 in just over a decade and seeing Dogecoin (CRYPTO: DOGE) gallop by 27,000% in six months, investors feel compelled to continue momentum in the crypto space.
Unfortunately, that could turn out to be a huge mistake.
Image source: Getty Images.
The cryptocurrency bubble will eventually burst
While it’s undeniable that cryptocurrency has generated game-changing returns, most of these benefits have been built on unfounded hype. In other words, some people view tokens like Bitcoin and Dogecoin as the future global currencies, but hardly anything has suggested that will come to fruition.
The reality is that digital currencies are virtually useless outside of a cryptocurrency exchange. Bitcoin has been stuck on 250,000 to 300,000 transactions per day for years, while Dogecoin has moved closer to an average of 30,000 daily transactions in recent times. For comparison, payment processing giants Visa and Mastercard processed 700 million transactions per day on a combined basis in 2018.
To build on this point, Fundera estimated earlier this year that only around 15,200 companies globally accept Bitcoin. Meanwhile, the Cryptwerk online business directory finds that Dogecoin is accepted by 1,400 companies. For context, there are over 32 million businesses in the United States and approximately 582 million entrepreneurs worldwide. There just isn’t the large-scale adoption that is being hyped by cryptocurrency proponents.
At the same time, blockchain technology is caught in a Catch-22. Blockchain being the transparent and immutable underlying ledger of digital currencies that records transactions. No company is willing to abandon a proven infrastructure in favor of blockchain until it is demonstrated that blockchain can be scaled in the real world. At the same time, there will be no proof that blockchain is revolutionary if no company is ready to be an early stage guinea pig, so to speak.
History shows unequivocally that all bubbles eventually burst, bar none. This is the fate that awaits cryptocurrencies.
Empty digital currencies to benefit this fast-growing trio
Rather than making your money work in an asset class driven by hype and emotion, my suggestion would be to buy the following trio of supercharged stocks. If you buy stakes in innovative companies whose products and services have increasing application in the real world, and you hold those stakes for long periods of time, you will most likely get rich.
Image source: Getty Images.
Etsy
For starters, the Etsy e-commerce platform (NASDAQ: ETSY) will make long-term investors forget about the volatility and hype associated with digital currencies.
To state the obvious, Etsy has been a clear winner in the coronavirus pandemic. With people stuck in their homes, many have turned online to shop for basic necessities and optional goods. For Etsy, that included a healthy increase in face covering sales. But the Etsy platform has one key benefit that even Amazon doesn’t seem to be a threat to: personalization.
The Etsy platform is built on the idea of putting customers in touch with small merchants who can, if necessary, personalize their order. Etsy’s merchant collection focuses on personal engagement and uniqueness that shoppers simply won’t find on the biggest ecommerce platforms. The proof is in the pudding that Etsy’s platform resonates with buyers. The usual spending of buyers – those who have bought at least six separate times for a total of more than $ 200, in total, over the past year – has skyrocketed. Regular shoppers spent 205% more in the first quarter of 2021 than in the previous year quarter.
Since Etsy generates most of its revenue from merchant ads, the company has also aggressively reinvested in its platform to streamline searches and retain users. Last year, it introduced SEO videos to promote products and gave its small marketers better access to analytics tools.
It is not excluded that Etsy will triple its annual turnover by the middle of the decade.
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Limited sea
Singapore-based Sea Limited (NYSE: SE) is another supercharged growth stock that can make investors rich. While Sea is far from cheap, the premium you would pay takes into account that it has three exceptionally fast growing operating segments.
At this time, Sea generates substantially all of its earnings before interest, taxes, depreciation and amortization (EBITDA) from its gaming division. Like online shopping, games have particularly benefited from the fact that people are stuck in their homes. As Sea’s mobile games target a global audience and the pandemic is far from over in many parts of the world, demand for gaming entertainment is likely to remain robust. Over the past year (through the end of March), quarterly active paying users have grown 124%, with 12.3% of the company’s total players now paying to play.
In the long run, Sea’s crown jewel is expected to be its Shopee e-commerce platform, which is still the most popular shopping download in Southeast Asia and is gaining traction in Brazil. With a focus on emerging markets and regions where the middle class is growing at an incredible rate, Shopee saw its gross orders jump 153% in the first quarter, with the gross merchandise value of those orders doubling to 12. $ 6 billion. This is just the tip of the iceberg.
Finally, Sea’s digital financial services division offers mobile wallet services to underbanked regions. The volume of mobile wallet payments is on track to exceed $ 14 billion in 2021, with more than 26 million paying customers in the first quarter.
If all goes well, Sea Limited’s revenues could potentially quintuple over the next four years.
Image source: Getty Images.
CrowdStrike Holdings
Cyber security stock CrowdStrike Holdings (NASDAQ: CRWD) is a supercharged third growth company that can easily outperform the cryptocurrency industry over the long term.
Cyber security may not be the fastest growing industry over the next decade, but it could very well be the safest double-digit growth opportunity. With more businesses than ever moving their data online and in the cloud due to the pandemic, the importance of protecting business and consumer data is greater than ever. In short, the demand for third-party cybersecurity solution providers is skyrocketing.
While there’s no shortage of cybersecurity specialists, what sets CrowdStrike apart is its cloud-native Falcon platform. Built in the cloud and powered by artificial intelligence, Falcon oversees approximately 6 trillion events every week. That is, CrowdStrike’s main platform is getting smarter to recognize and respond to potential threats over time. And in many cases, CrowdStrike’s solutions are more efficient and cost-effective than on-site security options.
It is clear from the company’s operating results that Falcon is resonating with corporate customers. It managed to retain 98% of its customers for two consecutive years, and existing customers spent between 23% and 47% more year over year for 12 consecutive quarters. Perhaps even more impressive is that 64% of customers have purchased at least four cloud module subscriptions, up from 9% just four years ago. It is this rapid evolution of the corporate clients of the company that allows CrowdStrike to generate a gross subscription margin in the upper 70% range.
Investors should expect CrowdStrike to grow by at least 30% per year until the middle of the decade.
This article represents the opinion of the writer, who may disagree with the official recommendation position of a premium Motley Fool consulting service. Were motley! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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