Before you consider investing in Dogecoin, read this:
- The “people’s currency”, Dogecoin, has been unstoppable since the beginning of the year.
- But just as Dogecoin went up, profits could soon melt away, because no competitive advantages are discernible.
- That looks a lot better with this trio of beaten up stocks. After their price declines, they now have a lot more to offer than Dogecoin.
For many decades, it has been the stock market that has helped investors build large fortunes. While it cannot outperform other types of investment every year, over the long term it has significantly outperformed the average annual return on other assets.
But since the rise of cryptocurrencies about a decade ago, some of them have pulled far out of the stock market. Small investors in particular have rushed to the so-called “people’s currency” Dogecoin.
Dogecoin did really well in 2021, but one fatal flaw remains
In early May, when Dogecoin hit an all-time high of almost 74 cents per token, its value had risen more than 27,000% in a six-month period. For comparison, the benchmark index S&P 500 rose 23,454%, including dividends, over the 56 year period ended December 31, 2020. That shows how insane the profits from Dogecoin have been in such a short time frame.
If you asked the Dogecoin “hodlers” (a deliberate typo used to describe the token holders) why they bought into the national currency, they would probably say that it is because of the community, the idea, yet To be at the very beginning of a great story and the fact that billionaires Elon Musk and Mark Cuban are supporting Dogecoin. But there’s one big problem with each of these prevalent bull arguments: They don’t offer any competitive advantage.
As I mentioned earlier, Dogecoin doesn’t do anything particularly well. For example, its transaction fees are significantly higher than many other popular digital currencies. Its blockchain is also not very quick to process or validate transactions compared to other crypto networks. And when you examine usage, only around 1,400 (mostly obscure) companies accept Dogecoin as a means of payment. You could have expected more momentum after eight years.
In other words, Dogecoin has all the hallmarks of a fad with no real stamina. Since there is no barrier to entry into the cryptocurrency space and Dogecoin has no special properties, it should be easy for any serious investor to avoid it.
It is much smarter to look around for unjustly beaten stocks
Instead of buying Dogecoin, I’d rather invest my money in the following trio of stocks that have become cheaper. These are companies that are well below their 52-week highs that I don’t own yet. But I would buy them without hesitation if I had to choose between Dogecoin and these stocks.
The first stock I would buy right now because of Dogecoin is the Chinese internet search giant Baidu (WKN: A0F5DE). The company’s shares are down 56% from their all-time high in mid-February, with the prospect of regulatory action in China weighing heavily on the company’s (and its competitors) valuation. While flagships like Alibaba have been penalized with record antitrust fines, I don’t expect that will be the case with Baidu.
The main selling point for Baidu has long been the dominance of its internet search platform. Although Google controls the lion’s share of global search, Baidu is king in China. According to GlobalStats, Baidu has held 66.9% to 79.9% of Internet searches in China for the past twelve months. As long as the Chinese economy grows (it often grows much faster than the US economy), advertisers will pay a lot of money to get their messages across to users.
Investors will also appreciate Baidu’s investments in artificial intelligence (AI) and cloud services. While search revenue rose 18% in the June quarter, the segment focused on AI and cloud services saw revenue growth of 80%. One should keep in mind that AI and cloud services can bring juicier margins than the marketing segment. That makes Baidu a nifty growth and value stock.
While marijuana stocks could be one of the best investments of the decade, U.S. pot stocks have fared miserably since hitting their all-time highs earlier this year. With Cresco Labs However, I wouldn’t worry (NYSE: A2PAHM), which is now 45% below its all-time high, especially not when compared to Dogecoin.
Like most Multi-State Operators (MSOs), Cresco is working to build its brand and create a profitable retail presence. The company has 34 operational dispensaries and has enough retail licenses to run about four dozen cannabis stores. Many of the existing dispensaries are in high-profile markets (Florida) or in states with limited licenses (Illinois and Ohio). Targeting states with limited licenses is a particularly smart strategy. With regulators deliberately restricting competition, Cresco has a greater chance of building its brands and gaining a loyal following.
However, what really sets Cresco apart from other MSOs is its massive wholesale presence. In the June quarter, 52% of its $ 210 million sales came from wholesale.
Usually wholesale has a bad rap for having lower margins compared to retail. But having a hugely lucrative cannabis distribution license in California, the world’s largest marijuana market, allows Cresco Labs to sell third-party and proprietary marijuana products in more than 575 pharmacies. In short, Cresco will thrive for long-term investors.
A third stock I’d buy right now instead of Dogecoin is the tech-powered real estate company Redfin (WKN: A2DU22). The company’s shares have practically halved since hitting an all-time high in mid-February.
There is no question that historically low mortgage rates have boosted demand for real estate providers. But what Redfin brings to the scales in terms of cost savings and personalization is what sets the company apart from the competition.
Most traditional real estate companies charge a fee of 2.5 to 3% for real estate brokerage. In comparison, Redfin charges between 1% and 1.5% based on how many deals a buyer or seller has already done with the company. With an average newly sold home price of $ 446,000 in July (according to U.S. officials), lowering the listing fee by up to 2 percentage points could save the average seller nearly $ 9,000. Perhaps it’s no surprise that Redfin’s share of existing home sales has catapulted from 0.44% in late 2015 to 1.18% in mid-2021.
Redfin’s personalization is also driving the business forward. During the pandemic, the company increased the use of 3D and virtual tours. It has also expanded its RedfinNow service, which purchases homes for cash, to avoid the hassle and haggling that comes with selling a home.
Redfin is changing a cumbersome industry before our very eyes, and that’s more than I can say of Dogecoin.
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