For more than a century, stocks have been the smartest long-term investment vehicle. While the stock market may not outperform bonds, gold, or real estate every year, the average annual return on stocks far outperforms other investment vehicles.
But in recent years, cryptocurrencies have given stocks a run for their money. In particular, private investors have used the so-called “people’s currency”, Dogecoin (CRYPTO: DOGE)which, at its peak in May, scored more than 27,000% in six months. That’s a higher return than the investor would get by holding the S&P 500 since 1965.
Dogecoin lacks stamina
There are a variety of reasons why the retail community has rallied behind Dogecoin. For one, it’s very popular with billionaires Elon Musk and Mark Cuban. Musk, in particular, has shown the ability to move crypto markets with tweets and memes. Investors also believe they will get in near the ground floor before we see widespread adoption in retail.
The problem with Dogecoin, as I said earlier, is that it completely lacks competitive advantages. Without something tangible to encourage adoption, there is no reason to believe that Dogecoin will ever be anything more than a fad.
For example, there is nothing unique about Dogecoin’s blockchain that would instill long-term trust. While the transaction fees are lower than Bitcoin, they are also much higher than hyphen, Stellar, XRP, Cardano, Nano, Bitcoin cash, and a really long list of other popular cryptocurrencies. Dogecoin also cannot validate and process transactions faster than many of its competitors.
The argument for widespread acceptance is shaken if you take a closer look at the average daily transactions of Dogecoin. Between 17,000 and 30,000 Dogecoin transactions have been completed daily for the past two months. That is a decrease from an average of 25,000 to 40,000 daily transactions in 2019. In comparison, the giants of payment processing are Visa and MasterCard processed a total of 700 million daily transactions in 2018.
And finally, Dogecoin lacks utility. It took about 1,400 of the most obscure online companies eight years to accept Dogecoin as a form of payment. When you consider that there are hundreds of millions of companies worldwide, this is not exactly a vote of confidence in the common currency.
This trio can easily outperform the national currency
With Dogecoin lacking anything that would resemble staying power, I believe stocks will easily outperform the people’s currency over the next five years. Specifically, I’m looking for the following three growth stocks that will revolve around Dogecoin by the end of 2026.
If you absolutely must have an exposure to crypto, my suggestion would be to ditch Dogecoin and buy fintech stocks square (NYSE: SQ).
For more than a decade, the seller ecosystem has been Square’s fundamental asset. This is the operating segment that provides merchants with point-of-sale equipment, loans, and analytics to help them grow their business. The gross annual payment volume (GPV) traversing Square’s seller ecosystem grew an average of 49% per year between 2012 and 2019, and the GPV is likely to exceed $ 140 billion in 2021.
Note that the seller ecosystem is no longer just for small traders. The company’s second quarter operating results showed that 65% of GPV came from so-called “larger” companies, with annual GPV of at least $ 125,000. That is 10 percentage points more than in the same period two years ago. Since the seller ecosystem is a chargeable segment, larger traders mean juicier gross profits.
But what crypto-loving retail investors are likely to appreciate more is Square’s fast-growing, peer-to-peer payment platform Cash App. Between the end of 2017 and the end of 2020, the number of monthly active users of Cash App more than quintupled to 36 million. Additionally, gross profit per Cash App user has increased about 150% over the past two years to $ 55. In comparison, it only costs Square about $ 5 to attract every new Cash app user.
Cash App also expands Square’s revenue channels. In addition to merchant fees, the company generates revenue from transfers, investments and Bitcoin exchanges.
Another company that may orbit Dogecoin for the next five years is cybersecurity stock Ping identity (NYSE: PING).
The nice thing about cybersecurity is that it has turned into a basic needs service. The coronavirus pandemic has accelerated the spread of corporate and consumer data to the cloud, which means third-party vendors like Ping Identity are becoming more trusted in protecting critical information.
While most cybersecurity stocks are valued using nosebleed sales multiples, pinging can be achieved for less than 7 times Wall Street’s forecast sales for the current year. That’s because some of the company’s customers opted for short-term subscriptions last year when the pandemic disrupted economic activity.
However, as Ping is now focusing on its significantly higher-margin Software-as-a-Service subscription segment, Annual Recurring Revenue (ARR) continues to grow. In the second quarter, ARR was up 19% year over year, with the company’s net retention rate of 111% showing that existing customers spent 11% more than the year-ago period. As the revenue recognition schedule for these higher margin subscriptions becomes more evenly distributed, we will likely see Ping’s revenue growth stay in the mid-tens across the board, if not higher.
A third share that Dogecoin can confidently overtake by the end of 2026 is the climber in social media Pinterest (NYSE: PINS).
In the past few weeks, Pinterest has been overwhelmed by the sequential decline in monthly active users (MAU) reported in the second quarter. As the US and global economies try to return to some level of normalcy, it seems that some people have chosen to spend less time on social media sites like Pinterest. But that single quarterly MAU decline doesn’t tell the full story. If investors step back several years, they would see a company growing its user base well within its historical range.
Perhaps more importantly, Pinterest continues to see its Average Revenue Per User (ARPU) rise even if its MAUs decline a little. Global ARPU rose 89% for the quarter ended June, with ARPU from international users increasing 163%. This effectively means that advertisers (i.e. merchants) are finding incredible value in Pinterest’s large user base and are willing to pay big bucks to get their message across with these users. In terms of the ARPU, Pinterest is still in the early stages of monetizing its platform.
And let’s not forget that Pinterest’s platform has a very targeted audience. These are people who willingly post about the things, places, and services that interest them. This makes it easy for merchants to target their ad money effectively, while Pinterest acts as an e-commerce intermediary.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.