The Dogecoin bubble is about to burst: purchase these surefire shares as a substitute – Motley Idiot
For more than a century, the stock market has stood on the pedestal alongside other investment vehicles. Though there have been years when bonds, oil, and even gold outperformed the benchmark S&P 500, no investment vehicle comes anywhere near the average annual return on the stock market in the very long term.
However, the past decade has produced soaring cryptocurrencies such as Bitcoin. As the world’s largest digital currency catapults from USD 1 to north of USD 40,000 per token, it and its competitors are in danger of knocking the S&P 500 off its pedestal.
Interestingly, however, it’s not Bitcoin that is intriguing investors. This year everything revolved around the so-called “people’s currency”, Dogecoin (CRYPTO: DOGE).
Make no mistake, the Dogecoin bubble is about to burst
Why Dogecoin? The simplest answer I can offer is that retail investors love to hunt assets with a lot of momentum. After Dogecoin started the year under half a penny ($ 0.005), its tokens soared as high as $ 0.73. Based on June 15, Dogecoin is up more than 6,700% year-to-date, which is far better than any stock.
Dogecoin enthusiasts are also enthusiastic about Tesla CEO Elon Musk takes a liking to their coin as well as more merchants who accept Dogecoin as a means of payment.
But if you grapple with the bull case presented on social media, you will find that it is full of hype and misinformation.
Although the acceptance of Dogecoin as a means of payment is technically increasing, it took eight years, for example, for 1,400 mostly obscure companies to come on board. Remember, that number of 1,400 is worldwide and there are an estimated 582 million entrepreneurs worldwide. The point is, Dogecoin (excuse the pun) is practically useless outside of a crypto exchange.
It doesn’t exactly raise eyebrows in the payments area either. Dogecoin’s blockchain processes around 50,000 transactions every day. To put that into perspective, it would take almost four decades for Dogecoin’s blockchain to process the number of transactions Visa and MasterCard edit in a single day on a combined basis. In addition, Dogecoin transaction fees are significantly higher than many popular competitors.
Additionally, you shouldn’t overlook the fact that every bubble in history has burst without exception. There is no question that the over 6,700% surge in Dogecoin within a few months of the social media hype represents a bubble.
These stocks are surefire winners
Instead of pouring your hard-earned money into the proverbial desire and hope that things turn out well, I’d suggest dropping Dogecoin and investing your money in the following trio of surefire stocks. These are companies that have an exceptional track record of making money from patient investors.
If you are looking for secure long-term returns, the Warehouse Club is the place for you Costco Wholesale (NASDAQ: COST). Including dividends paid, Costco has not delivered a negative return to investors since 2008. Additionally, the total return has been at least 20% for six of the past 12 years.
Costco’s success depends on two factors. First off, Costco’s size and deep pockets help do what few other grocers and retailers can do. In particular, Costco can buy goods in bulk, lowering the average price per unit. This is one of the reasons most of the groceries at Costco are cheaper than what you can find in chain-based supermarkets and mom and pop stores. By addressing consumer desire to save money, it is able to attract quite a lot.
The second factor that adds to the first is that Costco is based on the membership model. The fees the company collects from the sale of its annual memberships allow it to really thin its margins on grocery products in order to undercut its price competition. This brings more people into the stores and increases the likelihood that higher margin discretionary items will be purchased.
Additionally, the membership model encourages buyers to spend more. Even if non-members won’t shop at Costco’s warehouses, simply paying an annual fee for the right to shop at his stores will make consumers worry twice about buying goods elsewhere.
Believe it or not, Costco isn’t the only known company working on a 12-year hit streak. Chip manufacturer Broadcom (NASDAQ: AVGO) has also been on a winning streak since 2008 with a total return of at least 12% for shareholders in eight of the last 10 years.
The big catalyst for Broadcom over the next five years appears to be the upgrade of the wireless infrastructure in the US to 5G capability. It’s been a decade since wireless download speeds improved significantly, resulting in a steady technology upgrade cycle for consumers and businesses that could take years. Broadcom generates the majority of its sales with wireless chips in smartphones and other smartphone accessories.
In addition, Broadcom is in the right place at the right time when it comes to data consumption. Between the coronavirus pandemic disrupting jobs and the adoption of 5G, the demand for cloud storage is booming. Broadcom offers connectivity and access chips used in data centers that are at the heart of this memory boom.
If you need one more reason to buy into Broadcom, consider its incredible dividend growth. In a decade, Broadcom’s quarterly payout has increased more than 5,000% to $ 3.60. It’s not often that a surefire tech stock pocketed 3% annually.
Palo Alto networks
A third surefire stock you’ll happily own instead of Dogecoin is cybersecurity specialist Palo Alto networks (NYSE: PANW).
By and large, cybersecurity is one of the safest growth trends investors can invest in this decade. No matter how good or bad the economy is, robots and hackers never take a day off. This means that responsibility for protecting corporate and consumer data falls into the lap of third-party providers of cloud-based cybersecurity solutions.
Palo Alto has been in a successful transformation for years. The company has effectively minimized its reliance on physical security solutions in favor of high-margin, cloud-based subscription services. These services, which rely on artificial intelligence to detect and respond to threats more intelligently, are often significantly cheaper and more effective to operate than local security solutions.
The other cog in the overwhelming success of Palo Alto is its willingness to make subsequent acquisitions. These buyouts help expand the company’s product portfolio and make it much more attractive for small and medium-sized companies.
With most cybersecurity stocks valued at nosebleed multiples relative to their sales, Palo Alto appears modestly valued at seven times Wall Street’s consensus sales estimate for the next year.
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.