Historically speaking, patience pays. While certain asset classes, such as gold, oil, and housing, have had their time in the spotlight, investing in stocks over the long-term has produced the best results by a longshot. Even taking into account Black Monday in 1987, the dot-com bubble, the Great Recession, and the coronavirus crash, the broad-based S&P 500 has delivered an average annual total return (including dividends) of 11% since 1980.
But these returns have been peanuts compared to the short-term gains from the vast majority of cryptocurrencies. Retail investors have been especially enamored with the so-called “people’s currency,” Dogecoin (CRYPTO:DOGE).
Dogecoin has been driven by hype, ignorance, and misinformation
Earlier this month, Dogecoin rallied to $0.73 per coin, which may not nominally sound like a lot, but is huge considering this was at a quarter of one penny ($0.0025) about six months ago. The at-one-time 27,000% gain from Dogecoin in six months bested the return of the S&P 500, including dividends paid, over the previous 56 years.
But although Dogecoin has delivered jaw-dropping gains, the truth is that it’s been driven by hype, ignorance to facts, and misinformation. In other words, it’s a bubble in the making.
For example, Dogecoin enthusiasts often point to its increased utility and low transaction fees as reasons why its adoption is inevitable. But if you really research the crypto space, you’ll discover that this optimism tells over a sliver of the story. Dogecoin may have lower transaction fees than Bitcoin and Ethereum, but its fees are also markedly higher than Stellar, Nano, Ripple, Dash, Ethereum Classic, Bitcoin SV, and a host of other coins. Dogecoin supporters frequently leave this part out.
It’s also not very useful beyond cryptocurrency exchanges. It’s taken eight years for a measly 1,300 businesses to accept Dogecoin as a form of payment. All told, 50,000 transactions take place on Dogecoin’s blockchain daily. This doesn’t even more the needle next to payment kingpins Visa and Mastercard, which combine to process 700 million transactions each day.
Dogecoin is also being swung violently by baseless tweets from Tesla CEO Elon Musk. A “decentralized future currency” shouldn’t swing by a double-digit percentage just because Elon Musk posts a meme.
This is a bubble, and history is clear that it’s going to burst.
Ditch Dogecoin for these superior stocks
Instead of putting your money to work in what looks to be a seriously flawed asset, consider buying the following trio of smart stocks. These are companies with tangible long-term prospects and real growth that can build wealth over time for patient investors.
First up is fast-paced telemedicine giant Teladoc Health (NYSE:TDOC), which has retraced more than 50% from its February highs and looks ripe for the picking.
As you can probably imagine, Teladoc was one of the biggest beneficiaries of the coronavirus pandemic. Physicians wanting to keep high-risk patients and potentially infected individuals out of their offices turned to virtual visits as a solution. Teladoc handled almost 10.6 million visits last year, which is up from a little over 4.1 million in 2019. Then again, Teladoc’s sales grew by an annual average of 75% since 2013, so it’s not as if the company was struggling prior to the pandemic.
What’s great about telehealth is that it provides benefits up and down the healthcare treatment chain. It’s considerably easier for patients to stay home and consult with physicians. Likewise, doctors have a better chance of keeping up with high-risk patients via virtual platforms, which could result in improved patient outcomes. As for health insurers, they benefit from the lower costs of virtual visits, compared to office visits, as well as the prospect of improved patient outcomes.
To differentiate itself, Teladoc Health also acquired leading applied health signals company Livongo Health in November. Livongo collects copious amounts of data on chronically ill patients and, with the help of artificial intelligence, sends tips and nudges to its members to help them lead healthier lives. Livongo had already turned the corner to recurring profitability when it was acquired, and it’s since pumped up its member base to around 658,000.
Teladoc could easily be one of the fastest-growing healthcare stocks of the decade.
Pardon the pun, but sometimes all you need is “love.” Modular furniture designer and retailer Lovesac (NASDAQ:LOVE) has been a top-performer over the past year, with the company’s unique products and operational adaptability helping to push its share price considerably higher.
When you think of great investment opportunities, furniture probably doesn’t come to mind. That’s because furniture tends to be a relatively high overhead operating model that’s extremely cyclical and dependent on showrooms and customer traffic. Lovesac has shaken up this model in a variety of ways.
For instance, Lovesac’s sactional couches, which accounted for 84.5% of its fiscal 2021 sales, are modular in design so they can work with just about any livable space. Additionally, there are more than 250 different washable covers that can be purchased for sactionals. As the icing on the cake, the yarn used in sactionals is made from recycled plastic water bottles. To summarize, we have ESG investing and an abundance of usability options rolled up into one product.
Lovesac also showed the world that it doesn’t need traditional showrooms to thrive. While having access to brick-and-mortar showrooms and partnerships is still important, internet sales flourished last year with people stuck in their homes. Internet sales were up 86% in the fiscal fourth quarter from the prior-year period, and as a percentage of net sales the internet doubled in importance in fiscal 2021 from the prior-year period.
Best of all, with e-commerce further reducing overhead costs, Lovesac has become profitable well ahead of schedule.
Another smart stock that should be able to run circles around Dogecoin over the long run is cloud-based customer relationship management (CRM) software provider salesforce.com (NYSE:CRM).
What’s CRM software? In the simplest explanation, it’s software that helps consumer-facing businesses manage client information in real-time. It can be used to log information and track service issues, as well as handle complex tasks such as managing online marketing campaigns and providing predictive analyses of what existing clients might purchase new products or services. Through at least the midpoint of the decade, CRM solutions should offer double-digit average annual growth potential.
According to IDC, salesforce sits atop this rapidly growing industry. When it examined global CRM revenue in the first-half of 2020, almost 20% of all market share belonged to salesforce. The next four companies behind it didn’t even add up to a 20% global revenue share. This suggests it’s going to be really hard for competitors to unseat salesforce from its perch.
The company hasn’t been shy about using acquisitions to expand its moat, either. It’s in the process of acquiring cloud-based enterprise communications platform Slack Technologies for $27.7 billion in a cash-and-stock deal. If completed, salesforce can use Slack as a platform to cross-sell its CRM solutions to small-and-medium-sized businesses.
Marc Benioff, the CEO of salesforce, aims to grow his company’s sales from $21.3 billion in fiscal 2021 to more than $50 billion in five years. If accurate, this would make salesforce one heck of a bargain in the cloud space.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.