Investors have a lot to be thankful for over the past 11 months. Since hitting the bear market low on March 23, the benchmark S&P 500 and tech-focused Nasdaq Composite have returned 73% and 96%, respectively, through Feb. 23, 2021.
Yet, neither figure comes close to matching the returns seen in most brand-name cryptocurrencies. For example, Bitcoin, the largest digital currency by market cap, has gained nearly 620% through Feb. 23 since the March 23 bottom for the stock market.
But even Bitcoin has been left in the dust by one supercharged digital token: Dogecoin (CRYPTO:DOGE). Dogecoin has gained almost 1,050% year-to-date, and is up just shy of 2,000% on a trailing four-month basis.
Image source: Getty Images.
Dogecoin: All bark, no bite
If you're wondering how an asset can gain more than 1,000% in less than two months, look no further than the power of cult investing on retail boards like Reddit or social sharing platforms like Twitter. Similar to how the WallStreetBets community on Reddit banded together to take on the perceived big money in heavily short-sold stocks, retail investors on Reddit's SatoshiStreetBets board stuck together and piled into the exceptionally low-priced Dogecoin. It even received support from Tesla Motors' CEO Elon Musk, who pumped up the alt-coin via a series of tweets.
The problem is that Dogecoin was a joke from the get-go, and there's nothing about its utility that's going to change that. It was created in a matter of hours in 2013 by two engineers who thought it'd be funny to splice the two hottest things on the internet -- cryptocurrency and a Shiba Inu dog meme -- into one.
It can be bought and sold on select crypto exchanges, but has very limited utility. This is to say that only a fractionally small percentage of businesses accept it as a form of payment.
In other words, it has all the characteristics of a pump-and-dump asset, with the dump coming up at some point in the future.
Dump Dogecoin and put your money to work in stocks with staying power
Instead of investing your hard-earned money in a digital joke, consider putting it to work in businesses that have tangible long-term growth prospects and offer healthy upside. Here are three of the smartest stocks you can buy right now.
Image source: Getty Images.
Mastercard
If you really have an inescapable itch to gain cryptocurrency exposure, ancillary stocks like payment facilitator Mastercard (NYSE:MA) would be a smart bet. Mastercard recently announced that it would begin supporting a handful of cryptocurrencies on its network later this year.
However, the game-changing potential for Mastercard remains its cashless payment facilitation. Since a majority of the world's transactions are still conducted in cash, Mastercard's runway to expand its payment network into underbanked regions of the world could lead to multiple decades of high single-digit to low double-digit growth.
Mastercard's operating model is also tied to the health of the U.S. and global economy. When the U.S. and global economy are growing, consumers and businesses spend more. Higher spending should make Mastercard, which is driven by merchant fees, more money. Since periods of economic expansion last considerably longer than contractions and recessions, Mastercard is playing a numbers game that it's bound to win.
As one final note, Mastercard chooses to avoid lending and strictly focuses on payment facilitation. Though this can mean missing out on interest income and added fee potential during long periods of economic expansion, it also means no direct negatives during recessions with credit and loan delinquencies rise. Not having to set aside capital for loan and credit losses is a big reason why Mastercard's margins remain so robust.
Image source: Getty Images.
Cresco Labs
Following years of maturation for the cannabis industry, a handful of marijuana stocks are actually worth buying now. Perhaps topping that list is U.S. multistate operator (MSO) Cresco Labs (OTC:CRLBF).
Like most MSOs, Cresco has a retail presence. But as you're about to see, it's not necessarily the company's core growth driver.
After acquiring Verdant Creations and its four Ohio dispensaries, Cresco has roughly two dozen operating dispensaries nationwide. It's also in the process of buying Bluma Wellness, which would add more than a half-dozen retail locations in Florida. The most interesting thing about Cresco's retail approach is its focus on limited license states. With 15 open dispensaries in Illinois (10) and Ohio (5), Cresco is minimizing the competition it'll face and allowing its brands to shine.
The more impressive sales driver for the company is its wholesale segment. When it closed its purchase of Origin House in January 2020, it came into possession of a highly coveted cannabis distribution license in California. Since the Golden State is the most lucrative marijuana market in the world by annual sales, having the ability to place pot products in at least 575 dispensaries throughout California is a surefire moneymaking venture.
Image source: Getty Images.
Finally, forget all about the dart throw known as Dogecoin and put your money to work in the most dominant social media company in the world: Facebook (NASDAQ:FB).
Facebook ended last year with 2.8 billion monthly active visitors to its namesake site, as well as 3.3 billion family monthly active people. This latter figure includes unique visitors to its other owned assets, such as Instagram and WhatsApp. Put another way, 42% of the people on this planet, regardless of age, visits a Facebook-owned social platform at least once monthly. There's not a social platform on this planet that has a broader audience, or one that can be targeted more effectively by advertisers. It's worth noting that even in the steepest recession in decades for the U.S. economy in 2020, Facebook's ad revenue still grew by 21% from the previous year.
Additionally, it's almost mind-boggling to realize that Facebook hasn't even fully monetized its assets. Although its namesake site and Instagram generated more than $84 billion in ad revenue last year (accounting for 98% of Facebook's sales), WhatsApp and Facebook Messenger aren't yet generating meaningful revenue. When Facebook does open the floodgates, operating cash flow could absolutely skyrocket higher.
After years of being valued at a huge premium, Facebook is still growing by 20% to 25% annually, yet is sporting a price-to-earnings-growth ratio (PEG ratio) of 1. It's a screaming bargain and a smart buy for long-term investors.
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.
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