As of this writing, the price of a single bitcoin token has risen 1,001% over the past 52 weeks. That figure is likely to have changed by the time you read this, and it's a coin toss whether bitcoin will move up or down from here.
Bitcoin has created a lot of wealth in a hurry, but many investors stay away from this asset-less asset to focus on more substantial investments. And if you believe in digital currency as an idea but can't be convinced that bitcoin itself will stick around for the long haul, you can invest in bitcoin-like ideas by leaning on some household-name stocks.
So we asked a few of your fellow investors here at The Motley Fool how traditional stocks can do a better job of managing your nest egg than through a risky bitcoin bet. Read on to see how they came up with Microsoft Corporation (NASDAQ:MSFT), IBM (NYSE:IBM), and Oracle (NYSE:ORCL).
Told you they would sound familiar, didn't I?
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Danny Vena (Microsoft): As an accountant, I haven't invested in bitcoin or any other cryptocurrency because there aren't any underlying assets. This is more speculation than investing at this point, particularly in light of the 700% gain in bitcoin this year, which has all the makings of a bubble. The distributed database used by the underlying blockchain technology, however, could potentially revolutionize a number of different industries.
Investors looking to invest in blockchain could choose to invest in a company that has a solid and growing business, provides necessary services to other companies, and is itself making a play in the area of blockchain. For me, that company is Microsoft. Known for its ubiquitous Office Suite of productivity software and the Internet Explorer browser, Microsoft has invested in a number of other areas that could significantly propel growth, like its investments in the areas of artificial intelligence and blockchain.
Microsoft's Azure Cloud has become the strongest competitor to Amazon.com's (NASDAQ:AMZN) Web Services (AWS) and has been closing the gap, according to research company Gartner. The company recently announced its Azure blockchain-as-a-service suite that offers numerous blockchain apps and "supports an ever-growing number of distributed ledger technologies that address specific business and technical requirements."
This is on top of an already thriving business. In its most recent quarter, Microsoft's revenue grew to $24.5 billion, a billion higher than consensus estimates, while earnings per share grew 17%. Business network site LinkedIn contributed $1.1 billion to revenue in the quarter and is seeing record levels of engagement.
A big, blue bet on the blockchain industry at large
Anders Bylund (IBM): There is no doubt in my mind that blockchain technologies will change the world for the better. What's less clear is exactly which digital tokens will hit the mainstream in a big way. Bitcoin, for example, is an early winner but may not survive in the long run.
If you're interested in blockchain solutions but not ready to place your bets among the current assortment of cryptocurrencies and token chains, you should look into companies driving blockchain research for the long run.
At the forefront of that effort, you'll find good old IBM.
Big Blue is doing serious research on blockchain technologies, having already produced several dozen patents in that field. The company is finding ways to pair blockchain ledgers up with its world-leading artificial-intelligence tools under the IBM Watson banner. The next step is finding commercial applications and paying customers for all this.
That's happening, too. IBM recently launched a blockchain-based platform to help food retailers track their wares from production to final sale, with a focus on food safety. Some of the largest food producers and grocery store chains in the world are already on board. Real-world implementations should follow in the next couple of years.
Another IBM-powered blockchain tool is helping money center banks track their financial trading. Canadian banks use Big Blue's blockchain platforms to track and verify the identity of their customers.
And on and on it goes. IBM provides the technology platform, helps clients develop blockchain-based tools to meet their needs, keeps driving the whole technology forward, and is building a large business opportunity for the long haul.
So IBM is a strong blockchain play for patient investors. On top of that, the stock currently trades at the bargain-basement level of 11 times forward earnings while offering a cash-backed dividend yield of 3.9%.
This is a winning investment in many ways, and IBM also puts you right at the center of the exploding blockchain industry -- without binding your investment to bitcoin or any other cryptocurrency in particular.
The database king
Tim Green (Oracle): Bitcoin is one application of blockchain technology. The success of blockchain does not imply the success of bitcoin or any other cryptocurrency, much like the success of the internet didn't imply the success of every overheated dot-com stock nearly 20 years ago. If you want to bet on blockchain technology without a stomach-churning amount of risk, digital trinkets aren't the answer.
Given that blockchain is a type of database, it makes sense that Oracle is investing in the technology. The database giant launched its enterprise-grade blockchain cloud service in October, which promises to speed up business processes, reduce risk, and increase efficiency for its customers.
Blockchain isn't the only major initiative Oracle is undertaking. The company announced the Oracle Autonomous Database Cloud, a cloud database service powered by the next-generation Oracle Database 18c. The Autonomous Database Cloud aims to lower costs by automating processes, using machine learning to tune performance and upgrade and patch itself automatically. Oracle is promising 99.995% up-time along with prices that handily undercut AWS.
Like many legacy tech giants, Oracle finds itself in need of innovation. With the company's investments in blockchain technology and cloud computing, it's taking the steps necessary to maintain its database dominance.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Anders Bylund owns shares of Amazon and IBM. Danny Vena owns shares of Amazon. Timothy Green owns shares of IBM. The Motley Fool owns shares of and recommends Amazon. The Motley Fool also owns shares of Oracle. The Motley Fool has a disclosure policy.