Investing in bitcoin may seem like a compelling bet on the future. But if its roughly 20% decline over the past week alone should remind us of anything, it's that Bitcoin's staggering potential certainly doesn't come without significant risks.
We'd be remiss, however, if we didn't remind you that there's no shortage of intriguing investment opportunities in the stock market. To that end, we asked three top Motley Fool investors for stocks that they believe you would be wise to consider buying instead of bitcoin. Read on to learn why they like Zillow Group (NASDAQ:Z)(NASDAQ:ZG), Walmart (NYSE:WMT), and Alibaba (NYSE:BABA).
Try something more "real"
Steve Symington (Zillow Group): If you insist on investing in a disruptive digital technology, why not consider one that has a more tangible transition from existing systems in place -- perhaps one like Zillow Group and its leading portfolio of online real estate platforms?
Zillow Group's services and sites -- which notably include Zillow, Trulia, StreetEasy, and RealEstate.com -- are leading the way as the real estate market inevitably transitions to online platforms. Zillow has yet to achieve sustained GAAP profitability, choosing instead to drive top-line growth and take market share in these early stages. And it's succeeding to that end, with revenue this fiscal year expected to climb nearly 22%, to over $1.3 billion.
But that still is a small slice of the estimated $12 billion or so that agents spend advertising their listings each year. And that's not to mention the incremental growth Zillow can generate from its still small mortgages, rentals, and new-construction segments, as well as other real estate software and services operating under its umbrella, like e-signing specialist dotloop, which it acquired in 2015.
That said, shares of Zillow have climbed almost 60% over the past year as investors digest its latest results and begin to realize its potential. But I think the stock still has plenty of room to rise for patient investors willing to watch its story continue to play out.
A retail behemoth
Tim Green (Walmart): What do you get when you buy shares of megaretailer Walmart? You get a piece of a company that generated over $500 billion of revenue in fiscal 2018, along with $28 billion of operating cash flow. You get a stock that pays a 2.1% dividend and returned a total of $14.4 billion last year through dividends and share buybacks.
With bitcoin, all you'll get is a metaphoric participation trophy for throwing your hard-earned cash into nonsensical mania.
As far as retailers go, Walmart is doing everything right. The company managed to produce comparable-store sales growth for 14 straight quarters, with solid fourth-quarter results capping an incredible year. The e-commerce business, while suffering a slowdown in the fourth quarter, is still performing well. U.S. e-commerce sales jumped 44% in fiscal 2018, and the company expects to put up 40% growth in fiscal 2019. If there's any company that can go toe-to-toe with Amazon, it's Walmart.
Shares of Walmart have increased in price dramatically over the past year as investors began to buy into the e-commerce story. The stock is up nearly 40% in that time, and that means that it's far from cheap. Based on fiscal 2019 guidance, Walmart stock trades for about 18 times earnings. But if you want to own a retailer for the long run that won't crumble in the shadow of Amazon, Walmart is your best bet.
Anders Bylund (Alibaba): So you want to take a flier on something risky and volatile? With great risk comes the possibility of great reward, and that's certainly one of the biggest sources of rocket fuel that took bitcoin prices 650% higher over the last year. Alibaba can give you some of that white-knuckle excitement with a much smaller helping of risk -- at least over the next couple of years.
The Chinese e-commerce giant's share price has nearly doubled over the last 52 weeks, rising 85% higher, while the S&P 500 index gained 20%. Last month's third-quarter report showed top-line sales jumping 56% higher year over year. International business, cloud-computing services, and entertainment operations all doubled their sales.
If that sounded like a hungry little start-up business, you know why I'd put Alibaba in the same high-growth category as the leading cryptocurrencies. But we're actually talking about a massive and mature business here, with truly audacious long-term goals.
Alibaba's last four quarters added up to $35.8 billion of top-line sales and $10.6 billion in bottom-line net profits. You may have noticed the market cap creeping closer to $500 billion, making it one of the largest caps on today's stock market. The company manages nearly $600 billion of online retail transactions on an annual basis, and chairman Jack Ma hopes to hit a full trillion dollars in fiscal year 2020 -- just two years away.
Yes, there's a chance that Ma's enormous ambitions are reaching too far, too fast. I'm not 100% sure what will happen when the company has saturated the Chinese market and bumped into heavy competition on the international stage. The long-term story is unclear, even if the next few years look thrilling.
When compared to the risk-reward equation behind bitcoin, however, Alibaba offers a less explosive mixture on both sides of that equation. This one's for the thrill seekers who still would like to sleep at night.
The bottom line
There's no way to guarantee that Zillow Group, Walmart, or Alibaba will outperform bitcoin or the broader market over the long term. But when you consider Zillow's position leading the real estate industry online, Walmart's solid financial position and retail-industry leadership, and Alibaba's enviable place at the forefront of Chinese e-commerce, we like their chances of doing just that.