It seems an understatement to say that cryptocurrencies have taken the investing world by storm. After all, given the potential for these digital assets to upend the financial world as we know it by operating independently of any given central bank, it's hard to blame opportunistic investors for trying to ride the wave of excessive optimism cryptocurrencies have generated.
But even if they manage to gain mainstream global acceptance, it's not clear exactly which of the more than 1,000 cryptocurrencies will be the ones that succeed over the long run. In the meantime, as many investors have found out the hard way in recent months, investing in cryptocurrencies also tends to come with extraordinary volatility.
There's plenty of money to be made by investing in more traditional equities. So we asked three Motley Fool investors to each pick a stock that they believe is a compelling buy at today's prices. Read on to learn why they like Disney (NYSE:DIS), Applied Optoelectronics (NYSE: AOI), and Celgene (NASDAQ:CELG).
Focus on blockbusters, not blockchain
Steve Symington (Disney): If you ever wondered how long Disney can keep churning out blockbusters on the big screen, look no further than last weekend's record-smashing debut of Disney Marvel's Avengers: Infinity War. The latest superhero epic collected more than $640 million in worldwide gross ticket sales for the biggest global opening in history. That figure that has since swelled to over $808 million as of this writing -- and that's without the help of moviegoers in China, where Infinity War won't hit theaters until May 11, 2018.
Of course, Disney's box office prowess is powered by more than a single film. Since opening in mid-February, Marvel's Black Panther has already amassed gross ticket sales of more than $1.3 billion, at least temporarily securing its spot as the the biggest superhero movie of all time. Later this month, Disney's Lucasfilm subsidiary will follow with Solo: A Star Wars Story. Then in June comes Disney Pixar's Incredibles 2, followed by Marvel's Ant Man and the Wasp in July. If that wasn't enough, in November Disney Animation Studios will present Wreck-It Ralph 2. And that's not to mention the potential for big hits with a live-action rendition of Disney's Christopher Robin this August, and Mary Poppins Returns in December.
To be fair, bearish Disney investors are focused on sliding profits from its core media networks segment, as more cord-cutting consumers ditch cable and satellite plans for competing streaming-video and over-the-top services. But even putting aside the fact that Disney's thriving parks and resorts business has helped more than offset weakness at media networks in the meantime, Disney is fighting back with last month's launch of its new ESPN Plus streaming service, as well as plans to introduce a new Disney- and Pixar-branded streaming service next year.
Finally, don't forget about Disney's impending $52.4 billion acquisition of most of Twenty-First Century Fox, which is expected to close in mid-2019. The purchase will give the House of Mouse control over assets including the Twentieth Century Fox Film and Television Studios (think Marvel's X-Men, Fantastic Four, and Deadpool, as well as This is Us, The Simpsons, and Modern Family), National Geographic, FX Networks, Fox Sports Regional Networks, a large stake in European satellite provider Sky, a controlling stake in Hulu, and Star in India.
With that kind of industry dominance on the way -- and with shares trading at just over 13 times this year's expected earnings -- I think Disney is as intriguing a buy as our market has to offer.
Fiber-optic networking on the cheap
Anders Bylund (Applied Optoelectronics): So you want some adrenaline-pumping excitement in your investments. Maybe you're living on the edge a little bit -- just not far enough off the cliff to invest your nest egg in ultrarisky cryptocurrencies. In that case, let me show you a legit business whose share price has bounced between $23 and $103 in the last 52 weeks, and is currently sitting near the bottom of that range at roughly $33 per stub.
Applied Optoelectronics makes fiber-optic networking components and modules, helping data to flow between the super-fast optical cables and more traditional Ethernet systems. The company's transceivers are particularly popular with large data center customers who need a combination of long cable strands and extremely fast data transfers. In fiscal year 2017, the trio of Amazon.com, Facebook, and Microsoft accounted for 78% of AOI's total sales.
These data center customers are both AOI's best asset and its worst nightmare. When order volumes are surging, times are good. That was the story in the first half of 2017, when AOI's share price surged more than 300% higher. But when one of those key clients taps the brakes on fiber-optic installations for any reason, the market reaction can be punishing. Last summer, Amazon slowed down its transceiver orders to sketch out a firmer plan for the next step in its data center expansion ambitions. Applied Optoelectronics suffered the consequences.
At the moment, you can buy AOI shares at just 9.6 times trailing earnings and 7.6 times free cash flow. That's incredibly affordable in any light, and any of the computing giants on the company's customer list would look downright cheap at these valuation levels. Management argues that the order slowdown should be temporary, leading into a new surge in late 2018 and early 2019 thanks to several strong catalysts.
That's how you can get the excitement of the cryptocurrency roller coaster, without having to deal with all the risk.
Less volatility, less speculative
Keith Speights (Celgene): Like many cryptocurrencies, Celgene has been beaten down quite a bit over the last few months. But the volatility of this big biotech is nothing compared to that of most cryptocurrencies. More importantly, putting money on the line with Celgene doesn't require investors to take a shot in the dark.
It's easy to diagnose why Celgene stock has dropped this year. The company botched its submission of promising multiple sclerosis drug ozanimod, resulting in the Food and Drug Administration (FDA) refusing to approve the drug. That's not the end of the road for ozanimod, though. Celgene should still win approval for the drug after satisfying the FDA's additional data requirements.
Even without ozanimod, however, Celgene still has strong growth prospects. Its top-selling hematology drug Revlimid continues to enjoy strong momentum. That's true for Celgene's multiple myeloma drug Pomalyst and autoimmune disease drug Otezla as well.
In addition, the biotech's pipeline is loaded with promising candidates. A couple of drugs gained through acquisitions -- hematology drug fedratinib and non-Hodgkins lymphoma drug JCAR017 -- hold the potential to be big winners down the road. Celgene also has seven other pipeline candidates that could become blockbusters.
Celgene should realistically be able to grow its adjusted earnings per share by close to 20% over the next few years. With the stock trading at less than nine times expected earnings, this big biotech looks like a bargain.
The bottom line
To be clear, we can't guarantee that these three stocks will exceed the returns of any given cryptocurrency. After all, there's still a possibility that cryptocurrencies will fundamentally change the way our financial world works.
But it's going to be a long road for investors trying to cash in on that trend. And the paths to market-beating gains are much clearer for investors who opt instead to buy Disney, Applied Optoelectronics, and Celgene.