Bitcoin prices have swung from $1,940 to $19,200 over the last year, only to crash back down again. Today, one bitcoin is worth $7,500. Some investors find these wild swings exhilarating and hope for more of the positive moves, but others can't stand these roller-coaster rides.
So we asked a few of your fellow Motley Fool investors what they would recommend buying right now instead of bitcoin. These tickers should offer some solid long-term returns but without the extreme ups and downs of your average cryptocurrency.
A rising digital-payments player that's benefiting from new trends
Chris Neiger (Square): There's a massive shift happening right now in how people pay for goods and how they pay each other. Cash (and credit cards) might still rule, but digital payments are undeniably the heir to the throne. The rise of Apple Pay, peer-to-peer (P2P) payment apps, and digital point-of-sale (POS) payment terminals mean that consumers have more options than ever before to pay for items -- and Square's hardware and services make it all possible.
Most of Square's revenue comes from its transaction-based sales, which include payments using not only traditional cards but also wireless mobile transactions, including Apple Pay. Square's transaction-based revenue in the first quarter rose by 29% year over year to $523 million. That's great momentum for the company's largest revenue segment, but investors will be pleased to know that Square's software and services segment -- which includes its Instant Deposit service, which allows customers to gain immediate access to their funds, and Square's Caviar food-delivery company -- is booming. Software and services sales spiked 97% in the first quarter to $97 million.
What's great about Square is that it's already positioned itself to adapt to the ever-shifting payment landscape. The amount of mobile P2P payments is expected to reach $244 billion in the next three years, and Square is already poised to benefit because its Square Cash app, which allows users to send payments to each other, already boasts 7 million monthly active users.
Investors who want some exposure to bitcoin should also know that Square's Cash app began allowing users to buy and sell bitcoin at the beginning of this year. The company generated $34 million in bitcoin sales in the first quarter and, after related expenses, ended up with $200,000 in profit from the transactions. That's not a lot, but it does prove that Square can easily accommodate new digital-payment trends as they emerge.
If you add to all of this the fact that Square's share price is up more than 300% over the past three years, it's easy to see how this company can give investors safe exposure to bitcoin and other digital-payment trends -- and deliver huge gains at the same time.
Big, Blue, and on the rebound
Anders Bylund (IBM): Yes, this is the good old Big Blue you and your grandfather always knew. But it's not the same old IBM, and that's exactly why I'd recommend it over investing in bitcoin today.
First and foremost, IBM's stock is spring-loaded for a huge rebound. The company's shift to focusing on "strategic imperatives" has been a long and painful road, involving the sacrifice of large but low-growth revenue streams in the hardware markets for the promise of higher growth and wider margins in the future.
As a reminder, strategic imperatives initiative include sectors such as data analysis, artificial intelligence, mobile computing, and blockchain platforms. Yes, IBM is an early leader in employing the blockchain concept to solve business problems. It's the technology behind bitcoin and most other cryptocurrencies, with a twist -- IBM's blockchain tools are all about distribution and storage of important information.
At this point, IBM has reached a crucial tipping point, as about half of its total sales come from businesses under the strategic imperatives banner. That ratio is sure to keep rising thanks to the high-growth nature of these hand-picked focus areas. The strategic-imperatives focus is absolutely the right thing to do in the long run, even if the last few years have been difficult to watch.
Investors have punished IBM's stock over the last five years as the strategic remodeling led to more pain than profits. Today, Big Blue shares are trading at just 12 times trailing earnings and 15 times free cash flows. At the same time, a strong commitment to dividend increases combined with sliding stock prices to create a fantastic 4.5% dividend yield.
So you can get a piece of the blockchain action without ever touching a cryptocurrency and while also locking in a great dividend yield. IBM remains a well-run business with great returns on equity and solid cash flows. This company has been around for a hundred years, and management is not afraid to do whatever it takes to stick around for another century.
Can you say that about bitcoin?
Going with a trusted technology stock
Ashraf Eassa (Apple): Instead of buying bitcoin, I'd much rather scoop up shares of Apple. It's one of the most successful technology companies in the world, thanks in large part to its iPhone product category, which made up more than 62% of its revenue last quarter.
Of course, while I think Apple is doing a good job of trying to diversify beyond the iPhone, particularly with its aggressive move into subscription services such as Apple Music, as well as the continued impressive growth of its App Store revenue, I like Apple's prospects ahead of the upcoming iPhone product cycle.
In particular, last year, Apple introduced three new iPhones -- two straightforward refreshes of its previous-generation models and one all-new device (with a huge price tag, to boot), the iPhone X. This year, if the rumor mill is correct, Apple will be bringing an entirely redesigned device at standard price points and will also be introducing a larger variant of its iPhone X.
Apple is poised to more aggressively compete at lower price points while also expanding its higher-end offerings, making its lineup far more compelling and opening up opportunities to gain highly profitable market segment share.
If my thesis plays out, Apple could see a solid boost in revenue and profit growth, which could ultimately send the stock higher. And, if I'm wrong, I don't think the stock would necessarily crater -- and the company still pays a decent dividend (the stock yields 1.52% as of this writing) as a consolation prize.
That, to me, seems like a far more sensible bet than buying bitcoin.
Anders Bylund owns shares of IBM and a fraction of a bitcoin. Ashraf Eassa has no position in any of the stocks or cryptocurrencies mentioned. Chris Neiger has no position in any of the stocks or cryptocurrencies mentioned. The Motley Fool owns shares of and recommends Apple and Square, but has no position in any cryptocurrencies at all. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.