Investors were taken on a historic ride last year. With the benchmark S&P 500 gaining 16%, most investors ended the year in the green. Yet, they also endured the quickest bear market decline of at least 30% on record, as well as the swiftest snap-back rally in history.
One asset has hardly blinked at the adversity.
Bitcoin has soared, but it's a flawed investment
Over the trailing year, bitcoin -- the largest cryptocurrency in the world -- has quadrupled in value. Enthusiasts point to bitcoin's scarcity and utility as reasons for its outperformance.
Bitcoin is limited to a lifetime circulation of 21 million tokens. Currently nearing 18.6 million, it will take until the year 2140 before all bitcoin tokens have been mined. Considering that the U.S. central bank continues to grow the outstanding money supply, bitcoin is perceived to be a safe haven against dollar deflation.
Bitcoin has also been seeing increased usage as a medium of exchange. More than 5,000 bitcoin ATMs have been placed worldwide, with over 15,100 businesses (2,300 in the U.S.) now accepting bitcoin as a form of payment., according to Fundera.
Yet, bitcoin is also full of flaws. For example, scarcity and utility are at odds with one another and not complementary. Even with bitcoin divisible down to eight decimal places, there simply aren't enough tokens to make it a viable replacement for fiat currencies -- especially with a lot of tokens held by investors with no intention of putting them into circulation. If bitcoin wants full-scale utility, consensus will need to be reached to increase the token count.
It could even be argued that bitcoin isn't truly scarce at all. While it has a perceived cap of 21 million tokens, this limit exists only on consensus. There's nothing concrete about bitcoin's cap.
These innovative companies can run circles around bitcoin in 2021
I believe there are other investments that could handily outpace bitcoin in 2021. If you're looking to avoid bitcoin's nauseating volatility and buy a handful of great companies, these are the three unstoppable stocks to consider adding.
No matter what happens with the coronavirus disease 2019 (COVID-19) pandemic in 2021, it's going to be another great year for the predominantly defensive, yet high-growth healthcare sector. Few, if any, healthcare stocks offer more immediate and long-term upside than virtual health giant Teladoc Health (TDOC).
As you can imagine, Teladoc was a core beneficiary of the pandemic. Doctors wanted to keep potentially sick and at-risk patients out of their offices, so they leaned on virtual visits more than ever. Teladoc saw its aggregate number of virtual visits more than triple between the beginning of April and the end of September.
However, this is a sustainable trend, even after the pandemic. Virtual visits are billed at a lower rate than office visits, meaning that health insurers will increasingly promote them. Additionally, improved ease of access to physicians may lead to improved patient care and reduced incidence of high-cost chronic illnesses. It also doesn't hurt that virtual visits are more convenient for patients and physicians.
This year will also be the first time Teladoc and Livongo Health operate as a single entity. Teladoc purchased applied health signals company Livongo in a cash-and-stock deal that closed in early November. Livongo's business model provides helpful tips to people with chronic illnesses. These nudges induce lasting behavioral changes. Despite securing only a little over 1% of the U.S. diabetes market, Livongo turned profitable on a recurring basis prior to its acquisition.
Now under the Teladoc umbrella, Livongo is free to expand to new indications, like hypertension and weight management, and cross-sell within Teladoc's network. In short, this company's sales could double many times over this decade.
Another unstoppable stock that can deliver superior gains relative to bitcoin in 2021 is U.S. cannabis multistate operator (MSO) Cresco Labs (CRLBF).
All of a sudden, the U.S. pot industry has more catalysts than it can count. In less than a week, Joe Biden will be sworn in as the 46th President of the United States. Meanwhile, on Jan. 5, Georgia residents narrowly voted both Democratic Party candidates into the U.S. Senate. Assuming lawmakers vote along party lines, Democrats will have a narrow majority in both houses of Congress for the next two years. This means a pathway for federal legalization or cannabis banking reform now exists.
But Cresco Labs doesn't need congressional action to have a great year. First, the company is making significant headway on the retail front. Though it only holds 29 total retail licenses (on the lower end of the spectrum, relative to other billion-dollar MSOs), 10 of the company's 20 operating dispensaries are in Illinois. The Land of Lincoln is a limited license state, meaning companies maximizing their retail presence (currently a max of 10 stores) should be able to gobble up significant recreational market share.
Perhaps even more impressive is Cresco Labs' wholesale operations. While wholesale is a lower-margin segment than retail, Cresco is more than making up for these lower margins with exceptional volume. Following its acquisition of Origin House one year ago, Cresco came into possession of Origin's highly lucrative cannabis distribution license in California. This gave the company access to nearly 600 dispensaries throughout the Golden State. As California, the top marijuana market in the world by annual sales, works through red tape and opens new dispensaries, Cresco's wholesale opportunity is only going to grow.
Cresco still looks like a major bargain in the U.S. cannabis space.
Growth stock investors can also put their faith behind social media up-and-comer Pinterest (PINS) in 2021.
Like Teladoc, Pinterest was a direct beneficiary of the pandemic. People stuck at home spent more time online and on their phones. Pinterest had logged average annual user growth of 30% between 2017 and 2019, but saw an even larger uptick in 2020. Pinterest also picked up extra business during the summer, when a handful of prominent companies boycotted Facebook over its advertising practices.
Pinterest is set up to succeed long after the pandemic ends. Most of the company's new users are overseas. Though average revenue per international user is much lower than per U.S. users, Pinterest's rapidly rising monthly active user count is having little trouble attracting new advertising dollars in these overseas markets. The ability to double average revenue per international user many times over this decade is precisely why Pinterest's growth rate is phenomenal.
Pinterest also finds itself in the perfect position to take advantage of the rapidly growing e-commerce space. With the company's users willingly sharing the things, places, and services that interest them, all Pinterest has to do is connect small businesses to these motivated consumers. The company has beefed up its usage of video to keep its users more engaged. It has also partnered with Shopify to give small businesses more opportunities.
Look for Pinterest to deliver an encore performance to its stellar 2020 in the current year.