For nearly a full year, the stock market has been in all-out rally mode. The tech-heavy Nasdaq Composite and broad-based S&P 500 have bounced a respective 98% and 74% since hitting bear market lows on March 23.
However, these gains are peanuts compared to the performance of cryptocurrencies over the past year and beyond.
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The promise and peril of crypto
According to data from CoinMarketCap, the aggregate value of the universe of digital tokens was $1.5 trillion as of March 1, 2021. For context, that's up from $245 billion one year earlier and less than $8 billion five years ago. Investors' love for crypto has sent a variety of digital currencies "to the moon," as optimists like to proclaim.
For crypto bulls, the buy thesis really depends on your digital currency of choice. For Bitcoin (BTC +1.56%), it's the 21 million token limit and its growing utility with brand-name businesses. If it's Dogecoin (DOGE +1.03%), it's the support it's received from the likes of Elon Musk, the CEO of Tesla Motors and one of the richest people on the planet. There's also Ethereum, which offers smart contracts that could revolutionize how supply chains are tracked. Perspective means everything when it comes to investing in crypto.
But this perspective also means recognizing potential flaws. For example, Bitcoin's acceptance as a percentage of total U.S. businesses is exceptionally small, and it's not even the best payment option in the financial space among crypto. As for Dogecoin, it lacks true differentiation and has been pumped up by retail investors on social media.
Perhaps even more worrisome is the fact that all next-big-thing investments over the past quarter century have seen their bubbles burst. This isn't to say there won't eventually be survivors or standouts in crypto, so much as to point out that investors have a history of overestimating the impact of new technologies.
Pass on crypto and pile into these disruptive growth stocks
Rather than putting your money to work in the untested crypto space, consider buying into growth stocks that can deliver true disruption. The following three growth stocks have promising futures and should make you a whole lot richer.
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Teladoc Health
The healthcare sector is home to some of the most exciting innovation you'll ever see. Teladoc Health (TDOC +7.21%) aims to honor this track record of innovation by disrupting how patients are cared for.
Teladoc is the largest provider of telehealth services in the United States. As you can imagine, the coronavirus disease 2019 (COVID-19) pandemic was a major boon to its business. On a year-over-year basis, total visits more than doubled from 4.14 million to 10.59 million. Though international visits were up 71%, the bulk of this increase was derived from the U.S. (184% year-over-year visit growth).
The thing is, Teladoc didn't need a pandemic to succeed. It's been growing sales by an average of 75% annually since 2013, and its operating model provides benefits up and down the healthcare industry. Telehealth visits are more convenient for patients, can allow physicians to provide higher-quality care by staying on top of their patients' symptoms, and are generally billed at cheaper rates than office visits. This last part makes Teladoc a winner in the eyes of health insurers.
Furthermore, Teladoc completed its cash-and-stock deal to buy leading applied-health signals company Livongo Health in early November. Livongo collects copious amounts of patient data and leans on artificial intelligence (AI) to send tips and nudges to enrolled members, with the goal of improving their quality of life. Livongo has already secured north of 500,000 enrollments in diabetes, which represents less than 2% of the diabetes patient pool in the United States.
With Livongo expanding its services to include hypertension and weight management, and the combined company now able to cross-sell, the sky is the limit.
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CrowdStrike Holdings
Sometimes, disruptive growth stocks are right under your nose. That's the case with cybersecurity company CrowdStrike Holdings (CRWD +2.14%).
The beauty of cybersecurity is that it's now a necessary service. No matter how well or poorly the economy is performing or the size of a business, hackers and robots don't take time off. Businesses must constantly protect their internal and cloud-based enterprise and customer data against theft. Increasingly, we're seeing this protection fall to third-party providers like CrowdStrike.
CrowdStrike's claim to fame is its cloud-native Falcon security platform. Falcon oversees more than 3 trillion events on a weekly basis and leans on AI to grow smarter over time. Since it was built in the cloud, Falcon is quicker to respond to threats than on-premises solutions and can usually do so at a lower cost.
What's clear from the company's operating results is that businesses love the product. In 3.5 years, the percentage of clients with four or more cloud module subscriptions catapulted from 9% to 61%. This signifies that CrowdStrike is scaling with its clients. Also of note, the company doubled its customer count in each of the previous three years and has grown its fiscal year-to-date client count by a cool 85% through October.
As one final note, CrowdStrike's business is subscription-based. With minimal overhead, the company has already been able to achieve its long-term target of an adjusted subscription gross margin of 75% to 80%. It's almost hard to believe that it's still in the early innings of its growth phase.
Image source: Pinterest.
A third growth stock that can make you richer than owning volatile crypto assets is social media up-and-comer Pinterest (PINS +2.58%).
Similar to Teladoc, Pinterest is a direct beneficiary of the COVID-19 pandemic. With people forced to stay home, more folks than ever turned to the internet for entertainment and engagement. That made Pinterest's platform, which allows users to highlight the people, places, and things that interest them the most, a popular destination.
Last year, Pinterest's global monthly active users (MAU) jumped 37% to 459 million. But the company was no slouch before COVID-19. In the three years leading up to 2020, it averaged 30% year-over-year monthly active user growth. In other words, Pinterest has been resonating with people for some time, and COVID-19 was merely a shot in the arm that accelerated this shift.
What's going to allow Pinterest to grow at a rapid pace for years to come is international users. Of the 124 million net MAUs gained in 2020, more than 90% were from outside the United States. Though average revenue per user (ARPU) is a lot higher in the U.S. than it is internationally, the ability to double international ARPU many times over this decade is precisely why Pinterest's growth rate is so robust.
Pinterest is also designed to be a logical winner in the e-commerce space. Its users are willingly posting about the products and services that interest them. All Pinterest needs to do is keep these users engaged (hint: it's using a lot of video these days) and connect these motivated shoppers with small businesses that specialize in their interests.
If Pinterest plays its cards right, it could be a 10-bagger this decade.
