Over the very long run, there's been no better wealth creator than the stock market. According to a report released by Crestmont Research, the rolling 20-year total returns (including dividends) for the broad-based S&P 500 have never been negative between 1919 and 2020. In other words, if you bought an S&P 500 tracking index at any point since 1919 and held on for 20 years, you made money, period.
But over the past decade, cryptocurrencies have run circles around traditional equities. Over just the trailing year, through April 21, 2021, Bitcoin (BTC -0.83%), the largest digital currency in the world, gained better than 700%. Meanwhile, the hottest crypto, Dogecoin (DOGE -3.79%), is up nearly 16,000% over the trailing 12 months -- and no, that's not a typo.
Dogecoin is soaring for silly reasons
Dogecoin, which can be purchased for mere pennies, has represented the mother of all FOMO (fear of missing out) trades of late. Young investors have always been attracted to assets with massive amounts of momentum. Take its perceived-to-be low token price and the unregulated nature of crypto markets, and you have a powder keg moment for Dogecoin.
But not all is as it appears to be. For example, Dogecoin isn't being driven by anything fundamental that would remotely support its roughly $50 billion market cap attained earlier this week. Rather, tweets and pumping from Tesla CEO Elon Musk appear to have done most of the heavy lifting.
What's more, it's hard to overlook the fact that Dogecoin was created in 2013 as a joke by two engineers. By combining two of the buzziest things of 2013 -- cryptocurrency and a popular Shiba Inu dog meme -- Dogecoin was born. Dogecoin has plenty of momentum at the moment, but it lacks any real differentiation to be a meaningful digital currency.
Moreover, Dogecoin's utility is virtually nonexistent. If you think I harp on Bitcoin's lack of real-world use, take a gander at where Dogecoin is accepted. Depending on your source, anywhere from a few dozen to as many as 1,200 businesses worldwide accept Dogecoin as a form of payment. There are hundreds of millions of businesses around the world, which shows just how minimal Dogecoin's utility is.
Ignore Dogecoin: These stocks can make you rich
Dogecoin is nothing more than a dart throw -- and a bad one at that. Rather than throwing your money at what looks like a clear pump-and-dump asset, consider investing it in companies with tangible growth prospects that can make you richer over time. The following trio of stocks certainly fits the bill.
Square is arguably best known for its seller ecosystem. For almost a decade, the company has been providing predominantly smaller merchants with physical point-of-sale devices, analytics, loans, and other tools to help their businesses succeed. In the seven years prior to the pandemic, gross payment volume (GPV) traversing Square's network grew by an annualized rate of 49%. Even though this growth slowed dramatically due to the pandemic in 2020, we still saw $112.3 billion in GPV cross the seller ecosystem.
The interesting thing about the seller ecosystem is that it's beginning to attract larger businesses. Two years ago, 24% of all GPV originated in the fourth quarter from businesses with at least $500,000 in annualized GPV. As of Q4 2020, this figure was up to 30%. Since this segment is driven by merchant fees, having bigger businesses as customers should lead to higher gross profit.
However, Cash App is the bigger story. The company's peer-to-peer payments platform has seen its monthly active user count more than quintuple to 36 million in three years. Cash App allows Square to generate revenue from merchant transactions, as well as bank transfers, investing, and Bitcoin exchange. In fact, Bitcoin revenue grew ninefold in 2020 to $4.57 billion. Bitcoin revenue generates only menial margins, but it's bringing in millions of new members.
Best of all, Cash App brought in $41 in gross profit per user in Q4 2020. This compares to its customer acquisition cost per user of less than $5. That's one heck of a high-margin business, and it should quickly become Square's leading profit driver.
Another "SPAC-tacular" stock that can make you a lot richer than Dogecoin is esports and gaming platform Skillz (SKLZ 10.32%).
Skillz went public in mid-December via a special purpose acquisition company, or SPAC (thus the awful pun above). It's since retraced all of its impressive gains. But short-term pain in great or unique companies has always been to long-term investors' gain.
What allows Skillz to stand out is the company's unique approach to gaming. Instead of spending big bucks on developing games and hoping it can compete against some of the most established companies in the world, it's created a platform that allows developers to show off their games, and lets gamers compete against each other for cash and prizes. The end result is that Skillz and the developers are able to pocket a percentage of the cash, leading to the company's absurdly high gross margin of 95% in 2019 and 2020.
The key for Skillz is simply getting its name out there. Going a long way to getting that done is the multiyear agreement it signed with the NFL in the first week of February. This deal will allow developers to create NFL-themed games that'll debut on Skillz's platform by late 2021 or early 2022. Football is by far the most popular sport in the U.S., so Skillz couldn't have asked for a better partner.
And Skillz offers some of the most robust growth prospects on Wall Street. Although estimates remain somewhat limited and fluid, the expectation is that it'll see revenue soar from $230 million in 2020 to about $1 billion by 2024. That type of growth can make patient investors rich.
A final stock to buy instead of Dogecoin that has all the tools needed to make you richer is e-commerce platform Etsy (ETSY 10.56%).
Etsy is one of a few dozen companies that really thrived from the pandemic. People choosing to stay in their homes to avoid catching or spreading COVID-19 turned online to buy necessary goods, or to simply make feel-good purchases. Etsy benefited from both, with face coverings flying off the digital shelves.
The thing that makes Etsy so special is its focus on personalization and small merchants. By creating a platform catered to small and medium-sized businesses that aim to produce unique or customized products, Etsy has a degree of specialization in the retail space that'll be extremely hard to duplicate. Though Amazon is the industry's goliath, it's not as big a threat to Etsy as it might appear because of Etsy's specialization.
The proof is also in the pudding that consumers really love what Etsy has to offer. Last year, half of the company's all-time buyers made a purchase, with habitual buyer growth of almost 160%. A habitual buyer is someone who makes six or more separate purchases totaling at least $200 in aggregate throughout the year.
Etsy is doing a bang-up job of keeping buyers and sellers motivated, too. It's increased its usage of video and recently began offering listing videos for merchants. It's also revamped Etsy Ads to make advertising on the platform as efficient as possible for merchants. Understand that their success is imperative to Etsy's long-term well-being.
With its revenue on track to potentially triple by the middle of the decade, Etsy has the look of a moneymaker for patient investors.