Since the late 1800s, the stock market has been this country's greatest wealth creator. While other assets have had their brief moments in the sun, such as oil, gold, and housing, the total return of the stock market is unmatched.
That was until cryptocurrencies came along.
Since cryptocurrencies made their debut a little over a decade ago, they've run circles around the broader market. Whereas Bitcoin and Ethereum have been the clear No. 1 and No. 2 in market cap, it's Dogecoin (DOGE -0.75%) that's been garnering all the buzz of late.
Dogecoin does in six months what the S&P 500 hasn't in 56 years
Dogecoin, which was created as a joke in 2013 by combining two of the buzziest things at the time -- crypto and a Shiba Inu dog meme -- has risen by more than 26,000% over just the past six months. For some context, that's more than the benchmark S&P 500 has returned, including dividends paid, since 1964.
Ask "hodlers," and they'll tell you that Dogecoin's parabolic ascent has been caused by increased adoption and the realization of the network's lower transaction fees than Bitcoin and Ethereum. I'd also add that regular tweets on Dogecoin by Tesla Motors' CEO Elon Musk, who's proclaimed himself the "Dogefather," have helped pump up its valuation.
But if you were to dig beyond the hype, you'd see a digital currency with no substance. With no barrier to entry in the crypto space, we can easily find other crypto networks that process faster than Dogecoin and/or offer lower transaction fees.
To boot, the roughly 50,000 Dogecoin transactions handled daily don't even move the needle when compared to the more than 1 billion credit card transactions processed globally on a daily basis in 2018, according to the Nilson report. Not surprisingly, only around 1,300 businesses accept Dogecoin as payment. This is relative to hundreds of millions of businesses and entrepreneurs in existence worldwide. Translation: It has almost zero real-world utility.
The only true catalyst for Dogecoin is waiting on the edge of your seat and hoping Elon Musk tweets about it. That's not investing -- that's some combination of hype and gambling, and it's what makes Dogecoin an absolutely awful investment.
Dogecoin is all hype: Buy this trio of unstoppable stocks instead
Instead of tossing your hard-earned money down the proverbial hype-powered rabbit hole, I'd suggest buying the following trio of unstoppable stocks. These smart buys offer tangible outlooks and real innovation that can make you rich.
If you really, really want exposure to cryptocurrencies, the smartest way to do so would be to buy fintech stock Square (SQ 1.11%). It may not knock your socks off in the return department over the near term, but it has all the tools necessary to become a trillion-dollar company in the future.
Square has long been known for its commerce ecosystem. It provides merchants (mostly small businesses) with point-of-sale payment devices, analytics, and even loans, to help them grow and succeed. According to the company, it processed $33.1 billion in seller gross payment volume (GPV) in the March-ended quarter. That's up 29% from the prior-year period and more than five times its full-year GPV in 2012. Prior to the pandemic, seller ecosystem GPV was growing at an average annual rate of 49%.
The interesting thing about the seller ecosystem is that bigger merchants are getting involved. Over the past two years, bigger sellers -- those with more than $125,000 in annualized GPV -- have grown from 52% of total GPV to 61%. Since this is a segment that's based on fees from payments, Square should become significantly more profitable by having bigger merchants on its network.
However, it's digital peer-to-peer payment platform Cash App that's all the buzz. Cash App recently surpassed the ecosystem as Square's primary driver of gross profit. At the end of 2020, the company had 36 million monthly active users and was bringing in $41 in gross profit per user. This compares to paying less than $5 to attract each new user.
Furthermore, Cash App gives Square so many new ways to generate revenue. In addition to merchant fees, Square generates revenue from bank transfers, investment fees, and Bitcoin exchange. Though the margins on Bitcoin revenue are minuscule, it's driving new users to Cash App in droves.
For years, cannabis was one of the most-hyped investments. Unfortunately, there were regulatory hurdles and funding concerns that held many companies back. This isn't the case anymore, at least in the United States. Marijuana is projected to be one of the fastest-growing industries in the U.S. this year, with multistate operator (MSO) Cresco Labs set to take advantage.
As is common with MSOs, Cresco has a budding retail presence. Following the closure of its Bluma Wellness acquisition and pending the buyout of Cultivate, it'll have nearly three dozen operating dispensaries and the ability to ultimately have around four dozen, in total.
Instead of trying to expand into as many markets as possible, Cresco is predominantly focusing on limited-license states, at least from a retail perspective. By maximizing its presence in states that limit how many retail licenses they'll issue, it's giving itself the best possible chance to build up its brand(s) and gain a loyal following.
But the bigger growth driver is Cresco's wholesale segment. It possesses one of only a few cannabis distribution licenses in California, which happens to be the top market in the world, by annual weed sales. This license, which it gained via its acquisition of Origin House, allows it to place proprietary and third-party cannabis products into more than 575 dispensaries throughout the Golden State. Even though wholesale generates less impressive margins than retail cannabis, the volume is more than enough for this to be easily overlooked by investors.
A third unstoppable stock that should be purchased hand over fist before Dogecoin is Vertex Pharmaceuticals (VRTX -0.81%).
Vertex is a biotech stock with a specialty focus on developing treatments for patients with cystic fibrosis (CF), a disease characterized by thick mucus production that can obstruct a patient's lungs or pancreas. There currently are no Food and Drug Administration (FDA)-approved cures.
Nevertheless, this hasn't stopped Vertex from developing multiple generations of mutation-specific treatments designed to improve the lung function of CF patients. The company's newest product, combination therapy Trikafta, sailed through late-stage trials and was approved five months ahead of its scheduled review date with the FDA. Approximately 90% of CF patients have the mutation that it targets. Trikafta is expected to eventually hit $6 billion in annual sales after putting up nearly $3.9 billion in sales in its first full year on pharmacy shelves.
Because Vertex has had such incredible success in developing treatments for this tough-to-treat disease, it's built up an incredible $6.9 billion in cash and cash equivalents. This cash will be instrumental in helping the company advance a dozen internal compounds in clinical trials, as well as for potentially purchasing other businesses to diversify its revenue stream.
Vertex offers the perfect blend of growth and value.