Throughout history, the stock market has reigned supreme as the greatest wealth creator on the planet. It may not find itself as No. 1 every year, but over the very long run, no commodity or other asset class has outperformed the average annual total returns of the benchmark S&P 500.
However, over the past decade, cryptocurrencies have crushed the average annual return of the S&P 500 more often than not. For instance, Bitcoin, the largest digital currency by market value, has catapulted from less than $1 to about $50,000 per token in a little over a decade.
But it's not Bitcoin that's been generating all the buzz of late. That title goes to Shiba Inu-inspired joke cryptocurrency Dogecoin (DOGE 1.22%).
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The Dogecoin hype train will eventually derail
At this time last year, Dogecoin could be purchased for $0.0025 per token. But entering the weekend, it was north of $0.55. These are nominally tiny figures we're talking about here, but the aggregate return over the trailing 12 months is above 22,000%. For some context here, that's almost as good as the total return of the S&P 500 over the past 56 years.
In recent months, enthusiasts have talked up Dogecoin's lower transaction fees than the big two in crypto (Bitcoin and Ethereum), its increasing utility, and more recently Elon Musk's apparent pledge to work with Dogecoin's developers to improve the efficiency of its blockchain. It all sounds great on paper, but the only thing supporting Dogecoin is hype and ignorance of the facts.
For example, while Dogecoin does have lower transaction fees than Bitcoin and Ethereum, there is no shortage of networks that boast considerably lower transaction fees than Dogecoin. Ripple, Stellar, Dash, Bitcoin Cash, Nano, and Ethereum Classic are just some of the coins with substantially lower fees than Dogecoin. To boot, most of these networks validate and settle transactions faster than Dogecoin, too (including Bitcoin). If it was really about lower fees, Dogecoin would cease to be relevant.
The utility argument is bunk, as well. Dogecoin has averaged around 50,000 transactions daily over the trailing year, which compares to payment processors Visa and Mastercard which, according to the Nilson Report, averaged a combined 700 million payments daily in 2018. Only around 1,300 businesses worldwide accept Dogecoin, which is embarrassingly low after eight years.
Dogecoin is being driven by social media hype, ignorance of utility data, and rampant misinformation -- nothing more.
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Ditch Dogecoin for more profitable pastures
Instead of putting your money to work in a digital currency that's rife with flaws, my suggestion would be to put that money to work in stocks that'll give you a real chance to build wealth over the long run. The following trio of surefire stocks should be up to the task.
Amazon
It's debatable, but there may not be a more surefire long-term investment opportunity than Amazon (AMZN 1.33%).
Most folks know Amazon for its e-commerce dominance. The company's marketplace is expected to control almost 40% of all U.S. online retail market share in 2021, according to a report released by eMarketer in March 2020.
The thing is, retail margins are usually minuscule. To make up for this, Amazon has signed up more than 200 million people worldwide to a Prime membership. The fees it collects from these memberships help the company undercut brick-and-mortar retailers on price. Further, Prime members spend a lot more each year than non-Prime members, and they're more likely to remain loyal to Amazon's expanding product and service ecosystem.
And Amazon is about far more than just peddling goods online for a small margin. Its cloud infrastructure segment, Amazon Web Services (AWS), grew by 30% during the worst economic downturn in decades. What this tells us is that small and medium-sized businesses are pushing online and into the cloud at an accelerated pace. The best part is that since cloud margins run circles around retail margins, Amazon's cash flow should skyrocket.
Think about this for a moment: If investors were willing to pay a multiple of 23 to 37 times Amazon's cash flow for the entirety of 2010-2019, imagine what they'll do with Amazon valued at just 11 times its estimated cash flow for 2024, according to Wall Street.
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Trulieve Cannabis
After the bubble burst on marijuana stocks in 2019, some folks might be visibly gun-shy about buying into the industry. But over these past couple of years, we've seen the industry and many of its largest players mature before our eyes. U.S. multistate operator Trulieve Cannabis (TCNNF 3.87%) is one such pot stock that looks to deliver surefire returns for patient investors.
As of the first week of May, Trulieve had 87 dispensaries open nationwide. But what stands out about Trulieve's strategy is that 82 of these 87 retail locations are in the Sunshine State of Florida. By completely saturating medical marijuana-legal Florida, Trulieve was able to gobble up 53% of the state's dried cannabis flower market in 2020, along with 49% of its higher-margin cannabis oils market. This single-state focus has helped build up the company's brands while keeping marketing costs down. As a result, it's been profitable for 13 consecutive quarters.
Last week, Trulieve Cannabis also announced the largest marijuana acquisition in the industry's history. It plans to acquire multistate operator Harvest Health & Recreation (HRVSF +0.00%) in an all-stock deal valued at $2.1 billion. When complete, Trulieve would have 126 dispensaries and operate in nearly a dozen states. What's particularly attractive about this deal is Harvest's sizable presence (15 dispensaries) in Arizona, which recently legalized recreational cannabis. If Trulieve's Florida blueprint works in Arizona's potential billion-dollar weed market, shareholders are going to see some green.
In terms of operating income, you're simply not going to find a better-run marijuana stock than Trulieve Cannabis.
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Walgreens Boots Alliance
A third surefire winner that can best the hype-driven Dogecoin is pharmacy chain Walgreens Boots Alliance (WBA +0.00%).
Under normal circumstances, healthcare stocks are well shielded from economic downturns and recessions. Since we don't get to choose when we get sick or what condition(s) we develop, there's always demand for drugs and medical devices. However, the coronavirus pandemic was a different beast for pharmacy chains like Walgreens -- and they clearly suffered. Reduced foot traffic hurt front-end sales and clinic revenue.
But the good news is there's light at the end of the tunnel, in more than one respect. On a macro basis, Walgreens will continue to benefit from the largest vaccination campaign in history. Every person who walks into its stores to get vaccinated is an opportunity to create a customer for life.
More important, the company is already well into its turnaround plan, which is designed to boost organic growth and operating margins. Aside from slashing $2 billion from annual operating expenses, the company is aggressively spending on digitization initiatives. Though it represents a small portion of total sales, online revenue has been up by a double-digit percentage.
What's even more intriguing is Walgreens' partnership with VillageMD. The duo plans to roll out up to 700 full-service clinics at its stores around the United States. Operating as a full-service clinic should allow Walgreens to attract repeat customers and funnel these folks into its higher-margin pharmacy services.
For you value-seeking investors, Walgreens Boots Alliance at less than 11 times forward-year earnings is a good deal.
