Popular cryptocurrencies like Bitcoin (BTC +0.75%) and Ethereum (ETH +2.14%) have been excruciatingly volatile. While the prices of both have skyrocketed over the past year, they've each tumbled more than 30% from their highs in recent weeks. That gut-wrenching volatility is more than many investors want to handle.
Those looking for potentially enriching investments without such wild swings have come to the right place. We've asked some of our contributors for stock ideas that offer compelling wealth-creating potential without the volatility associated with cryptocurrency. Here's why they think Enbridge (ENB 0.46%), First Solar (FSLR 2.98%), and Brookfield Infrastructure Partners (BIP +1.00%) are better options.
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Building off a strong base
Reuben Gregg Brewer (Enbridge): At first blush, Canadian pipeline giant Enbridge would seem an odd juxtaposition to digital currencies. However, the company has a collection of offshore wind power projects in Europe under way. That will help to power the world with clean energy that could be used to mine for digital coins. The company's clean energy business is only about 3% of adjusted EBITDA today, but it will grow in the years ahead thanks to investments like this and others (including transporting hydrogen).
That's great, but what's most interesting if you are tired of the volatility in the cryptocurrency space is the other 97% of adjusted EBITDA. Roughly 54% comes from oil pipelines, 29% from natural gas pipelines, and 14% from a natural gas distribution business. It is a North American category leader in each of these divisions. And it is these operations, and the reliable cash flows they generate, that will provide the foundation for the company's future growth in renewable power.
The best part, however, is that because of the negative stigma attached to carbon-based businesses today, Enbridge's dividend yield is a hefty 7%. And that's backed by more than 25 years of annual dividend increases. A clean energy shift and big quarterly dividend checks might just lift your spirits some -- and help shelter your portfolio from the often wild swings in the crypto world.
Future crypto mining could benefit this stock
Neha Chamaria (First Solar): Cryptocurrencies have gotten crushed in recent weeks. But if the heady mix of high potential returns with high risk still excites you, forget crypto and consider investing in a solar stock that's gotten crushed as well, but has a far more substantive growth catalyst than a cryptocurrency. In fact, there might be a link between the two.
You see, cryptocurrencies slumped earlier this month after Tesla CEO Elon Musk announced suspension of vehicle purchases using Bitcoin because of the "increasing use of fossil fuels for Bitcoin mining." The development has spurred debates about crypto energy use and how renewable energy could be an answer. In other words, crypto miners could increasingly adopt renewable energy sources and provide the solar energy market a much-needed fillip. One solar stock you might want to check out is First Solar, which is down nearly 22% year to date.
First Solar is a leading provider of solar solutions and is known for thin-film photovoltaic modules that are more efficient and cost-effective, and therefore a great choice for utility-scale solar projects. The company has consistently maintained a conservative balance sheet that has not only helped it survive down cycles but given it the leeway to invest in, improvise, and expand its technology.
In its most recent quarter, First Solar earned a gross margin of 23% versus 17% a year ago and expects to earn 25% margin at the midpoint of its sales and gross profit guidance for 2021. It also expects to end the year with net cash balance between $1.8 billion and $1.9 billion, which is substantially higher than its 2020 net cash balance of $1.5 billion. With solar installation in the U.S. alone projected to grow threefold over the next decade, First Solar has a lot of potential.
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A proven wealth creator
Matt DiLallo (Brookfield Infrastructure): The primary draw of buying or mining cryptocurrencies is the opportunity to participate in a potential once-in-a-lifetime money-making opportunity. Unfortunately, the promise of outsize returns almost always comes with a healthy dose of volatility. If you have trouble stomaching wild price swings, you might want to consider a less volatile company like Brookfield Infrastructure.
The company owns a diversified portfolio of critical infrastructure like pipelines, power lines, ports, toll roads, and data centers. Most of these assets generate relatively steady cash flow backed by long-term fixed-rate contracts. That gives Brookfield the money to pay an attractive dividend that currently yields 3.8%.
However, don't let the boring nature of Brookfield's business model fool you. The company has an excellent track record of enriching investors. Since its formation more than a decade ago, Brookfield has generated an average total annual return of about 18%. That enabled it to crush the S&P 500, which has produced an 11% annualized total return during that timeframe. Put another way, $10,000 invested in Brookfield Infrastructure at its inception would have grown into more than $83,000.
There's plenty more wealth-creating upside ahead for Brookfield's investors. The company expects to grow its earnings by a 7% to 14% annual clip in the years ahead as it continues expanding its infrastructure portfolio. That should enable it to increase its attractive dividend by 5% to 9% each year. This steadily rising income stream should give Brookfield the power to continue producing enriching total returns without the stomach-churning volatility that comes with chasing cryptocurrencies.
