There are a number of ways to build wealth over time, but none have delivered better average annual returns than the stock market. Gold and bonds have had their time in the spotlight, but the very long-term total return of 7% for stocks, including dividends, hasn't been topped.
However, this investing supremacy has been challenged in recent years by cryptocurrencies. We've watched as Bitcoin, the largest digital currency by market cap, has averaged a triple-digit annual return for a decade.
But it's not Bitcoin that crypto investors are infatuated with. Meme-based digital currency Dogecoin (DOGE 1.43%) is the cryptocurrency momentum chasers are counting on to "go to the moon."
Here's the full story on Dogecoin you're not being told on message boards
Why Dogecoin? Peruse the social media message boards on Reddit or Twitter and you'll find a few cohesive messages:
- Dogecoin has lower transaction fees than Bitcoin and Ethereum.
- Its adoption is picking up, so you'll want to be in on the ground floor.
- It's supported by billionaire Elon Musk, the CEO of Tesla.
These catalysts sound great on paper, but they don't tell the full story on Dogecoin. Rather, they show a sliver of what's actually happening, with the hope that investors don't wise up and dig deeper. If they do look beyond the surface-scratching hype, they'd find a digital currency whose transaction fees are significantly higher than a number of other popular coins, such as Nano, Ripple, Stellar, Dash, Ethereum Classic, Bitcoin SV, IOTA, Bitcoin Cash, and many more. Dogecoin is often slower at validating and settling transactions than its peers, as well.
It doesn't pass the sniff test on the utility front, either. Only around 50,000 transactions are handled on its blockchain daily, meaning it would take over 38 years for Dogecoin to process the 700 million transactions Visa and Mastercard handle daily. Further, a meager 1,300 businesses have come to accept Dogecoin as payment in eight years.
As for Musk, his tweets are having no tangible effect on improving utility or processing speeds.
I have a phrase I use for assets like Dogecoin that skyrocket without any tangible catalysts: pump-and-dump scheme.
These stocks have a significantly better chance of "going to the moon" than Dogecoin
Rather than chasing the baseless hype that's been built into Dogecoin's bloated valuation, a smarter move would be to buy innovative stocks with tangible growth prospects. When looking out years into the future, this trio of companies offers the real potential to go "to the moon."
First up is clinical-stage drug developer Novavax (NVAX 0.72%), which looks to be sitting on a treatment capable of billions of dollars in annual sales.
As you might have guessed, Novavax's claim to fame has to do with its development of a COVID-19 vaccine. The company's experimental vaccine, NVX-CoV2373, was tested in a large-scale trial in the U.K. and produced a vaccine efficacy that was just shy of 90%. It demonstrated efficacy of 96.4% against the original strain of COVID-19 and 86.3% efficacy against the most prominent variant in the U.K.
Yet, take a closer look at Novavax's stock chart and you'll see it's lost more than half of its value in under four months. Why? The answer is that it's delayed its emergency-use authorization filing for NVX-CoV2373 in the U.S., U.K., and Europe from the second quarter to the third quarter, and announced it may not be producing vaccines at full capacity until the fourth quarter. This has some folks wondering if Novavax is going to miss out on the low-hanging fruit in lucrative developed markets.
But here's the thing: Novavax's potential market for its vaccine is global. What's more, booster vaccines are almost certainly going to be needed, unless COVID-19 is somehow eradicated. This would give Novavax a real shot to become one of a handful of major players in developed countries, as well as in emerging markets. In other words, Novavax could be bringing in $4 billion to $6 billion in annual sales from its COVID-19 vaccine, if approved.
It's incredibly rare for a biotech stock with a blockbuster drug to be valued at two times peak annual sales and something like five times forward earnings, but that's exactly where Novavax is at the moment. If you want a stock with moonshot potential, take a closer look at Novavax.
Another stock with the long-term potential to go to the moon is insurance company EverQuote (EVER 1.18%).
I know... insurance is about as exciting as watching paint dry. But what makes EverQuote such an incredible company is its focus on the fastest-growing channel within the industry: digital advertising. Whereas the entire insurance ad and distribution industry is projected to grow by an annualized rate of 4% through 2024, EverQuote expects digital ad spending on insurance products to grow by 16% annually over the same time frame. By the end 2021, the company is forecast to hold close to a 7% share of the $6.5 billion digital ad-spend market.
EverQuote's foundational growth driver is its auto insurance marketplace. Consumers use its online marketplace to get quotes and comparison shop auto policies, with an estimated one in five ultimately purchasing an auto policy. The platform is convenient for users, and it allows insurers to more effectively target their ad dollars. In other words, rather than tossing money as a print campaign, EverQuote's marketplace consumers are qualified and motivated shoppers. Advertisers are, therefore, getting more bang for their advertising buck.
Another interesting thing about EverQuote is that it's expanding into new verticals. Even though auto insurance accounted for $84.5 million (up 25% year over year) of the company's $103.8 million in first-quarter revenue, the $19.3 million generated from life, health, renters, and home insurance was up 41% from the prior-year period. These new verticals can help EverQuote maintain a 20%-plus sales growth rate.
With the company expected to turn the corner to profitability in 2022 or 2023, all while maintaining a double-digit growth rate, its valuation of roughly two times sales looks downright cheap.
Patient investors should also dump Dogecoin in favor of fast-paced edge cloud giant company Fastly (FSLY 2.55%). Fastly's network helps to expedite the delivery of content to end users in a secure manner.
There's no question that Fastly was one of the key beneficiaries of the coronavirus pandemic. While the pandemic has been awful for humankind, those of us stuck at home increasingly turned to the internet for work, news, and entertainment. Since Fastly's network is based on usage, an increase in traffic caused its revenue growth to soar.
Like Novavax and other growth stocks, Fastly has been clobbered since mid-February. There are concerns that the company's sales growth could slow as the U.S. inches closer to a return to some semblance of normal. Fastly's operating loss forecasts have also come in larger than expected, with higher headcount and reinvestment taking their toll.
However, these concerns look overblown, especially if you dig into the data. The company's gross margin came in at 60.1% in the first quarter, and its dollar-based net expansion rates have been 147%, 143%, and 139% in each of the past three quarters. In other words, its existing clients are spending 39% to 47% more on a year-over-year basis. Neither figure sounds worrisome to me.
This ongoing shift to digital content at the business and personal level could allow Fastly to triple its annual sales between 2020 and 2024. If that's the case, its cash burn should slow dramatically after this year. It remains an exciting company for growth-seeking investors.