Over the long term, the stock market is a proven money machine. Since 1980, the benchmark S&P 500 has delivered an annual average total return, including dividends, of just over 11%. This is to say that people who chose to reinvest their dividends have doubled their money, on average, every 6.5 years since 1980. That's impressive considering the many obstacles the stock market has navigated its way through (the dot-com bubble, the Great Recession, and the coronavirus crash).
But in recent years, the broader market has taken a back seat to the mother of all momentum trades: cryptocurrencies. For example, Bitcoin, the world's largest digital currency by market cap, has averaged a triple-digit annual return, which absolutely crushes the performance of the S&P 500.
Yet, it's not Bitcoin that has retail investors captivated. The true crypto charmer is the "people's currency," Dogecoin (DOGE -0.32%).
The shiba inu dog breed served as inspiration for Dogecoin's developers. Image source: Getty Images.
The Dogecoin bulls aren't seeing the full picture
Why Dogecoin? Some investors love it because of its perceived-to-be "affordable" price of less than $0.40 per coin. Others point to its lower transactions fees relative to the Big Two (Bitcoin and Ethereum). And still other investors believe in Dogecoin's growing utility. Unfortunately, all of these would-be catalysts are incorrect or they overlook the big picture.
For instance, Dogecoin might be nominally cheap at $0.38 per coin (as of late afternoon June 4), but this completely ignores that there are almost 129.9 billion Dogecoin already in circulation, with approximately 5.2 billion new Dogecoin being added by mining activity every year. The roughly 4% supply inflation in 2021 might not sound like much, but it's been well over a decade since actual price inflation in the U.S. was 4%. In short, Dogecoin is neither cheap, nor is it a very good hedge against inflation.
If you were to take a closer look at Dogecoin's transaction fees, you would see they're lower than Bitcoin and Ethereum. But what enthusiasts frequently sweep under the rug is that they're noticeably higher than a number of other popular cryptos. Stellar, Ripple, Bitcoin Cash, Bitcoin SV, Ethereum Classic, Nano, and Dash are just a few that have markedly lower transaction fees than Dogecoin. Further, the roughly 20 minutes Dogecoin takes to validate and settle payments is higher than a lot of its peers. It's not the efficient network it's being made out to be by its fans.
Lastly, its utility is questionable. That's because there isn't much utility at all off of cryptocurrency exchanges. Only roughly 1,300 businesses worldwide have given the green light to accepting Dogecoin as a form of payment, and it's taken eight years just to reach this paltry level.
To sum things up, Dogecoin is a dud, and it's not worth your hard-earned money.
Dump Dogecoin for these top-tier stocks
Instead of buying what looks to be a hype-driven pump-and-dump asset, my suggestion would be to put your money to work in the following trio of surefire stocks. These are companies with real growth prospects and fundamental data you can wrap your hands around.
Image source: Square.
Square
If you've got a cryptocurrency itch that simply must be scratched, consider buying fintech stock Square (SQ 5.04%), which'll offer exposure via Bitcoin trading (I'll touch on this in a moment).
Most people are likely familiar with Square because of its seller ecosystem. This is the segment that provides point-of-sale devices, analytics, loans, and other tools to help merchants grow their businesses. In the seven years leading up to the pandemic, the gross payment volume (GPV) processed on Square's network grew from around $6 billion to approximately $106 billion (about 49% annually, on average).
What's particularly promising about the seller ecosystem is that it's generating a larger percentage of revenue from bigger merchants. In the March-ended quarter, 61% of GPV came from businesses with at least $125,000 in annualized GPV, up from 52% in the same quarter back in 2019. Since the seller ecosystem is a predominantly fee-driven segment, bigger businesses should help it maintain a solid double-digit annual growth rate.
Square's even buzzier growth segment is peer-to-peer digital payments platform Cash App. Between the end of 2017 and the end of 2020, Cash App's monthly active user (MAU) count more than quintupled to 36 million. What's more, Square is generating $41 in gross profit per MAU while spending less than $5 to bring in each new user. It should be no surprise that Cash App is surpassing the seller ecosystem as the company's leading driver of gross profit.
While Cash App can bring in revenue via merchant fees and bank transfer fees, it's investing and Bitcoin exchange that have been the major drivers of revenue and interest. If crypto trading remains popular, Square will benefit.
Image source: Getty Images.
Elanco Animal Health
Another surefire way to make money in the stock market is to put it to work in companies focused on companion animals. That's why pet pharmaceuticals provider Elanco Animal Health (ELAN 4.10%) is such a smart buy.
The pet industry may not be growing by the same jaw-dropping rate as cybersecurity or cloud computing, but it might the safest growth trend of any industry worldwide. According to data from the American Pet Products Association, it's been at least a quarter of a century since spending on pet expenditures declined on a year-over-year basis. This year, close to $110 billion is forecast to be spent on companion animals, $32.3 billion of which will be for veterinary care and other medical products.
Elanco has its paws in both the companion animal and commercial livestock sales channels. Prior to last year, it generated most of its sales from keeping livestock free of disease. But a $7.6 billion deal to acquire Bayer's animal health segment beefed up its exposure to the considerably faster-growing companion animal segment. This deal should boost the company's organic growth potential, and it'll result in up to $300 million in annual cost synergies.
The current plan is for Elanco to launch eight new products this year that can initially bring in $100 million in sales for 2021. This should help Elanco hit Wall Street's aggressive growth target of a near-doubling in per-share profit between 2021 and 2024.
Image source: Getty Images.
Green Thumb Industries
Certain U.S. marijuana stocks can also be much smarter investment choices than the hype-driven Dogecoin. In particular, multistate operator (MSO) Green Thumb Industries (GTBIF 1.58%) should have no trouble making its long-term investors richer.
Even with a flurry of consolidation in recent months in the U.S. MSO space, Green Thumb stands out as one of the industry's biggest players. With its closure of the Liberty Compassion acquisition, Green Thumb has 58 operational dispensaries and enough retail licenses in its back pocket to open 45 additional locations. In total, it has access to a dozen legalized markets.
In general, Green Thumb has been picky about its expansion. It's chosen markets that offer billion-dollar annual sales potential, like New Jersey, high per-capita spending potential, such as tourist-dependent Nevada, and limited-license states, like Illinois. Choosing to operate in limited-license states is a smart move in that it reduces the amount of competition Green Thumb will have to contend with. This means a better chance to build up its brand and create a loyal following.
Arguably the best thing about Green Thumb is that close to two-thirds of its sales are derivative pot products. Derivatives, such as vapes, edibles, oils, and infused beverages, come with higher price points than dried cannabis flower and are less susceptible to oversupply. In other words, they're Green Thumb's ticket to recurring profitability.
Unlike Dogecoin, Green Thumb will have investors seeing green.
