There are a lot of ways to build wealth, but none has arguably been more consistent than investing in the stock market. Even though stocks do finish behind other investment vehicles from time to time, the market has delivered the highest average annual return of traditional asset choices.
However, this tried-and-true thesis has been put to the test in recent years by the emergence of cryptocurrencies. In particular, retail investors can't seem to get enough of Dogecoin (DOGE -4.84%), which they believe is "going to the moon" -- an implication that it'll skyrocket higher.
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Dogecoin's chances of a moonshot are slim to none
The bull thesis surrounding Dogecoin usually falls into one of the following three categories:
- It's nominally cheap at $0.29 per token (as of June 18);
- You can get in on the ground floor before broad-based adoption picks up; and
- Elon Musk is a big supporter.
It sounds like a promising investment opportunity, but it all falls apart if you do any digging. In reality, Dogecoin's primary catalysts have been social media hype and misinformation, with very little in the way of tangible catalysts.
For example, Dogecoin might be nominally inexpensive at $0.29 per token, but it's not exactly cheap if you consider that 130 billion tokens are outstanding. This is a figure that grows by more than 5 billion coins each year. Inflation may be rising in the U.S. now, but the 3.4% base inflation rate forecast in 2021 by the nation's central bank is still lower than the nearly 4.1% token inflation experienced by Dogecoin "hodlers."
The idea of getting in on the ground floor with Dogecoin is also somewhat laughable given how little utility it has off of cryptocurrency exchanges. It's taken eight years for Dogecoin just to be accepted by 1,400 mostly obscure businesses worldwide. Further, its blockchain has been handling fewer than 30,000 transaction on a daily basis in recent weeks. This blockchain simply isn't equipped to handle being scaled.
To address the final point, Tesla CEO Elon Musk has proven himself to be as much a liability as a savior. Musk has frequently flip-flopped on Bitcoin, and will more than likely have a bifurcated opinion of Dogecoin at some point in the future.
Dogecoin is nothing more than a glorified pump-and-dump scheme, which means it's eventually headed for disaster -- not the moon.
These stocks are cleared for takeoff
If you want to watch your money ascend to the heavens, you'll need to buy into innovative stocks that can double your initial investment many times over. The following trio of companies all have that quality and are cleared for takeoff.
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Lovesac
When you think of innovation, furniture stocks don't exactly come to mind. But despite being in a historically stodgy industry that's stuck in the retail Stone Age, Lovesac (LOVE -1.63%) is relying on innovation and omnichannel investments to turn the furniture industry on its head.
To begin with, Lovesac isn't offering traditional furniture. The bulk of its revenue (over 80%) comes from selling sactionals. These are effectively modular couches that can be rearranged in dozens of ways to fit any livable space. Although sactionals are pricier than the typical couch, they're considerably more functional. Buyers also have their choice of more than 250 different covers, which ensures that it'll match the look they're aiming for. And if this still isn't enough, the yarn Lovesac uses in its covers is made entirely from recycled plastic water bottles. Functionality, optionality, and environmentally friendly, all rolled up in one.
Perhaps the most impressive thing about Lovesac has been the company's ability to pivot its sales approach to match prevailing market conditions. Whereas most furniture retailers are almost entirely dependent on foot traffic into brick-and-mortar showrooms, Lovesac pivoted to online sales and, to a lesser extent, pop-up showrooms during the pandemic. Lovesac's minimized brick-and-mortar presence helped to reduce its overhead costs, pushing the company to recurring profitability two years earlier than Wall Street had forecast.
Lovesac offers sustainable double-digit growth potential through at least the midpoint of the decade, if not beyond. And at just over $1 billion in market cap, it remains largely undiscovered by Wall Street.
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Trulieve Cannabis
Another stock that's ready to go to the moon, while leaving Dogecoin eating its dust, is U.S. marijuana stock Trulieve Cannabis (TCNNF 4.60%). You might not think of cannabis stocks as innovative, but Trulieve will prove you wrong.
You see, most U.S. multistate operators (MSO) -- companies that control the seed-to-sale process -- tend to plant their proverbial flags in as many legalized markets as they can. Trulieve shunned this approach in favor of saturating its home market of Florida. As of this past week, Trulieve had 90 operational dispensaries, 84 of which were located in the medical marijuana-legal Sunshine State. This blueprint that focuses on a single state has helped the company achieve 13 consecutive profitable quarters, and it's kept the company's marketing costs down as a result of effective branding. In terms of total sales, Trulieve controlled 53% of Florida's dried cannabis flower market and 49% of its oils share, as of the end of 2020.
Innovation can also come in the form of an opportunistic acquisition. In May, Trulieve Cannabis announced that it would acquire MSO Harvest Health & Recreation (HRVSF) in an all-stock deal valued at $2.1 billion. Harvest has close to three dozen operating dispensaries and a focus on five states. One of these five states happens to be Florida, which'll further entrench Trulieve in its home market.
However, the real treasure of this deal is the 15 dispensaries Harvest Health has open in its home market of Arizona. The Grand Canyon State voted to legalize recreational pot last November, with sales commencing in January 2021. If Trulieve can follow its Florida blueprint in Arizona, it could have a firm grasp on two billion-dollar states.
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Redfin
A third stock ready for launch is technology-driven real estate company Redfin (RDFN 1.06%).
Like Lovesac and Trulieve, Redfin is operating in a niche that's desperate for disruption. The way Redfin is looking to shake up the real estate sector is by providing huge cost-savings to buyers and sellers, and leaning on personalization to drive its business.
Traditional real estate companies typically charge a commission/listing fee of 3%. Meanwhile, Redfin charges either 1% or 1.5%, depending on how much prior business has been done with the company. This difference of up to 2 percentage points might not sound like much, but it's significant. With historically low mortgage rates pushing up demand for new and existing homes, the amount of savings Redfin can provide sellers is being magnified on a daily basis. Not surprisingly, Redfin's share of U.S. existing home sales has climbed from 0.44% to 1.14% since the end of 2015.
Redfin has a variety of services aimed at making the selling process easier on homeowners. The RedfinNow service, which is active in a handful of cities, purchases homes directly from sellers with cash. This almost entirely removes the hassles of selling a home. There's also Concierge, which works with homeowners on improvements and/or staging to maximize the selling price of a property.
Redfin could very well quadruple its revenue over the coming four years.
