When most people think of crypto companies, they typically think of cryptocurrency mining companies, cryptocurrency exchanges, and financial institutions heavily involved with crypto assets. However, there are a growing number of companies that have extensive exposure to crypto without many people even realizing it.
One way to find these crypto stocks is by checking out the official holdings of exchange-traded funds (ETFs) that specialize in blockchain and crypto. For example, if you take a look at the holdings for the Schwab Crypto Thematic ETF (STCE 2.23%), which launched in 2022, you can see a number of names that seem incongruous at first. Three names particularly stand out: MicroStrategy (MSTR 5.88%), Overstock.com (OSTK 4.29%), and AMC Entertainment Holdings (AMC 4.96%).
NASDAQ: MSTR
Key Data Points
1. MicroStrategy
On the surface, MicroStrategy looks just like a typical software analytics company. The company provides software solutions to a wide range of financial services, retail, healthcare, and technology companies. But what it is best known for is the extensive amount of Bitcoin (BTC 1.35%) it holds on its balance sheet. As of Dec. 27, MicroStrategy held 132,500 Bitcoins, now worth over $2.7 billion. Given that the total market cap of MicroStrategy is just over $2.5 billion, it is easy to see how buying this company's stock is really just a proxy for buying Bitcoin.
Image source: Getty Images.
Moreover, the former CEO (and now executive chairman) of the company is none other than Michael Saylor, one of the biggest Bitcoin bulls in the world. On the MicroStrategy website, there's an orange Bitcoin button -- once you press it, you'll be redirected to a new site with a collection of videos from Saylor extolling the virtues of crypto and Bitcoin.
Saylor has publicly predicted that the price of Bitcoin is going to $500,000, and he is positioning MicroStrategy to take advantage of this stratospheric new valuation. Until this year, it primarily meant accumulating more and more Bitcoin for the company. But in 2023, the company also plans to expand the number of software and enterprise infrastructure solutions it can provide related to the Bitcoin Lightning Network, which enables fast, secure, low-cost Bitcoin payments.
NYSE: OSTK
Key Data Points
2. Overstock.com
If you thought Overstock was just a discount retailer specializing in furniture and home furnishings, you would be mistaken. When it launched during the dot-com boom, Overstock.com made its name by becoming a high-profile e-commerce website where you could buy just about anything at significantly reduced prices. However, Overstock.com has embarked on a strategic overhaul in recent years that has often emphasized blockchain and crypto.
The first step occurred in 2014 when Overstock.com became the first major e-commerce site to accept Bitcoin. Then, in 2017, Overstock.com became the first major retailer to accept a wide range of altcoins, including Dogecoin (DOGE 0.93%). Moreover, at about the same time, Overstock.com created a wholly owned subsidiary called Medici Ventures, which invests in blockchain and crypto companies. Prior investments have included start-ups that specialize in everything from crypto tokens to digital wallets.
NYSE: AMC
Key Data Points
3. AMC Entertainment
Finally, there's AMC Entertainment, which is more than just a movie theater chain these days. Quite simply, the company has realized that the previous generation of entertainment is coming to an end. So what do you do for an encore when people prefer to stream movies at home rather than go to the local cinema?
The answer, quite simply, is crypto. In 2021, the company announced it would begin accepting cryptocurrency as a form of payment for movie tickets. In addition to Bitcoin, AMC Entertainment now accepts Dogecoin and Shiba Inu (SHIB 2.22%) as a form of payment. And the company is also exploring a wide range of other initiatives related to film and cinema, including new NFT collections related to blockbuster films and possibly even a new crypto token tied to its business operations.
How to value these crypto companies?
Before you think about investing in these stocks just because they are "crypto companies," just keep in mind how fiendishly hard it can be to value these stocks. In the example of MicroStrategy, nearly all of the company's valuation is tied up with Bitcoin, so it might not seem difficult. But what about Overstock.com and AMC Entertainment, where it is a lot harder to figure out how much of future cash flows are attributable to crypto?
For now, the only one of these crypto companies currently on my watchlist for 2023 is MicroStrategy, given its price has skyrocketed 74% since the end of December. It will be interesting to see how the company plans to offer new Bitcoin Lightning Network solutions to clients, and whether that can move the needle on Bitcoin's acceptance as an online payment solution.
When I'm looking through the holdings of ETFs, that's the type of catalyst I would like to see. The next time you peruse the holdings of an ETF, look for an interesting company doing unexpected things in a hot niche or sector.
