A big reason MicroStrategy (MSTR +4.46%) was such a hot stock in 2024 is its bullish position on Bitcoin. The company is such a big believer in crypto that it's planning to raise $42 billion in capital during the next three years for the purpose of adding to its tally.
Other companies hold Bitcoin as well, but what may surprise you is just how much more MicroStrategy owns than other public companies. And that aggressive strategy can also tell you a lot about whether the tech stock is a good fit for your portfolio.
NASDAQ: MSTR
Key Data Points
MicroStrategy holds 10x more Bitcoin than the next-largest position
According to Bitcoin Treasuries, MicroStrategy's Bitcoin holdings as of Dec. 31 totaled 446,400 coins. What's surprising is that no other public company is anywhere near MicroStrategy in terms of Bitcoin holdings. Marathon Digital is a crypto miner and it has the second-largest tally at 40,435 bitcoins. The largest non-crypto mining company listed is electric vehicle maker Tesla, which holds 9,720 bitcoins. Chief Executive Officer Elon Musk has been no stranger to crypto in the past, often posting messages on social media relating to various digital currencies.
Many companies, however, simply aren't comfortable with holding so much crypto on their books because of the volatility that can come with it. Although the strategy worked incredibly well for MicroStrategy in 2024 -- its share price climbed about 370% for the year -- it can be extremely difficult to predict Bitcoin's path as a lot depends on government regulations, sentiment from retail investors, interest rates, and other factors.
What this tells investors about the company's overall strategy
MicroStrategy clearly isn't interested in just holding Bitcoins as a way to diversify its holdings and have exposure to crypto. The company's co-founder Michael Saylor is one of the biggest Bitcoin bulls you can find, and he doesn't see a reason to stop adding to the stockpile. "We'll just keep buying the top forever, every day is a good day to buy Bitcoin," Saylor says.
At this point, MicroStrategy has essentially become a Bitcoin holding company. While it does have its software and business intelligence business, crypto's soaring popularity and rising value are what have helped this tech stock amass such incredible gains during the past year.
From a fundamentals perspective, the company's enterprise software business is underwhelming. It doesn't generate a profit and revenue has been declining. The main reason to invest in the stock is if you're bullish on the price of Bitcoin.
Is MicroStrategy a good stock to put into your portfolio?
If you love Bitcoin and are convinced it's going to continue soaring, then MicroStrategy can be a suitable investment to consider for your portfolio. But all other investors are likely better off avoiding the stock because of the inherent volatility that will come with holding such a large stash of Bitcoins.
The cryptocurrency has gone on a volatile ride over the years and sharp corrections in value are not uncommon. And without strong fundamentals to rely on, the stock is going to live or die by how well Bitcoin performs. Investing in the stock involves taking on a high degree of risk, which may simply make it an untenable option for many investors.
MicroStrategy's market cap is about $75 billion even though the company generates less than $500 million in annual revenue. There simply isn't a valuation metric that can justify its price because it has gotten so detached from its fundamentals. This is a speculative option that is only going to be suitable for investors with a high risk tolerance.
