Forget Bitcoin: These Controversial Stocks Are Better Buys
Ever since the Wall Street bear market crashed on March 23, 2020, benchmarks have been on fire. In particular, the broad base S&P500 and very technological Nasdaq Compound are 69% and 95% higher respectively since the trough.
But if you think those gains are impressive, you haven’t been paying attention to the leading cryptocurrency bitcoin, which has risen almost fivefold in value since March 23.
The usual group of catalysts fanned the flames for the world’s largest digital token. Enthusiasts will point to Bitcoin’s 21 million token limit (i.e. scarcity), growing number of merchants accepting Bitcoin (utility), ever-increasing US money supply, and Bitcoin’s revolutionary blockchain, as reasons for its overwhelming outperformance.
However, I see the bitcoin investment thesis differently than most. While there is some intrigue about blockchain technology, bitcoin’s other selling points aren’t quite as compelling. For example, its rarity is only tied to a loose promise that community consensus will not increase the number of tokens. It’s not a real shortage.
Additionally, the usefulness of bitcoin is, at best, questionable. Fundera finds that more than 15,100 businesses worldwide accept bitcoin as payment, including 2,300 in the United States. Just one problem…there are approximately 7.7 million businesses in the United States with at least one employee. It’s not a general utility. With so many tokens held by investors and out of supply in circulation, bitcoin has little hope of ever having significant real-world utility.
Instead of running after clearly wrong investmentI would argue that a handful of controversial stocks are much better buys and capable of providing superior long-term returns.
Facebook (FB -6.16% ) may be the world’s leading social media site, but it’s also a lightning rod for controversy. Over the summer, Facebook face to face of more than 400 advertisers on its inaction regarding hate speech on its platform. As a result, brand names like Coca Cola, Microsoftand Ford briefly removed their ads from the social media hub’s platform. Facebook has since taken steps to address these concerns.
But what should not be overlooked is how dominant facebook is, even with the controversy constantly lagging behind. This is a company that ended 2020 with 2.8 billion monthly active users visiting its namesake site and 3.3 billion family monthly active people visiting all of its owned assets (including Instagram and WhatsApp). There’s no social media platform that comes close to the breadth of reach that Facebook can offer advertisers.
Another amazing thing about Facebook is that it’s still in the early stages of its growth. While it may be hard to believe for a nearly $750 billion company, WhatsApp and Facebook Messenger have yet to be significantly monetized. These are two of the six most visited social media platforms in the world.
Additionally, Facebook has other sales channels it hasn’t really explored yet, including Facebook Pay.
Facebook may be a large-cap stock, but it continues to grow like a mid-cap company.
Teva Pharmaceutical Industries
For much of the past four years, Teva Pharmaceutical Industries ( SUITS YOU -3.10% ) has been a magnet for controversy. Its former management team settled corruption allegations with the US Department of Justice, and the company faces a slew of lawsuits from US regulators over generic drug pricing and the role it played. played in the opioid crisis. If that wasn’t enough, Teva also grossly overpaid generic drug maker Actavis in 2016, which inflated its outstanding debt.
Yet even with these concerns, Teva makes a much more compelling investment than bitcoin. One of the reasons this is the case is CEO Kare Schultz. Schultz is a straightening specialist who has done wonders within three years and three months he led Teva. Operating expenses for the full year are expected to fall by $3 billion, while net debt will fall from over $34 billion to less than $24 billion. With Schultz expected to stay on as CEO until the end of 2023, Teva could have less than $15 billion in net debt by then. In other words, the company is no longer in financial difficulty.
Teva is also at the center of a sustained growth trend with generics. Brand name drug prices are not coming down, which means there will be a growing emphasis on generic use in the years to come. With improved access to medical care around the world and baby boomers approaching their golden years in the United States, there is a path to strong generic volume growth for Teva.
Perhaps the biggest catalyst will be putting the company’s legal issues in the rearview mirror. Schultz’s leadership should help the company (at worst) negotiate a settlement that involves minimal cash fines.
With a forward price/earnings ratio of just 5, Teva is a screaming bargain.
Another controversial stock with all the tools needed to spin circles around bitcoin in the long run is the mining company Palantir Technologies (PLTR -3.60% ).
Which makes technology stock Palantir such a controversial business is its dealings with the US government. Founded shortly after the September 2001 terrorist attacks, Palantir began providing its data mining software and consulting services to various government agencies, including the Immigration and Customs Enforcement Agency (ICE). ICE is a polarizing agency that some Americans like and others would rather see disbanded.
What’s not polarizing is the growth potential that Palantir brings to the table. This is a company that in mid-November raised its full-year sales forecast to predict 44% year-over-year growth. Major government and defense contracts were a driving force for the company’s Gotham data mining platform for years.
But in the longer term, it’s the company’s Foundry platform that provides even more intrigue. Foundry is enterprise-based and designed to make complex data more manageable and actionable for the business using its solutions. Although it is the slowest growing platform compared to Gotham, investors should understand that annual spend increases over time with Palantir’s corporate clients. Give it a few years and Foundry could easily become Palantir’s primary growth engine.
While not cheap in the traditional fundamental sense, Palantir offers a significant long-term benefit.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.