There are few guarantees on Wall Street. However, one constant has been the very long-term outperform of the stock market over other investment vehicles. Stocks may not top oil, gold, or housing every single year, but the benchmark S&P 500 has consistently delivered higher average annual returns than any other asset class.
Then, a little over a decade ago, cryptocurrencies made their debut and turned this veritable truth — that stocks are one of the best ways to build wealth over time — on its head. Bitcoin, the world’s largest cryptocurrency by market value, has risen from less than $1 to, at one point recently, more than $64,000.
But it’s not Bitcoin garnering all the attention from cryptocurrency investors. Rather, it’s meme-based digital currency Dogecoin (CRYPTO:DOGE).
Dogecoin is a bubble waiting to burst
Over the trailing year, Dogecoin has risen from approximately a quarter of one penny ($0.0025) to as high as $0.73. Nominally, that doesn’t sound like a lot. But on a percentage basis, investors who held for at least a year were up by as much as 27,000%! Moves like that tend to attract momentum chasers.
The problem is that none of the catalysts driving Dogecoin higher are tangible or accurate. For example, tweets from Tesla CEO Elon Musk have been the primary spark for Dogecoin. Musk, the self-proclaimed “Dogefather,” has hyped up Dogecoin on his Twitter feed, and made mention of the joke-born cryptocurrency during a Saturday Night Live skit. Think about how ridiculous this sounds: The core investing thesis for Dogecoin is hoping Elon Musk tweets in a given day.
Dogecoin supporters also frequently talk up its low transaction fees and increased adoption. Unfortunately, neither are accurate or fully truthful statements. Dogecoin is only handling around 50,000 transactions daily — this compares to 700 million daily for Visa and Mastercard combined — and a meager 1,300 businesses worldwide have green-lit Dogecoin as an acceptable form of payment. There are also no shortage of popular digital currencies with transaction fees that are a fraction of what Dogecoin charges, including Stellar, Ripple, Nano, Ethereum Classic, Bitcoin SV, and Dash.
Remember how one of the major goals of crypto was to decentralize the network? You won’t get that with Dogecoin, either. According to BitInfoCharts, two-thirds of all outstanding Dogecoin is owned by just 99 addresses.
In short, Dogecoin fails the sniff-test all around and has the look of a pump-and-dump scheme.
Smart investors are piling into these stocks instead of Dogecoin
Instead of putting your hard-earned money at risk in an asset that’s been hyped and is shrouded in misinformation, perhaps it’s time to follow the smartest investors into stocks that have game-changing potential. The following trio of supercharged companies certainly fits the bill.
A person administering a vaccine into the right arm of a young woman.
Rather than buying the hype-driven Dogecoin, successful billionaire money managers have been busy scooping up shares of biotech stock Novavax (NASDAQ:NVAX). During the first quarter, Israel Englander’s Millennium Management doubled its existing stake in Novavax, while Jim Simons’ Renaissance Technologies opened a nearly 673,000-share position worth close to $122 million.
The buzz surrounding Novavax has to do with the company’s development of coronavirus disease 2019 (COVID-19) vaccine candidate NVX-CoV2373. In a large-scale phase 3 study in the U.K., Novavax’s leading vaccine candidate demonstrated a 96.4% efficacy against the original strain of COVID-19 and a still-impressive 86.3% efficacy against the prominent U.K. variant.
While these figures would seem to be more than sufficient to raise some eyebrows and get NVX-CoV2373 in front of regulators in the U.S., U.K., and Europe, there have been delays. The company pushed back plans to file for emergency-use authorization (EUA) in all three countries/regions till the third quarter, and likely won’t be at full production capacity till the fourth quarter. This means it could miss out on some near-term low-hanging fruit.
Then again, vaccinated the world isn’t going to happen overnight. Additionally, it’s looking as if booster shots may be needed. In other words, Novavax’s may have missed out on some sales opportunity, but the pie is large enough that it can benefit immensely from a successful COVID-19 vaccine EUA.