Bitcoin is on fire, but are you cashing in?
You should be, according to Fundstrat analysts in a Friday. Dec. 8, note. Led by managing partner Thomas Lee, the analysts suggest 12 stocks to own to best capitalize on the bitcoin boom.
"We believe investors should have exposure to blockchain, particularly given bitcoin has essentially zero correlation to equities, bonds and commodities - hence, as a portfolio strategy, bitcoin is a good diversification tool," Fundstrat wrote.
But equities managers might struggle to leverage bitcoin-related names given their mandates or practical issues. That's why Fundstrat offered a group of 12 stocks that best leverage bitcoin and blockchain, either tethered to the price gains of bitcoin and tokens, the transaction activity of either wallets or exchanges, and the mining of digital currency based on proof of work or proof of stake.
An equal weighted basket of the following stocks is up 136% year-to-date, Fundstrat said. While it trails bitcoin's otherworldly price appreciation, it tops the S&P 500 Index's 2017 gains, which are about 17%.
"What could go wrong," Fundstrat wrote. "Bitcoin and tokens are better ways to leverage blockchain. But these equity plays allow equity portfolios to have exposure."
Most leveraged equities:
- Bitcoin Investment Trust (GBTC) , MGT Capital Investments Inc. (MGTI) , HIVE Blockchain Tehcnologies Ltd. (PRELF) , U.S. Global Investors Inc. (GROW) and DigitalX Ltd. (DGGXF)
- "Many investors know the ETN GBTC which is issued by Grayscale Investments and is a direct play on bitcoin and leveraged to its price appreciation. GBTC can be bought "new issue" from Grayscale. MGTI is a miner owned by McAfee and is mining bitcoin profitably in Washington, leasing farmer utility rights of ways to get power at wholesale cost. With 5,000 rigs, MGTI will be a major miner. HIVE/ GROW mines in Iceland where electricity costs are low. DCC provides ICO advisory and blockchain consulting services."
- CME Group Inc. (CME) , Cboe Global Markets Inc. (CBOE) and Goldman Sachs Group Inc. (GS)
- "The cash-settled bitcoin futures/derivatives should be a very profitable contract, given the OTC nature of bitcoin itself (less liquid means more profit for derives providers). And given CME/CBOE are only major providers offering this contract, could be meaningful boosts to profit. We put in Goldman Sachs, as we expect GS to be the first investment bank to be involved in bitcoin trading."
- Nvidia Corp. (NVDA) and Advanced Micro Devices Inc. (AMD)
- "GPUs are used by miners for many tokens other than bitcoin. Bitcoin mining is almost exclusively via ASICs (specialized chips). But as blockchain grows, and as transactions grow, mining will grow and therefore require more GPUs."
- Overstock.com Inc. (OSTK) and Square Inc. (SQ)
- "Overstock has exposure via its Medici Ventures (blockchain biz) and because OSTK accepts bitcoin payments (and has been retaining a portion). Square announced users can buy/sell BTC on its platform. Currently, bitcoin exchanges are highly profitable but at the moment, Square is not a full BTC exchange."
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