Stock picker Tom Lee has a long track record when it comes to making smart recommendations of stocks to buy. Recently, he entered into the crypto currency world and talked about Bitcoin.
For those reading this living under a rock, Bitcoin is hot right now, with prices surging over 1,000% in 2017. This post isn’t going to go into the minutiae about Bitcoin, as you can learn Bitcoin basics in other posts.
Today I will be looking at Bitcoin related stocks that Tom Lee thinks are a worthy investment.
5 Bitcoin Related Stocks To Make Money
#1. Nvidia (NASDAQ: NVDA)
Nvidia is a chipmaker that can greatly benefit from the Bitcoin craze. The reason for this is simple. A simple way to get Bitcoin is to mine them. But to do so you need a powerful CPU that can run complex processes to mine effectively.
Seeing as I recently wrote that I am bullish on Nvidia, it should come as no surprise that I agree with Mr. Lee on this pick. With the price of Nvidia coming back from a sell off, now could be a great entry point into this stock.
#2. Square (NYSE: SQ)
Square has disrupted the retail marketplace by making it easy for small businesses to accept credit card payments. With their innovative devices and software, anyone can turn their phone or tablet into a point of sale device.
In November, Square CEO announced that the company would allow users to buy and sell Bitcoin on their app.
I can see why Mr. Lee likes Square because of this announcement, however, this is a long stretch as one of the Bitcoin related stocks. I don’t see people signing up for Square to simply buy and sell Bitcoin. If anything, people will do so on the many Bitcoin exchanges out there.
Additionally, I doubt many of the small business owners that use Square devices are going to risk their business revenues buying and selling Bitcoin. I would stay away from this stock if you are looking to get exposure to Bitcoin.
#3. Chicago Board Options Exchange (NASDAQ: CBOE)
The Chicago Board Options Exchange is the largest U.S. options exchange and recently began trading Bitcoin futures to both retail and institutional investors. The company will make money on this by the fees and commissions they earn on trades.
Recommended Cryptocurrency Posts:
I can see where there will be a small spike in revenues due to the ability to trade Bitcoin futures. But I don’t see enough of an impact to move the needle. In other words, I don’t see a meaningful boost to the bottom line or the stock price.
For example, most retail investors are not going to trade Bitcoin futures. They are either going to buy the digital currency through an exchange or through any ETF that may come to market.
I can see institutional investors interested in futures however they too are mostly going to get exposure through other avenues as well.
#4. Advanced Micro Devices (NASDAQ: AMD)
AMD is just like Nvidia and can profit off the popularity of Bitcoin through making powerful processors to help people min for Bitcoin. While Mr. Lee likes AMD because of Bitcoin, I think there are some headwinds the company needs to overcome. I would recommend looking at Nvidia before Advanced Micro Devices.
#5. Overstock (NASDAQ: OSTK)
While Overstock is a traditional online retailer, it has been accepting Bitcoin as a form of payment since 2014. Earlier this year, Overstock and tZERO started a joint venture to trade digital coins.
While Mr. Lee likes Overstock, I think it is a bad investment if you are looking to take advantage of the Bitcoin craze. Primarily because not many people are using Bitcoin to pay for things. Most people are hoarding Bitcoin and enjoying the rise in value.
As far as their partnership to trade Bitcoin, again, I think it is a bad idea to invest in the stock simply for this reason. Bottom line is there are other Bitcoin related stocks that you can make money in more so than Overstock.
Overall, I like one of Mr. Lee’s picks for Bitcoin related stocks. While only time will tell if these investments prosper along with the value of Bitcoin, some of these picks will rise in value simply because they are best of breed and have a solid business plan. This especially rings true with Nvidia.
With that said, you can’t blindly follow the picks of Mr. Lee. As an example, he predicted the price of Bitcoin would hit $25,000 by year-end and barring something major happening, this call isn’t going to happen.
The bottom line is that Bitcoin remains volatile and isn’t a form of traditional money. Any investment in the crypto currency needs to be money you are willing to lose because there is a good chance you will.
This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.