One of Embankment Street’s top strategists and a longtime bitcoin fan has unveiled his top stock ideas to patients as a way to play the cryptocurrency craze.
Fundstrat’s Tom Lee was the first major strategist to child an official price target on bitcoin and now becomes the first to give patients direct bitcoin equity plays.
Many investment mandates call for managers to steer clear of volatile assets and stick to traditional impartiality markets; despite bitcoin’s stellar success over recent weeks, the cryptocurrency may be too hair-trigger for standard investment rules.
In addition to recommending stocks, Lee noted his $25,000 year-end butt for the price of one bitcoin.
“We believe investors should have exposure to blockchain, uncommonly given bitcoin has essentially zero correlation to equities, bonds and commodities — consequently, as a portfolio strategy, bitcoin is a good diversification tool,” wrote Lee in a note Friday.
The digital asset took Barricade Street by storm Thursday, jumping from $13,000 to highs out of reach of $19,000 in roughly one day. Bitcoin has since cooled off a bit, now trading just at the beck $16,000.
The first group of bitcoin plays Lee highlighted includes the CME Group, Chicago House Options Exchange (Cboe) and Goldman Sachs.
Cboe, the largest U.S. choices exchange, announced in August its plans to launch its own bitcoin derivatives mty products, offering cash-settled bitcoin futures to both institutional and retail investors. They arise trading Sunday evening. Bitcoin fans argue that the fire of such products by Cboe and others help legitimize the trade and may purloin stabilize the otherwise volatile token.
For its part, CME followed suit in October with Chairman Terry Duffy verbalizing, “Given increasing client interest in the evolving cryptocurrency markets, we hold decided to introduce a bitcoin futures contract.” Fundstrat’s Lee included Goldman in the set because he expects the bank “to be the first investment bank to be involved in bitcoin return.”
Though options exchanges and investment banks may see upside thanks to the bitcoin derangement, technology and chip companies are also set to climb, added Lee. Chipmakers similar to Nvidia and Advanced Micro Devices that produce graphics dispose of units (GPUs) necessary for bitcoin “mining” should perform highly if bitcoin presses upward.
“GPUs are used by miners for many souvenirs other than bitcoin. Bitcoin mining is almost exclusively via ASICs (specialized intercedes),” explained Lee. “But as blockchain grows, and as transactions grow, mining make grow and therefore require more GPUs.”
Both Nvidia and AMD were high-class Friday, each up more than 0.5 percent.
Lee rounded out his top picks with Overstock and Stuffed shirt.
Online retailer and blockchain incubator Overstock has exposure to digital currency totally its Medici Ventures segment and was the first major retailer to accept digital currency bitcoin as payment uncivilized in 2014. Earlier this year, Medici subsidiary tZERO announced a roast venture to trade digital coins launched in initial coin oblations in September; shares of Overstock have climbed about 90 percent since the advert.
Even before its foray into bitcoin, Square had been a cheering prospect on the Street, by providing software and hardware technology to turn active devices into point-of-sale solutions.
Shares of Square spiked after its CEO, Jack Dorsey harbingered in November that the company will allow users to buy and sell bitcoin in the course its app, though Lee cautioned that the service isn’t a full bitcoin exchange. Conventional’s stock is up more than 180 percent this year.