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A big reason MicroStrategy (MSTR -3.03%) was such a hot stock in 2024 is its bullish position on Bitcoin. The company is such a big believer in crypto that it’s planning to raise $42 billion in capital during the next three years for the purpose of adding to its tally.
Other corporations also own Bitcoin, but what is surprising is how much more MicroStrategy owns than other public corporations. And this competitive strategy can also tell you a lot about whether technology inventory is a smart fit for your portfolio.
According to Bitcoin Treasurys, MicroStrategy’s Bitcoin holdings as of December 31 amounted to 446,400 coins. What is unexpected is that no other public company comes close to MicroStrategy in terms of Bitcoin ownership. Marathon Digital is a crypto miner and has the second largest total with 40,435 bitcoins. The largest non-crypto index mining company is electric vehicle manufacturer Tesla, which owns 9,720 bitcoins. CEO Elon Musk has been no stranger to cryptocurrencies in the past, posting messages on social media related to various virtual currencies.
However, many corporations simply do not feel comfortable having so many cryptocurrencies on their books due to the volatility it can entail. While the strategy has performed incredibly well for MicroStrategy in 2024 (its percentage value has increased by around 370% over the year). It can be incredibly complicated to expect Bitcoin’s performance as it largely depends on government regulations, retail investor sentiment, interest rates, and other factors.
MicroStrategy clearly isn’t interested in just holding Bitcoins as a way to diversify its holdings and have exposure to crypto. The company’s co-founder Michael Saylor is one of the biggest Bitcoin bulls you can find, and he doesn’t see a reason to stop adding to the stockpile. “We’ll just keep buying the top forever, every day is a good day to buy Bitcoin,” Saylor says.
At this point, MicroStrategy has necessarily become a Bitcoin holding company. Although it has its software and business intelligence business, the growing popularity and rising price of cryptocurrencies is what has helped this tech inventory accumulate such gains over the past year.
From a basic perspective, the company’s enterprise software business is disappointing. This generates some profit and cash is decreasing. The main reason to invest in stocks is if you are confident in the value of Bitcoin.
If you like Bitcoin and are sure it will continue to rise, MicroStrategy is possibly a suitable investment for your portfolio. But it would probably be best for all other investors to avoid the stock due to the volatility inherent in holding such a stash of Bitcoin.
Cryptocurrencies have seen a volatile progression over the years, and giant price corrections are not uncommon. And without solid building blocks to depend on, stocks will live or die based on Bitcoin’s performance. Investing in stocks involves taking on a high level of risk, which could make it an unsustainable option for many investors.
MicroStrategy’s market cap is about $75 billion even though the company generates less than $500 million in annual revenue. There simply isn’t a valuation metric that can justify its price because it has gotten so detached from its fundamentals. This is a speculative option that is only going to be suitable for investors with a high risk tolerance.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Tesla. The Motley Fool has a disclosure policy.
Market insights driven through Xignite and Polygon. io.