Buffett Defames Cryptocurrency but Blockchain Holds Promise

Warren Buffett, one of the most influential and sought-after value investors, criticized cryptocurrency and its trading.

Buffett, the owner of Berkshire Hathaway and its vice chairman, Charles Thomas Munger strongly criticized investments in bitcoins and other cryptocurrencies at the Berkshire Hathaway annual meeting 2018. He believes that these will soon meet their end in a miserable way.

Per Buffett, cryptocurrencies are non-productive assets. Hence, the cycle of investment might be pretty short, as it would require people interested to invest in such non-productive products. All this will lead to stagnation in the cryptocurrency industry in the near future.

Volatility of Cryptocurrency

The lack of support from global central banks has made the acceptance of cryptocurrencies difficult in real-world transactions. Additionally, a number of fraudulent initial coin offerings (ICOs) have made investors further apprehensive about the industry’s future.

Owing to all these, the cryptocurrency industry looks highly volatile. We have seen companies like Alphabet and Facebook banning cryptocurrency ads on their platforms.

China has also imposed a ban on bitcoin trade, while a number of other countries have tightened regulations. These in turn have negatively impacted cryptocurrencies like itcoin, Ethereum, Ripple and Litecoin.

As continued volatility and rising skepticism over the future of cryptocurrencies make investors nervous, we believe, to keep risks at bay, they can shift their focus toward the underlying technology that powers cryptocurrency -– blockchain.

Blockchain Witnessing Widescale Adoption

Blockchain’s process of secured storage and transmission of data through a decentralized database is the most attractive feature of the technology. Originally used for cryptocurrency transactions, the system is transparent and incorruptible and is meant to provide unaltered information.

The distributed ledger technology (DLT) makes tampering of data impossible as a number of people are involved and have access to it. This safe system lowers monetary losses with minimum chances of double counting and hacking.

Notably, the technology has already been adopted by the insurance, banking, food supply and automobile industries among others. It is also being adopted in the shipping and freight industries, aimed at more transparency and simplicity in tracking shipments across borders and trading zones.

With such impressive visibility, the companies offering solutions and products related to blockchain operations are looking to gain immensely going ahead. Adoption of the technology is projected to reach $7.6 billion by 2022 from $411.5 million in 2017 at a CAGR of 79.6%, per data from MarketsandMarkets.

Let’s take a look at some companies that are well-positioned to benefit from rapid adoption of blockchain technology.

International Business Machines IBM has a strong foothold in the blockchain industry with deals in multi-line insurance, bank guarantee, automobile industry, global food supplying industry among others.

The company has also unveiled a blockchain-based banking technology aimed at aiding financial institutions to simplify and quicken cross-border transactions. The company also partnered with the largest container shipping firm in the world, A.P. Moller-Maersk, intended to deliver a secure and efficient industry-wide trading platform using blockchain technology.

We believe that with a variety of blockchain deals and more in the pipeline, this company will gain from the increasing adoption of the technology. IBM has a Zacks Rank #3 (Hold) and a long-term earnings growth rate of 4.95%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

International Business Machines Corporation Price

International Business Machines Corporation Price | International Business Machines Corporation Quote

Microsoft MSFT has also been trying to expand its footprint in the blockchain market with deals involving a wide range of applications in different industries.

Last year, the company unveiled Coco framework for faster and secure blockchain-based transactions. The company also introduced its blockchain solution on its cloud platform Azure, which is finding large scale adoption, given the flexibility in usage. It has clients like 3M, Webjet, Monetary Authority of Singapore and The Association of Banks in Singapore.

With a Zacks Rank #3 and a long-term earnings growth rate of 11.96%, Microsoft is another company to make the most of the growth opportunity in the market.

Microsoft Corporation Price

Microsoft Corporation Price | Microsoft Corporation Quote

Accenture’s ACN blockchain initiatives are backed by its motto of “Blockchain needs to adapt to an imperfect world.” Considering regulatory changes and human errors among other issues, Accenture provides Editable Blockchain and was awarded with a patent for the same last year.

The company has also inked several blockchain based deals. Most recently, the company announced that it is developing a blockchain prototype along with DHL to track pharmaceuticals throughout the supply chain. This will be a huge step against tampering of drugs. Also, its blockchain technology, aimed at addressing global shipping issues, received approval in March.

Though a late entrant in the blockchain market, Accenture with a patent for Editable Blockchain is expected succeed in the long run. The company has a Zacks Rank #3 and a long-term earnings growth rate of 10%.

Accenture PLC Price

Accenture PLC Price | Accenture PLC Quote

Intel INTC is one of the chip makers looking to gain from the rising demand for blockchain technology even if cryptocurrency faces headwinds. For enhancement of security in blockchain transactions, Intel is offering Intel Software Guard Extensions and Intel Xeon Scalable processors, which are anticipated to experience increased demand.

This will eventually be beneficial for this Zacks Rank #3 stock’s financials. The stock has a long-term earnings growth rate of 8.42%.

Intel Corporation Price

Intel Corporation Price | Intel Corporation Quote

NVIDIA NVDA also carries a Zacks Rank #3 and has a long-term earnings growth rate of 10.25%. The company is a major supplier of GPUs related to blockchain operations and is probably the first choice in that respect.

It is expected that this chipmaker will enjoy the growth prospects of the blockchain market with or without the existence of cryptocurrencies, which will eventually boost its revenues. 

NVIDIA Corporation Price

NVIDIA Corporation Price | NVIDIA Corporation Quote

Advanced Micro Devices AMD is poised to gain as well. The company is witnessing increased adoption of Vega-based GPUs and Polaris products in the blockchain industry and is expected to witness a surge in demand for these products going ahead.

Advanced Micro has a Zacks Rank #3 and a long-term earnings growth rate of 7.75%.

Advanced Micro Devices, Inc. Price

Advanced Micro Devices, Inc. Price | Advanced Micro Devices, Inc. Quote

To Conclude

We believe that even if the seasoned investor Warren Buffett’s predictions and expectations regarding cryptocurrencies come true, the companies which are working with the underlying technology and its applications in various industries will not face headwinds. Hence, investments in the abovementioned stocks might provide good money making opportunities.

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