Bitcoin is wildly unpredictable. Its value can hit all-time highs one month and then slump the next, with seemingly no reason or logic. In the past month, the Bitcoin price is down by 20%. For that reason, I’ve always seen Bitcoin as a gamble. I struggle to understand where its intrinsic value lies.
Some people expect that cryptocurrencies will replace physical money in the future. That may be so. But how can we be sure that Bitcoin will prevail, when there are so many alternative cryptocurrencies already out there?
In any case, I think holding the following stocks in your ISA will carry less risk, without worrying if the global economy will in the distant future ditch physical money.
Unlike Bitcoin, AstraZeneca (LSE: AZN) seems to be the image of reliability. Over the past year, its share price is up 25%. Going back five years, the price has surged by 66%. The pharma company’s projective dividend yield is just shy of 3%. As you might expect, with numbers like these, its trading at quite a high price-to-earnings ratio of 28.
Investors have reasons to be cheerful, after AstraZeneca lifted its full year sales guidance after a strong Q3. Total revenue had increased by 22%, to $6.4bn. New drugs – which are obviously of particular importance to pharmaceutical companies – seem to be performing well, particularly in emerging markets.
At its current valuation, Astra’s share price may have some volatility in the future. But for a buy-and-hold investor, I would hope sales momentum carries the price even further.
Glencore (LSE: GLEN) tells another story. Its share price has slumped by 27% during the past year, and 25% over the previous five years. That being said, its price-to-earnings ratio is trading at just 10, and its prospective dividend yield is above 6%, which puts the stock firmly in the value buy category.
What’s the story behind the global mining company’s share price slump?
My fellow Fool, Alan Oscroft, notes that the commodities markets are tied to economic cycles. The US-China trade war has affected prices, as China is generally a substantial buyer of commodities.
Ordinarily, I am anxious about mining and commodity-based investments. However, with a market cap of £30bn, I have comfort that Glencore is established and has a proven track record. The dividend also eases the fear, for me.
Although commodity pricing – and in particular, the price of cobalt – has fluctuated lately, I wonder if the market is over-reacting to the trade war. Fundamentally, I think Glencore is a solid business and has taken steps to cut its costs. The company believes that commodity prices will eventually move in its favour. If and when this happens, I would expect the Glencore price to climb.
Buying shares in Glencore is risky. But with a chunky dividend, I’d argue that it’s a better option than Bitcoin for most investors with a long-term horizon.
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T Sligo has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019