For well over a century, few investment vehicles have helped make people richer than the stock market. The market may not go up every year or always outperform other asset classes, such as gold or bonds, but its average annual return runs circles around the average yearly return of other assets.
But over the past decade, this thesis of stock-market superiority has been called into question by the rise of cryptocurrencies. In particular, retail investors have flocked to joke-based digital currency Dogecoin (CRYPTO:DOGE), which gained as much as 27,000% in a six-month stretch between early November and early May.
Dogecoin is a dud because it lacks competitive advantages
In the eyes of Dogecoin optimists, their meme coin is the future world’s currency. They believe they’re getting in well before broad-based adoption occurs. But there’s one glaring problem with their thesis: The “people’s currency,” as Dogecoin came to be known, has absolutely no competitive advantages.
Dogecoin “hodlers” (holders of the token) regularly point to its lower relative transaction fees to the Big Two in crypto, Bitcoin and Ethereum. But that overlooks the other side of the equation. A number of other popular cryptocurrencies charge a fraction of what Dogecoin does per transaction (or perhaps nothing at all). In no particular order, these include: Nano, Ripple, IOTA, Bitcoin Cash, Bitcoin SV, Ethereum Classic, DigiByte, Qtum, Monero, Dash, Cardano, Stellar, and Litecoin; the list goes on, but we’d be here for a long time if I continued.
If Dogecoin’s transaction fees aren’t an advantage in the crypto space, then it must have an impressive validation and settlement time, right? Nope. Nano, Ripple, and Stellar, just to name a few, validate and settle transactions on their respective blockchains in a matter of seconds.
If you think Dogecoin’s advantage is in handling volume on its blockchain network, you’d also be mistaken. At its peak, Dogecoin’s blockchain is reportedly capable of 40 transactions per second. Meanwhile, payment processing kingpin Visa can process 24,000 transactions each second — or roughly the same number of transactions occurring on Dogecoin’s blockchain in an entire day. Within the crypto space, Stellar claims to be able to process 3,000 transactions per second. No matter how you slice the data, Dogecoin has no edge.
It doesn’t even have an advantage as an inflation hedge. Cryptocurrency mining of Dogecoin is increasing the token count by a little over 4% in 2021. It’s been more than a decade since the U.S. has regularly seen 4% or greater inflation.
Unlike Dogecoin, these stocks have real-world competitive advantages
The fact is that Dogecoin is nothing more than a hyped asset with virtually no real-world utility. The good news is that you can choose to put your money to work in stocks that do offer tangible competitive edges — and they’ll likely make you far more money than Dogecoin ever will. The following trio of companies should excel over the long run due to their plain-as-day competitive advantages.
Want to know one of the easiest ways to lock up a competitive edge? The answer is to be the only company allowed to operate in a particular space. Sirius XM (NASDAQ:SIRI) is effectively a legal monopoly, as the only satellite-radio operator. While it’s not devoid of competition, its role as the lone satellite provider gives it a number of advantages.
Arguably the biggest edge for Sirius XM is the company’s operating model. The company’s online and terrestrial radio competitors are predominantly reliant on advertising to generate revenue. Meanwhile, Sirius XM brings in most of its sales from subscriptions. This distinction is important, because inevitable periods of economic contractions or recessions often lead to advertising dollars…