Bitcoin Prices Today Plunge 8% on Fears of Increased Cryptocurrency Regulation

The 3 Best Biotech Stocks to Buy Todaymoneymorning.com/wp-content/blogs.dir/1/files/2018/05/bitcoin_graph-75×50.jpg 75w, moneymorning.com/wp-content/blogs.dir/1/files/2018/05/bitcoin_graph.jpg 550w” sizes=”(max-width: 300px) 100vw, 300px” title=”The 3 Best Biotech Stocks to Buy Today” />Bitcoin prices today plunged to $7,500 per coin on Wednesday afternoon. The world’s largest cryptocurrency fell to its lowest levels in five weeks as fear of increased regulation ticked into trader sentiment.

Bitcoin prices have declined by more than 20% since hitting a near-term high on May 6. Nearly every single cryptocurrency in the top 100 by market capitalization was in the red Wednesday.

Of course, the recent downturn hasn’t stopped Bitcoin’s most vocal bulls from setting lofty targets for the year ahead. Fundstrat co-founder Tom Lee stuck with his price target of $25,000. In an appearance on CNBC Tuesday, Lee listed three factors that would push Bitcoin prices higher. Lee noted the cost of producing Bitcoin, historical trading patterns, and an increased interest from institutional investors.

Most People Don’t Know This About Bitcoin:A systems upgrade expected any day now could send Bitcoin to $100,000.Go hereto see why Bitcoin’s not dead… and how it could make you millions.

Here is a recap of the top five cryptocurrencies by market cap as of 3:30 p.m. EDT:

Cryptocurrency Market Cap Price Change (24h)
Bitcoin (BTC) $128,804,286,733 $7,554.31 -8.14%
Ethereum (ETH) $58,651,294,621 $588.75 -12.47%
Ripple (XRP) $23,450,571,575 $0.60 -10.41%
Bitcoin Cash (BCH) $17,411,789,382 $1,015.64 -13.28%
EOS $9,607,274,812 $10.98 -14.93%

Now here’s a closer look at today’sMoney Morningcryptocurrency insight, themost important cryptocurrency updates you need to know…

Money MorningInsight of the Day

Bitcoin pricesfell back to the $7,500 level over the last 24 hours, as markets continued a broader selloff in the cryptocurrency sector.

That’s creating a buying opportunity for savvy investors.

We show you one major reason why right here…

The Top Cryptocurrency Stories for Wednesday

Join the conversation. Click here to jump to comments…

How this global stock-market selloff shows that Trump still calls the tune

Bad Trump is back.

Investors who thought concerns about trade, particularly U.S.-China tensions, were fading into the background got a wake-up call after President Donald Trump expressed unhappiness with the state of negotiations Tuesday afternoon, while also casting doubt on whether a planned summit with North Korea leader Kim Jong Un will happen. Also, Trump is weighing trade measures that would cut European Union steel and aluminum exports to the U.S. by about 10%, a sign the blocs efforts to secure tariff exemptions arent satisfying the White House.

Wall Street isnt suffering too much Wednesday morning, but the remarks were seen contributing to a risk off reaction that sent Asian and European equities sharply lower while stoking demand for traditional haven assets, including the Japanese yen, the Swiss franc, U.S. Treasurys and even beleaguered gold.

Read: Heres why emerging market carnage is boosting the Japanese yen

Because both the U.S.-China trade spat and the North Korea issue are more sensitive to Asia, the fact that Asian markets took it on the chin underlines that trade worries were the catalyst for Wednesdays moves, said Adam Sarhan, founder of 50 Park Investments.

Add in a meltdown for the Turkish lira, which was subsequently arrested with an emergency rate hike by the countrys central bank, and the stage was set for a bout of global risk aversion that led a slightly overbought market in the U.S. to give back some gains after a nearly three-week rally, Sarhan said.

See: Emerging markets feel the pain as dollar, Treasury yields rise

Were seeing a shift in global sentiment back to a risk-off environment, meaning fear is picking up because a few of these pieces are becoming unwound, he said, in an interview. In other words, the rally over the last three weeks in stocks was largely predicated on the fact that the China trade war threat was easing.

The initial reaction in U.S. stocks after the remarks wasnt overly dramatic, with major indexes holding near unchanged. The air came out of the market ahead of the closing bell, with stocks slumping to end at session lows. The real turmoil came in Asian trading hours, with major Asian equity indexes selling off sharply, leaving Japans Nikkei 225 Index
NIK, -1.18%
down 1.2%, while the Shanghai
SHCOMP, -1.41%
dropped 1.4% and Hong Kongs Hang Seng
HSI, -1.82%
shed 1.8%.

U.S. stocks joined in, opening lower. Major indexes remain in negative territory, but off early lows, with the S&P 500
SPX, -0.29%
off 0.3%, while the Dow Jones Industrial Average
DJIA, -0.43%
shed 0.5%.

For investors, the action revives a focus on good Trump versus bad Trump. In 2017, the market trope goes, investors cheered good Trump, who didnt act on campaign rhetoric on trade, instead emphasizing tax cuts and deregulation. In 2018, the focus was back on bad Trump as the White House moved to impose sweeping tariffs on allies and antagonists alike while also moving to exit from the multilateral treaty designed to limit Irans nuclear ambitions. That was tempered, however, by a cooling of tensions with North Korea, including plans for a June summit.

Moreover, the incident underlines uncertainty, with Trumps dissatisfaction on the China trade front coming just two days after Treasury Secretary Steven Mnuchin calmed investors by declaring that Washington and Beijing had put a trade war on hold as both agreed to delay imposing threatened tariffs.

It was the stock market rally that followed Mnuchins comments that might have been the overreaction, said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA.

Reducing its trade surplus with the U.S. isnt consistent with Chinas long-term plans, he said, while Trump remains unlikely to back down on intellectual property issues that directly conflict with Chinas industrial policies, Ricchiuto said, in a note.

As such, we continue to focus on the adverse combination of rising rates, a firming dollar and rising energy prices, which we believe argue for a continued shallow recovery and an equity market that continues to experience a shrinking multiple, he said.

Sarhan said investors should keep watch on the 50-day moving averages as important near-term support levels for the major indexes. The S&P 500s 50-day average stood at 2,674.26 on Wednesday, according to FactSet. The average, which serves as a marker for short-term momentum and trend changes, had previously served as resistance before the upside breakout that began earlier this month.

So far, the stock markets retreat looks like a normal and healthy pullback, he said. If it intensifies, however, it will raise questions as to whether recent gains were merely a bounce from oversold levels.

Related Topics U.S. Stocks Markets NY Stock Exchange NASDAQ

Quote References NIK -270.60 -1.18% SHCOMP -45.39 -1.41% HSI -568.71 -1.82% SPX -7.85 -0.29% DJIA -107.54 -0.43% Show all references
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Top 5 Oil Stocks To Own For 2019

President and CEO of Tallgrass Energy Gp Lp (NYSE:TEGP) David G Jr Dehaemers bought 47,500 shares of TEGP on 05/07/2018 at an average price of $20.29 a share. The total cost of this purchase was $963,775.

Tallgrass Energy GP LP owns, operates, acquires and develops midstream energy assets in North America. The company provides crude oil transportation to customers in Wyoming, Colorado, and the surrounding regions through Pony Express. Tallgrass Energy GP LP has a market cap of $3.77 billion; its shares were traded at around $20.41 with and P/S ratio of 1.72. The dividend yield of Tallgrass Energy GP LP stocks is 7.61%.

CEO Recent Trades:

President and CEO, 10% Owner David G Jr Dehaemers bought 47,500 shares of TEGP stock on 05/07/2018 at the average price of $20.29. The price of the stock has increased by 0.59% since.

Directors and Officers Recent Trades:

Director Jeffrey A Ball bought 15,000 shares of TEGP stock on 05/07/2018 at the average price of $20.26. The price of the stock has increased by 0.74% since.

For the complete insider trading history of TEGP, click here

Top 5 Oil Stocks To Own For 2019: Marathon Oil Corporation(MRO)

Advisors’ Opinion:

  • [By Tyler Crowe]

    Back in 2011, Marathon Oil (NYSE:MRO) elected to spin off Marathon Petroleum. At the time, much of the reasoning for the split was that both entities would garner higher valuations than as an integrated company. Also, by separating them, both could best allocate capital to grow shareholder value.

  • [By Matthew DiLallo]

    Saudi Aramco’s valuation, however, isn’t the only one that would benefit from a pop in the price of crude. Many oil producers in the U.S. restructured their operations to run on $50 oil, so if the Saudi strategy is successful, these oil companies would produce a gusher of cash flow, which could fuel high-octane gains for investors. While that rise would likely lift the entire sector, Devon Energy (NYSE:DVN) and Marathon Oil (NYSE:MRO)could outperform in that scenario.

  • [By Matthew DiLallo]

    Marathon Oil (NYSE:MRO) CEO Lee Tillman feels the same way. He stated on the company’s first-quarter call that: “Our financial flexibility is at the top of our peer group and was further strengthened by receipt of proceeds from Libya and our final Canadian oil sands payment. This flexibility allows us to pursue multiple high-return uses of free cash, but we are taking a disciplined approach and we are not considering large-scale M&A.”

  • [By ]

    Presto, West Texas Intermediate crude rose 3% to $71.18, the highest since December 2014, boosting shares of oil companies including Occidental (OXY) , which gained 4.8%, Marathon (MRO) , up 3.8%, and Apache (APA) , which gained 2.5%. Spot gasoline also rose 2.7% to $2.17 a gallon, boding ill for the summer driving season in the U.S. and potentially eroding any gains middle-class Americans received from the Trump tax cuts.

  • [By Zacks]

    Oil production is surging in Canada but producers are far from happy as their profit margin is sinking and they are striving to stay competitive with their U.S. counterparts. While upstream companies like Marathon Oil Corporation (NYSE: MRO), Hess Corporation (NYSE: HES) and others are enjoying the shale boom and rebound in prices in the United States, their Canadian counterparts like Cenovus Energy Inc. (NYSE: CVE) and others are thinking of reducing production. The primary reason behind this is the shortage of pipelines in the country. In short, pipeline construction in Canada has failed to keep pace with rising domestic oil production – the heavier sour variety churned out of the oil sands –  resulting in infrastructural bottlenecks. This has also forced producers to give away their products at a discounted rate.

Top 5 Oil Stocks To Own For 2019: Halliburton Company(HAL)

Advisors’ Opinion:

  • [By Garrett Baldwin]

    Earnings season is now in full swing, with today’s key reports fromAlphabet Inc. (Nasdaq: GOOGL) and Halliburton Co.(NYSE: HAL). Thanks to tax cuts, expectations are high. Analysts expect profit growth to top 18%, which would be the biggest jump in seven years. But there are a few bearish trends that are still lurking in the market. And if you’re serious about making money, you need to know how to harness them and target individual stocks for life-changing gains.Money MorningQuantitative Specialist Chris Johnson explains.

  • [By Paul Ausick]

    Halliburton Co. (NYSE: HAL) reported first-quarter 2018 results before markets opened Monday. The oil and gas services company posted adjusted diluted earnings per share (EPS) of $0.41 on revenues of $5.74 billion. In the same period a year ago, the company reported EPS of $0.04 on revenues of $4.28 billion. First-quarter results also compare to consensus estimates for EPS of $0.41 per share and $5.75 billion in revenues.

  • [By ]

    KBR (NYSE: KBR)
    Though an under-the-radar name, KBR was the construction arm of oilfield services giant Halliburton (NYSE: HAL) before being spun off. With a consolidated market cap of $2.6 billion, KBR describes itself, per its website, as a “global provider of differentiated professional services and technologies within the Government Services and Hydrocarbon sectors.”

Top 5 Oil Stocks To Own For 2019: Transocean Inc.(RIG)

Advisors’ Opinion:

  • [By Lisa Levin]

    Check out these big penny stock gainers and losers

    Losers
    Aceto Corporation (NASDAQ: ACET) fell 41.9 percent to $4.30 in pre-market trading. ACETO board disclosed that it is taking proactive steps to address business and financial challenges. Canaccord Genuity downgraded Aceto from Buy to Sell.
    Helios and Matheson Analytics Inc. (NASDAQ: HMNY) fell 25.3 percent to $2.86 in pre-market trading after reporting an ATM offering of $150 million.
    Pier 1 Imports, Inc. (NYSE: PIR) fell 17.4 percent to $2.86 in pre-market trading after reporting a fourth quarter sales miss. Comps were down 7.5 percent in the quarter.
    Sleep Number Corporation (NASDAQ: SNBR) fell 12.4 percent to $32.00 in pre-market trading following a first quarter earnings miss.
    Paratek Pharmaceuticals, Inc. (NASDAQ: PRTK) fell 10.2 percent to $11.90 in pre-market trading on news of $125 million convertible debt offering.
    Merrimack Pharmaceuticals, Inc. (NASDAQ: MACK) shares fell 8 percent to $8.02 in pre-market trading after dropping 2.02 percent on Wednesday.
    Exponent, Inc. (NASDAQ: EXPO) shares fell 5.6 percent to $80 in pre-market trading.
    Lumentum Holdings Inc. (NASDAQ: LITE) shares fell 4.8 percent to $60.00 in pre-market trading after rising 1.78 percent on Wednesday.
    vTv Therapeutics Inc. (NASDAQ: VTVT) fell 4.6 percent to $2.10 in pre-market trading after surging 84.87 percent on Wednesday.
    Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) shares fell 4.5 percent to $40.07 in pre-market trading after the company reported Q1 results.
    Align Technology, Inc.. (NASDAQ: ALGN) fell 3.5 percent to $267.40 in pre-market trading after rising 1.61 percent on Wednesday.
    Transocean Ltd. (NYSE: RIG) shares fell 3.5 percent to $12 in pre-market trading after the company issued quarterly fleet status report.
    GoPro, Inc. (NASDAQ: GPRO) fell 3.2 percent to $4.90 in pre-market trading.
    Unilever PLC (NYSE: UL) fell 2.6 percent to $54.73 in pre-market

  • [By Max Byerly]

    ValuEngine upgraded shares of Transocean (NYSE:RIG) from a hold rating to a buy rating in a research note released on Wednesday morning.

    Several other research firms have also recently issued reports on RIG. Bank of America increased their price objective on Transocean from $12.00 to $13.00 and gave the stock a neutral rating in a research report on Wednesday, April 18th. Citigroup increased their price objective on Transocean from $15.00 to $16.00 and gave the stock a buy rating in a research report on Monday, April 30th. Susquehanna Bancshares set a $11.00 price objective on Transocean and gave the stock a hold rating in a research report on Friday, January 12th. Cowen set a $11.00 price objective on Transocean and gave the stock a hold rating in a research report on Thursday, January 11th. Finally, Piper Jaffray set a $11.00 price objective on Transocean and gave the stock a hold rating in a research report on Wednesday, January 10th. Eight investment analysts have rated the stock with a sell rating, ten have given a hold rating and fourteen have issued a buy rating to the stock. The company currently has an average rating of Hold and an average price target of $11.79.

  • [By The Ticker Tape]

    TD Ameritrade clients appeared to take some profits in multiple names during the period. Oil companies were popular sells with ConocoPhillips (NYSE: COP), BP  PLC (ADR) (NYSE: BP), National-Oilwell Varco Inc. (NYSE: NOV), and Transocean LTD (NYSE: RIG) all net sold. Oil prices traded near three-year highs on higher global demand and possible OPEC-led production cuts. COP and BP both traded at multi-year highs, while NOV and RIG reached 52-week highs, enticing clients to take profits in all four names. Alcoa Corp. (NYSE: AA) traded at levels not seen since before the financial crisis following proposed tariffs on steel and aluminum, and was net sold. For the third month in a row, Facebook, Inc. (NASDAQ: FB) was net sold after CEO Mark Zuckerberg testified before Congress regarding the misuse of user data and a beat on earnings.

  • [By Logan Wallace]

    American International Group Inc. grew its position in shares of Transocean LTD (NYSE:RIG) by 7.7% during the 1st quarter, HoldingsChannel.com reports. The institutional investor owned 872,019 shares of the offshore drilling services provider’s stock after buying an additional 62,611 shares during the quarter. American International Group Inc.’s holdings in Transocean were worth $8,633,000 as of its most recent filing with the Securities and Exchange Commission (SEC).

  • [By Jason Hall]

    So what’s an investor to do? Owning the companies best-positioned to profit is a great place to start. Consider two of Big Oil’s finest inRoyal Dutch Shell plc (ADR)(NYSE:RDS-A)(NYSE:RDS-B)andTotal SA (ADR)(NYSE:TOT), offshore drillerTransocean LTD(NYSE:RIG) and natural gas for transportation specialistClean Energy Fuels Corp(NASDAQ:CLNE).

Top 5 Oil Stocks To Own For 2019: Williams Partners L.P.(WPZ)

Advisors’ Opinion:

  • [By Lisa Levin]

    Analysts at Stifel Nicolaus downgraded Williams Partners L.P. (NYSE: WPZ) from Buy to Hold..

    Williams Partners shares fell 0.63 percent to close at $41.23 on Friday.

  • [By Dan Caplinger]

    The stock market stayed in a pretty narrow range on Thursday, climbing early in the session but then slowly drifting lower through the afternoon hours. In the absence of major news, investors largely looked forward to key events like trade negotiations among the world’s largest economies. Other financial markets saw mixed moves as well, with 10-year Treasury yields climbing above 3.1% while oil prices stayed comfortably above $70 per barrel. Despite the quiet day, some companies had good news that pushed their shares sharply higher. World Wrestling Entertainment (NYSE:WWE), Chesapeake Energy (NYSE:CHK), and Williams Partners (NYSE:WPZ) were among the best performers on the day. Below, we’ll look more closely at these stocks to tell you why they did so well.

  • [By Lisa Levin] Gainers
    Carver Bancorp, Inc. (NASDAQ: CARV) shares jumped 92.1 percent to $7.01.
    iPic Entertainment Inc. (NASDAQ: IPIC) gained 21.6 percent to $9.73.
    Baozun Inc. (NASDAQ: BZUN) shares jumped 18.7 percent to $53.49 after reporting Q1 results.
    World Wrestling Entertainment, Inc. (NYSE: WWE) shares jumped 15.9 percent to $50.50. The company's "Smackdown Live" may not be renewed at NBCUniversal network and the company's "Monday Night Raw" program could be worth three times its current value elsewhere, according to a report for The Hollywood Reporter.
    Spectrum Pharmaceuticals, Inc. (NASDAQ: SPPI) gained 14.7 percent to $ 20.46 after the company issued further details on Phase 3 ADVANCE study of ROLONTIS.
    Motus GI Holdings, Inc. (NASDAQ: MOTS) climbed 13.4 percent to $5.5009.
    Endocyte, Inc. (NASDAQ: ECYT) rose 13.3 percent to $ 14.23 after the company announced presentation of Phase 2 data from prostate cancer trial of 177Lu-PSMA-617 at the 2018 ASCO Annual Meeting.
    Diana Containerships Inc. (NASDAQ: DCIX) gained 12.9 percent to $1.7499 after the company announced the sale of Post-Panamax Container Vessel for $21 million.
    Essendant Inc. (NASDAQ: ESND) gained 12.7 percent to $12.43. Essendant confirmed receipt of unsolicited proposal from Staples of $11.50 per share in cash.
    Blink Charging Co (NASDAQ: BLNK) rose 11.8 percent to $8.04 after surging 31.68 percent on Wednesday.
    OptimumBank Holdings, Inc. (NASDAQ: OPHC) gained 11.5 percent to $5.15.
    Flotek Industries, Inc. (NYSE: FTK) shares climbed 10.7 percent to $3.74.
    Farmer Bros. Co. (NASDAQ: FARM) rose 7.9 percent to $25.95 after climbing 7.90 percent on Wednesday.
    Minerva Neurosciences Inc (NASDAQ: NERV) rose 6.5 percent to $6.93 after Journal of Clinical Psychiatry published positive results of cognitive performance from Phase 2B trial of roluperidone in schizophrenia patients.
    Williams Partners L.P. (NYSE: WPZ) rose 5.6 percent to $40
  • [By Lisa Levin]

    Analysts at Stifel Nicolaus downgraded Williams Partners L.P. (NYSE: WPZ) from Buy to Hold..

    Williams Partners shares fell 0.63 percent to close at $41.23 on Friday.

  • [By Lisa Levin] Gainers
    Loxo Oncology, Inc. (NASDAQ: LOXO) rose 17.1 percent to $163.30 in pre-market trading as the company disclosed that LOXO-292 Phase 1 trial abstract was selected for 'Best of ASCO'.
    CytomX Therapeutics, Inc. (NASDAQ: CTMX) rose 11.5 percent to $27.15 in pre-market trading after the company announced presentations at the 2018 ASCO Annual Meeting.
    Check-Cap Ltd. (NASDAQ: CHEK) rose 12.3 percent to $5.47 in pre-market trading after reporting narrower-than-expected Q1 loss.
    Flotek Industries, Inc. (NYSE: FTK) shares rose 7.1 percent to $3.62 in the pre-market trading session.
    Baozun Inc. (NASDAQ: BZUN) shares rose 5.8 percent to $47.65 in pre-market trading after reporting Q1 results.
    World Wrestling Entertainment, Inc. (NYSE: WWE) rose 5.5 percent to $46.00 in pre-market trading.
    Williams Partners L.P. (NYSE: WPZ) rose 5.3 percent to $40.50 in pre-market trading after The Williams Companies, Inc. (NYSE: WMB) announced agreement to acquire all public equity of Williams Partners in a $10.5 billion deal.
    Koss Corporation (NASDAQ: KOSS) shares rose 4.6 percent to $2.72 in pre-market trading after surging 12.55 percent on Wednesday.
    Enphase Energy, Inc. (NASDAQ: ENPH) rose 4.5 percent to $5.85 in pre-market trading after gaining 5.66 percent on Wednesday.
    Farmer Bros. Co. (NASDAQ: FARM) rose 4.1 percent to $27 in pre-market trading after climbing 7.90 percent on Wednesday.
    Kosmos Energy Ltd. (NYSE: KOS) rose 4 percent to $7.70 in pre-market trading.

     

  • [By Matthew DiLallo]

    Natural gas pipeline giant Williams Companies (NYSE:WMB) announced today that it agreed to acquire the rest of its master limited partnership (MLP) Williams Partners (NYSE:WPZ) that it didn’t already own in a $10.5 billion deal. Not to be outdone, Canadian energy infrastructure giant Enbridge (NYSE:ENB) made an offer to acquire its namesake MLP Enbridge Energy Partners (NYSE:EEP), along with the rest of its publicly traded entities, including Spectra Energy Partners (NYSE:SEP). These transactions have big implications not only for investors in these entities but for those who own other pipeline companies, too.

Top 5 Oil Stocks To Own For 2019: Apache Corporation(APA)

Advisors’ Opinion:

  • [By Jason Hall]

    Since oil prices peaked in 2014, both Total and Shell have managed to generate positive total returns for investors who held through the downturn, in large part because of their diverse operations. Neither has come close to outperforming theS&P 500, but it could have been far worse; one only has to look at some of the biggest independent oil producers, includingApache Corporation(NYSE:APA) (down 53%),Anadarko Petroleum Corporation(NYSE:APC) (down 33%), andContinental Resources, Inc.(NYSE:CLR) (down 12.3%) to appreciate the benefit of Total’s and Shell’s more diversified operations.

  • [By Paul Ausick]

    Apache Corp. (NYSE: APA) dropped about 7.3% Thursday to post a new 52-week low of $34.50. Shares closed at $37.20 on Wednesday and the stock’s 52-week high is $55.23. Volume was over 11 million, about three times the daily average of around 3.9 million. The company reported quarterly results this morning, but investors were not impressed.

  • [By ]

    Now, I haven’t dabbled in U.S. shale oil or in the permian basin since I extracted myself from Apache (APA) several months ago after an epic fight in the name of capital preservation. But The Wall Street Journal ran a piece last week explaining that due to already-mentioned distribution bottlenecks, Permian-basin oil prices had fallen below $60 a barrel despite the fact that WTI futures were trading above $70.

  • [By Chris Lange]

    Apache Corp. (NYSE: APA) fourth-quarter results are scheduled for Thursday. The consensus forecast is for $0.22 in EPS on $1.55 billion in revenue. Shares were trading at $38.11. The consensus price target is $50.43. The 52-week range is $35.70 to $56.51.

  • [By John Bromels]

    And despite the stock market’s long bull run, there are still some dividend stocks out there that are both cheap and high-quality. So let’s go bargain shopping and see if we can find some! Three in the bargain bin that look promising are Kinder Morgan(NYSE:KMI),ExxonMobil(NYSE:XOM), and Apache Corporation(NYSE:APA). Here’s why they might be right for your portfolio.

  • [By Max Byerly]

    Get a free copy of the Zacks research report on Apache (APA)

    For more information about research offerings from Zacks Investment Research, visit Zacks.com

What Gold’s History Teaches Us About Bitcoin As A Store Of Value

&l;p&g;The most compelling use case for Bitcoin today is as a store of value. But too often, people dismiss the idea because of Bitcoin&a;rsquo;s volatility.

&l;em&g;How can it be a store of value when its price moves 20% in a month?&l;/em&g;

It&a;rsquo;s a refrain we&a;rsquo;ve heard recently from &l;a href=&q;http://blogs.marketwatch.com/thetell/2014/01/23/j-p-morgans-jamie-dimon-says-bitcoin-is-a-terrible-store-of-value/&q; target=&q;_blank&q;&g;J.P. Morgan&l;/a&g;, &l;a href=&q;http://www.afr.com/markets/currencies/goldman-chief-lloyd-blankfein-says-bitcoin-not-yet-a-store-of-value-20171130-gzwenb&q; target=&q;_blank&q;&g;Goldman Sachs&l;/a&g;, and &l;a href=&q;http://www.etf.com/sections/etf-industry-perspective/vanguard-bitcoin-presents-quandary?nopaging=1&q; target=&q;_blank&q;&g;Vanguard&l;/a&g;, among others. Typically, these people compare Bitcoin to gold and decide it falls short.

&l;em&g;Gold is solid. Bitcoin is volatile. It&a;rsquo;ll never work.&l;/em&g;

These statements are ignorant of gold&a;rsquo;s history and devoid of imagination.

&l;strong&g;What the History of Gold Teaches Us&l;/strong&g;

The 1970s&a;nbsp;are a dividing line for gold. Before 1971, the U.S. dollar was hard-backed by gold, and gold&a;rsquo;s value was effectively vouchsafed by the full faith and credit of our government.

When Richard Nixon took the U.S. off of the gold standard in 1971, it set gold loose from its moorings. What followed was a period of huge volatility, as gold fought to establish itself as an independent store of wealth. In 1974, for instance, gold bullion prices rose 73%, before falling 24% in 1975. In 1981, gold lost 33% of its value, after being up 121% just two years prior.

&l;/p&g;&l;div class=&q;table-wrapper&q;&g;&l;table&g;&l;tbody&g;&l;tr&g;&l;td colspan=&q;4&q; width=&q;336&q;&g;&l;strong&g;Gold Prices Post Gold Standard&l;/strong&g;&l;/td&g;

&l;/tr&g;&l;tr&g;&l;td width=&q;66&q;&g;&l;strong&g;Year&l;/strong&g;&l;/td&g;

&l;td width=&q;90&q;&g;&l;strong&g;Return&l;/strong&g;&l;/td&g;

&l;td width=&q;90&q;&g;&l;strong&g;Year&l;/strong&g;&l;/td&g;

&l;td width=&q;90&q;&g;&l;strong&g;Return&l;/strong&g;&l;/td&g;

&l;/tr&g;&l;tr&g;&l;td width=&q;66&q;&g;1972&l;/td&g;

&l;td width=&q;90&q;&g;43.14%&l;/td&g;

&l;td width=&q;90&q;&g;1977&l;/td&g;

&l;td width=&q;90&q;&g;20.43%&l;/td&g;

&l;/tr&g;&l;tr&g;&l;td width=&q;66&q;&g;1973&l;/td&g;

&l;td width=&q;90&q;&g;66.79%&l;/td&g;

&l;td width=&q;90&q;&g;1978&l;/td&g;

&l;td width=&q;90&q;&g;29.17%&l;/td&g;

&l;/tr&g;&l;tr&g;&l;td width=&q;66&q;&g;1974&l;/td&g;

&l;td width=&q;90&q;&g;72.59%&l;/td&g;

&l;td width=&q;90&q;&g;1979&l;/td&g;

&l;td width=&q;90&q;&g;120.57%&l;/td&g;

&l;/tr&g;&l;tr&g;&l;td width=&q;66&q;&g;1975&l;/td&g;

&l;td width=&q;90&q;&g;-24.20%&l;/td&g;

&l;td width=&q;90&q;&g;1980&l;/td&g;

&l;td width=&q;90&q;&g;29.61%&l;/td&g;

&l;/tr&g;&l;tr&g;&l;td width=&q;66&q;&g;1976&l;/td&g;

&l;td width=&q;90&q;&g;-3.96%&l;/td&g;

&l;td width=&q;90&q;&g;1981&l;/td&g;

&l;td width=&q;90&q;&g;-32.76%&l;/td&g;

&l;/tr&g;&l;tr&g;&l;td colspan=&q;4&q; width=&q;336&q;&g;Source: Opengold.&l;/td&g;

&l;/tr&g;&l;/tbody&g;&l;/table&g;&l;/div&g;&l;em&g;You can almost hear the naysayers now: How can you call it a store of value when it loses one-third of its value in a single year?&l;!–nextpage–&g;&l;/em&g;

&l;strong&g;What a New Store of Value Looks Like&l;/strong&g;

This volatility is what you&a;rsquo;d expect from a new store of value. Insisting that a new store of value emerge fully formed in its long-term steady state is asking too much. In fact, you would expect two things from any store of value as it established itself:

&l;ol&g;&l;li&g;&l;strong&g;A Rapidly Appreciating Price At First, Slowing Over Time&l;/strong&g;: The price of a new store of value would likely start out very low, as few would believe in it. As it became established, prices would rise exponentially. Over time, this price appreciation would slow as it reached a steady state.&l;/li&g;

&l;li&g;&a;nbsp;&l;strong&g;High-But-Declining Volatility&l;/strong&g;: Similarly, early volatility would be extreme, as its long-term sustainability would be in question. But over time, that volatility would tail off as the asset became more established.&l;/li&g;

&l;/ol&g;

That&a;rsquo;s exactly what we saw in gold, and Bitcoin is following the same path. Bitcoin&a;rsquo;s price rose exponentially in its earliest days, and that growth is slowing over time. Volatility&a;mdash;while still high&a;mdash;has declined markedly, and will likely fall further as derivatives and market-making activity increase.

&l;img class=&q;size-large wp-image-30&q; src=&q;http://blogs-images.forbes.com/matthougan/files/2018/05/Screen-Shot-2018-05-22-at-3.17.24-PM-1200×622.jpg?width=960&q; alt=&q;&q; data-height=&q;622&q; data-width=&q;1200&q;&g; Bitcoin Volatility Is Declining Over Time

&l;strong&g; Why Store of Value Matters: The Valuation Case for Bitcoin&l;/strong&g;

The store-of-value argument is important because it answers the biggest question surrounding Bitcoin: What is it worth?

A store of value is worth what people will pay for it. While gold has some use as an industrial metal and in jewelry, it would not trade for $1,300 per ounce based on those uses alone. It&a;rsquo;s worth $1,300 per ounce because people are willing to pay $1300 per ounce for it as a store of wealth.

If you accept Bitcoin as an emerging store of value, you can look at the current price and argue it&a;rsquo;s cheap. The current market cap of Bitcoin&a;mdash;the value of all Bitcoin in existence&a;mdash;is $143 billion. The current market cap of gold is somewhere around $7.5 trillion. In other words, Bitcoin is storing around 2% of the wealth of gold.

Look out 10 years: As the digital world becomes an ever-larger part of our lives, and the millennial generation moves into its prime age range for saving, it&a;rsquo;s not hard to imagine a world where Bitcoin holds 1/10th the value of gold. That would imply a 500% price increase, from current levels of around $8,000 to about $40,000.

Could Bitcoin&a;rsquo;s value be equal to gold? That would suggest a shade under $400,000.

Could it be higher, because Bitcoin has more potential utility?

Don&a;rsquo;t listen to the folks who say Bitcoin will never be a store of value. It&a;rsquo;s actually right on track, following in the footsteps of every other significant store of value that&a;rsquo;s come into the world. &a;nbsp;There&a;rsquo;s no guarantee it will stay on that path, but if it does, the opportunities are significant.

Should Value Investors Take A Road Trip With RV Makers?

Dreaming of the open road and getting away from it all? How about piling your family into an RV and heading into the sunset? Or how about a nice quiet retirement hopping from one natural wonder to the next? Sounds amazing and I have dreamed of doing just this when I retire and I know I am not the only one. This got me thinking about the Recreational Vehicle (RV) market and what value investment opportunities there might be in RV manufacturing companies.

Idealistic dreams of the open road aside, there are considerations that are needed to ensure that an investment in the RV business makes sense to the value investor. I will be reviewing two of the largest RV manufacturers, Thor Industries, Inc. (NYSE:THO) and Winnebago Industries, Inc. (NYSE:WGO) to identify if these companies are solid value investments.

Investment Thesis

My goal of these articles is to identify quality companies at a fair price and purchase them with a margin of safety to ensure growth of my investment. I will be looking for the following in my analysis:

Do I know or have the ability to understand what the business does? What about the company keeps competitors at bay and ensure longevity? Does the company have quality management who are open, honest, and working in the best interest of the stakeholders? What is the value of the company and can I can buy the company at a price that gives a level of comfort? Criteria 1 Understanding the Business

Winnebago and Thor are both leading U.S. manufacturers of recreational vehicles (RV), including motorized and towable options. Thor started in 1980 and is ranked number one by market share with 48% of the market and $7.25 billion in revenues in 2017 and includes subsidiaries including Airstream, Thor Motor Coach, Jayco, Heartland, and Starcraft, amongst others. Winnebago has been in business since 1957 and is ranked 3rd in market share with 6% of the market and revenues of $1.55 billion in revenue and sells under the Winnebago and Grand Design names. Berkshire Hathaways (BRK-A, BRK-B) Forest River, Inc. is ranked 2nd in market share.

The Recreation Vehicle Industry Association (RVIA) states that over 9 million people own RVs and there were just shy of 505,000 RVs sold in 2017, which represents a 17% increase over 2016. Demographic changes including more of the population reaching retirement age as well as younger buyers interested in outdoor lifestyles have forecasters expecting the RV industry to grow well into the future.

Source: RVIA.org

The RV industry is considered a cyclical business, with sales fluctuating based on the economy. The growth of the U.S. economy and a reduction in unemployment rates since the Great Recession has helped bolster the RV industry. Forecast growth of the economy in the next few years is expected to remain strong and similar to the past years since the Great Recession of 2008-09. Forecasts show that GDP, unemployment, and inflation for the next three years will maintain a similar pattern as prior years as shown in the table below.

Year GDP Unemployment Inflation
2010 2.5% 9.3% 1.5%
2011 1.6% 8.5% 3.0%
2012 2.2% 7.8% 1.7%
2013 1.7% 6.7% 1.5%
2014 2.6% 5.6% 0.8%
2015 2.9% 5.0% 0.7%
2016 1.5% 4.7% 2.1%
2017 2.3% 4.1% 2.1%
2018 Forecast 2.7% 3.8% 1.9%
2019 Forecast 2.4% 3.6% 2.0%
2020 Forecast 2.0% 3.6% 2.1%

Source: thebalance.com

Historically, the RV industry follows the economic cycle, but a recent trend in younger buyers purchasing their first RV and the aging of the population, which has traditionally been the buyers of RVs, shows that there might be additional demand over the next few years and beyond, even if the economy cools down.

Criteria 2 – Competitive Advantage

For Thor, the size and breath of their subsidiaries is their main competitive advantage, with size and price range of purchase options to accommodate buyers on the entire price spectrum. The company has been actively acquiring additional brands including Jayco in 2016 and Livin Lite RV in 2013.

Winnebagos competitive advantage is the brand name itself. Winnebago is an American classic brand. When you think of RV, Winnebago comes to mind. Having been in business for over 60 years, the Winnebago name is known to a large number of potential buyers. A recent innovation for Winnebago is the first zero emissions all-electric RV option.

Criteria 3 Management

Management effectiveness can be measured using the Return on Equity (ROE) and Return of Invested Capital (NASDAQ:ROIC) listed in the tables below. Both companies have successfully increased both ratios over the years which shows that management has been good stewards of the investor’s funds and are using the funds effectively to grow the company. Additionally, both companies are growing without extensive long term debt. Thor has approximately $80 million outstanding and the company intends to reduce that to zero this summer. Winnebago is showing $272 million in long term debt.

Thor Industries, Inc

Thor Industries

2010

2011

2012

2013

2014

2015

2016

2017

5-Year Avg.

Return on Equity (ROE)

16.16

14.23

14.43

17.54

19.14

19.52

22.01

26.34

21.45

Return on Invested Capital (NASDAQ:ROIC)

15.68

13.89

14.18

17.33

19.03

19.44

16.86

22.72

19.92

Winnebago Industries, Inc

Winnebago Industries

2010

2011

2012

2013

2014

2015

2016

2017

5-Year Avg.

Return on Equity (ROE)

10.79

11.48

35.49

20.26

24.79

19.92

18.6

20.09

21.45

Return on Invested Capital (ROIC)

11.85

11.48

36.34

20.97

25.52

19.92

18.6

13.09

19.38

Thor Industries CEO has been with the company since 2001 and has been in the RV industry even longer in various positions. Additional senior management has also been with the company for 7 or more years.

Winnebago Industries Grand Design Brand’s CEO has been in the industry for 30 years and the Chairman of the Board has been with Winnebago since 2008.

Criteria 4 Value Calculation

As mentioned in my previous article, I will be using a margin of safety valuation model based on Discounted Cash Flow (NYSE:DCF). Below are the calculations used to determine both the Fair Value (Intrinsic Value) Today and the Margin of Safety price depending on the investors discounted price requirements.

Thor Industries, Inc.

Future 10-Year Price Calculation:

This calculation uses the current EPS, expected EPS growth rate, and P/E Ratio to determine what the intrinsic value of the company will be in 10 years.

Thor Industries

Figures

Process

2017 EPS

7.09

Source: morningstar.com

Expected EPS Growth Rate

11.90%

Source: nasdaq.com

Future 10-year EPS

16.75

Calculate what the EPS will be in 10 years using the current EPS grown for 10 years at the compounded Expected EPS Growth Rate

Price/Earnings (P/E) Ratio

18.77

The P/E Ratio used to calculate the Future 10-year price is the lower of 2x the Expected EPS Growth Rate or highest yearly P/E over the past 10 years.

Note: In this case, the 2x EPS growth rate is higher than the highest historical P/E (18.77) over the past 10 years, so I used the highest historical P/E.

Source: morningstar.com

Future 10-year Price

$409.65

Future 10-Year EPS x P/E

Fair Price Today:

This calculation will use the Future 10-Year Price and discount that amount to today’s price based on the investor’s Required Rate of Return. Each investor has a certain minimum expected rate of return for taking the risk with a certain company. These prices would be considered the current intrinsic value of the company. As a value investor we would want to consider buying at this price or lower.

Thor Industries, Inc.

Required Rate of Return (NYSE:RRR)

Fair Price Today

Calculation

15% minimum required rate of return

$101.26

Future 10-Year Price / (1.15) compounded for 10 years

12% minimum required rate of return

$131.90

Future 10-Year Price / (1.12) compounded for 10 years

10% minimum required rate of return

$157.94

Future 10-Year Price / (1.10) compounded for 10 years

Margin of Safety Calculation:

In order to ensure a margin of safety, a value investor should look for a purchase price below today’s fair price (intrinsic value). Some value investors call this the “on-sale” price. To find the price a value investor should look to buy this company is to identify their required rate of return and then identify the margin of safety they would need.

Example: For Investor A to invest in a company he/she requires a 12% return and wants to purchase a company at a margin of safety of 33%, then the price he/she should pay would be $88.37.

Margin of Safety

15% RRR

12% RRR

10% RRR

50% discount

$50.63

$65.95

$78.97

33% discount

$67.84

$88.37

$105.82

25% discount

$75.94

$98.92

$118.45

Winnebago Industries, Inc.

Future 10-Year Price Calculation:

This calculation uses the current EPS, expected EPS growth rate, and P/E Ratio to determine what the intrinsic value of the company will be in 10 years.

Winnebago Industries, Inc.

Figures

Process

Current EPS

2.67

Source: morningstar.com

Expected EPS Growth Rate

9.68%

Source: www.nasdaq.com

Future 10-year EPS

$6.72

Calculate what the EPS will be in 10 years using the current EPS grown for 10 years at the compounded Expected EPS Growth Rate.

Price/Earnings (P/E) Ratio

19.36

The P/E Ratio used to calculate the Future 10-year price is the lower of 2x the Expected EPS Growth Rate or highest yearly P/E over the past 10 years.

Note: In this case, the 2x EPS growth rate (19.36) is lower than the highest historical P/E over the past 10 years. so I used the 2x EPS growth rate.

Source: morningstar.com

Future 10-year Price

$130.22

Future 10-Year EPS x P/E

Fair Price Today:

This calculation will use the Future 10-Year Price and discount that amount to today’s price based on the investor’s Required Rate of Return. Each investor has a certain minimum expected rate of return for taking the risk with a certain company. These prices would be considered the current intrinsic value of the company. As a value investor we would want to consider buying at this price or lower.

Winnebago Industries, Inc.

Required Rate of Return (RRR)

Fair Price Today

Calculation

15% minimum required rate of return

$32.19

Future 10-Year Price / (1.15) compounded for 10 years

12% minimum required rate of return

$41.93

Future 10-Year Price / (1.12) compounded for 10 years

10% minimum required rate of return

$50.21

Future 10-Year Price / (1.10) compounded for 10 years

Margin of Safety Calculation:

In order to ensure a margin of safety, a value investor should look for a purchase price below today’s fair price (intrinsic value). Some value investors call this the “on-sale” price. To find the price a value investor should look to buy this company is to identify their required rate of return and then identify the margin of safety they would need.

Example: For Investor B to invest in a company he/she requires a 10% return and wants to purchase a company at a margin of safety of 50%, then the price he/she should pay would be $25.10.

Margin of Safety

15% RRR

12% RRR

10% RRR

50% discount

$16.09

$20.96

$25.10

33% discount

$21.57

$28.09

$33.64

25% discount

$24.14

$31.45

$37.66

Final Determination

As of the writing of this article, Thor Industries (THO) has a price of $97.40, and Winnebago Industries (WGO) is priced at $37.00.

Both companies are valued fairly today based on their intrinsic values, with Thor slightly better priced than Winnebago. While these are fair prices, value investors should look for an additional margin of safety before purchasing. Looking at the Margin of Safety Calculations above, both companies are at or approaching a buy range depending on the level of discount desired and required rate of return.

Each investor has to determine their level of margin of safety and requirements in regards to required rates of returns, but both Thor and Winnebago should be on value investor’s radar. They will both be placed on my Wishlist.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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