Cryptocurrencies and EV stocks are two of the hottest “growth” assets out there today.
Bitcoin is up millions of percentage points since it was created in 2009, and EV stocks like Tesla (NASDAQ: TSLA) have also been delivering sky-high returns.
Based on historical results, crypto has handily outperformed EV stocks. There are many cryptocurrencies that have risen by millions of percentage points, while the best EV stocks have only risen by a few thousand. On the flipside, there are plenty of cryptocurrencies that have totally died and are now worth $0.
If you’re an investor who wants to gamble a little, you might find it hard to choose between crypto and EV stocks. You could always buy a bit of both. But if you must choose between the two asset classes, I’ll outline a case for each one to help you make an informed decision.
The case for cryptocurrencies
The case for cryptocurrencies rests on potential for outsized returns. When cryptocurrencies first launch, they’re typically worth next to nothing. If they take off, a rally to even $1 can take them up several million percentage points. Shiba Inu rose 14 million percent between its debut and November 4, 2021! No EV stock has ever delivered such an impressive return.
The downside with crypto is that it’s a pure gamble. Some cryptos, like Bitcoin, have real world uses cases, but the vast majority of them function like chips at a casino. Betting on them is just a roll of the dice. You can gamble if you want. But if you buy alt-coins, the word gamble describes your actions in a very literal sense.
The case for EV stocks
The case for EV stocks over crypto rests on the fact that they are businesses and therefore can be analyzed. You can make an informed investment decision in an EV stock; you can’t really do the same for most cryptocurrencies.
In my mind, an “informed” take on EV stocks is that they’re extremely overpriced and not worth it. But if you look at a stock like Magna International (TSX: MG)(NYSE: MGA), you may find some value.
Magna is a traditional car parts company that just recently jumped into making EV parts. Its revenue and earnings are down over the last three years, so it isn’t in a great place at the moment. However, it recently launched a joint venture with LG called LG/Magna E-Powertrain. This joint venture will produce motors and other electronic components for electric cars. The traditional automakers that Magna already sells parts to have expressed an interest in getting into EVs. Ford was all but ready to build an EV with Rivian, but backed out of the deal at the last minute. Magna has the potential to make a lot of money selling to companies like Ford through its Joint Venture with LG.
Does all of that make Magna International a buy? Hardly. I actually don’t like the stock, personally. But the point is that Magna is a business with operational developments and financial statements you can analyze. Before you invest in such a company, you can do a thorough analysis and make a truly informed decision. That’s not the case with most cryptocurrencies, which are basically poker chips.
