XRP, Bitcoin, and other cryptocurrencies are not for the faint of heart. Although they may deserve a spot in some portfolios as diversifiers, I’d argue that they’re not the most suitable option for prudent investors who seek to remove risk from their portfolios. Sure, XRP and Bitcoin are alternative assets that move like gold. That said, they’re tremendously volatile, and although many people have embraced crypto, I’m still not 100% convinced that another 50-80% meltdown isn’t in the cards.
Indeed, if speculative stocks like Zoom Video can shed a majority of their value over a short timespan, so too can XRP and Bitcoin. It’s not a popular opinion, but cryptocurrencies may not even be deserving of a small portion of one’s portfolio, given the risks and immense volatility they’ll introduce.
Forget XRP: There are better alternative assets out there
Although they can rally in the face of financial fiascos in parts of the world, investors will only be able to get back what someone else is willing to pay at the time of sale. Indeed, it’s hard to value Bitcoin, or any cryptocurrency for that matter. If a token is only worth as much as what the next person will pay, eventually, we could reach a point where no excited buyers are willing to pay a price above what you paid. And that’s the real risk. If interest dries up, the broader crypto markets could be dragged down, with cryptos like XRP amplifying the downward move versus the likes of the more established Bitcoin.
In this piece, we’ll have a look at two steady stocks that I believe are better portfolio diversifiers than XRP or Bitcoin. In times of geopolitical crisis, I view precious metals and commodities as the areas to look to if you seek to weather a volatility storm. First Majestic Silver (TSX:FR)(NYSE: AG) and Suncor Energy (TSX: SU)(NYSE: SU) are two intriguing names that could help your portfolio thrive in tough times rather than exacerbate any downside risks.
First Majestic Silver
First Majestic Silver is one of my favourite silver miners out there. The firm has benefited greatly from the recent rally in silver prices. As a premier miner with operations in the U.S. and Mexico, First Majestic is an intriguing precious metals option that may prove undervalued if the recent rally in precious metals continues into the year’s end.
With record revenues for 2021 in the books and a dividend hike, FR stock is one of few stocks that I’d be willing to buy on the way up. If you lack precious metals exposure, it’s tough to match the risk/reward in a name like First Majestic.
As 2022 continues to upset the stomachs of investors, I’d look for First Majestic to make a run for its highs at around $23, as silver prices look to make new highs of their own.
Suncor Energy
Suncor Energy is an integrated oil kingpin whose shares are up 40% over the past year. Despite the oil-boom-driven rally, a case could be made that shares are still cheap, even given the likelihood of a near-term pullback in WTI.
Indeed, OPEC could ramp up production, and a peaceful resolution to the Ukraine-Russia crisis could see sanctions be lifted, with Russian oil imports being pulled off the table. Such a scenario could pave the way for a vicious oil pullback well below the US$100-per-barrel mark. In such a bear case for oil, Suncor stock will take a hit. Still, I don’t think it will fall nearly as fast as its peers, given its modest 14.6 times earnings multiple.
For now, investors can collect the juicy 4.2%-yielding dividend, as they look to secure their portfolios against rising energy prices.
