On Jan. 9, the storied but beleaguered photography firm Eastman Kodak Co. (NYSE: KODK) let slip word that it's integrating blockchain technology into its operations.
Kodak said it wants to use a blockchain distributed ledger to help photographers license their work - and get paid - when people use those images.
You know what happened next...
Kodak's shares soared higher by 119% that day - and then another 57% the next day.
Then the talking heads on CNBC and FOX Business - and in mainstream publications everywhere - tut-tutted both Kodak and the investors who bought into its scheme.
They've got a point. Chasing after desperate companies putting blockchain into their business or names is a bit foolish. After all, plenty of investors who hit the greed pedal following Kodak's blockchain announcement got creamed on profit-taking.
Here's the thing. Those mainstream analysts missed the larger meaning behind this story.
Investors are right now feeling a great need to invest in blockchain before they miss their opportunity. And they're chasing it everywhere they see it, even if it means making a play on a long-struggling company like Kodak.
Blockchain, of course, is the backend technology that makes cryptocurrencies like Bitcoin possible. And it's blockchain's promise that's behind Bitcoin and other digital coins' recent wild ride.
So I get it. I want to be invested in blockchain - and I think you folks should be, too. But plays like Kodak are extremely risky trades, not long-term profitable investments.
So today I want to tell you about a stock that is a great backend play on blockchain technology.
It's is a highly respected tech leader that offers stable returns - but that will crush the market over the next three years thanks to its moves into blockchain and other bleeding-edge technologies.
Let's take a look...
Stay Strong with Bitcoin
With Bitcoin prices falling recently to $10,000, a 50% drop from their all-time high of $20,089 on Dec. 17, it's no surprise that many investors are panicking.
Before you sell out of fear, consider this...
Bitcoin has been massively profitable over the long term. In fact, it has made peak gains of 5,000% since I first recommended it to Strategic Tech Investor members back in February 2016.
These kinds of dips have happened before - and they'll happen again. But the future of digital currencies is extremely bright.
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That said, when we spoke Dec. 19, I warned you to be careful about getting into Bitcoin as we head into 2018. No, I'm not pessimistic about cryptocurrencies in general or Bitcoin in particular. In fact, just the opposite is true - I firmly believe these e-currencies are the wave of the future and still face huge upside.
My concern is for individual investors like you. Bitcoin has hit the futures markets for the first time ever, and that means Wall Street traders, hedge funds, and other high rollers are sharpening their knives - setting Bitcoin up for massive volatility.
My call couldn't have been timelier. Practically as I hit "send" on that report, Bitcoin fell $1,070 in a day. Not only that, but it weakened over the next few days, falling from a high of roughly $20,000 to $10,000.
For you Bitcoin veterans out there, that kind of swing is pretty normal. You folks can handle it. But for new investors, that type of volatility is hard to swallow.
So while I suggest current Bitcoin owners hold onto it for the forks - right now, instead of buying the digital currency itself, here's where to look for blockchain profits...
A Trade - Not an Investment
Now then, don't get me wrong. I'm not saying that at some point it might not be worth taking a flier on Kodak or some other company that announces a blockhain initiative.
Founded in 1888 in Rochester, N.Y., Kodak says it will help launch an initial coin offering (ICO), with the token to be named KodakCoin. The firm said the new crypto coin will become the backbone of its new blockchain-based payment system.
Kodak was prompt to say that it's not issuing the ICO itself, which it says will have a value of $20 million to $100 million. The company also gets no proceeds from the sale of the KodakCoins, which will be used on the new KodakOne image-rights management platform.
Even though Kodak seems to be embracing blockchain for the long haul, now is not the time to wade into the stock as it heads back down again. Besides, I believe we'll see plenty more companies embracing blockchain technology.
In fact, Kodak was one of several to do so recent months.
- In early October, the company formerly known as Bioptix Inc. said it was pivoting from animal healthcare to blockchain technology and renamed itself Riot Blockchain Inc. (Nasdaq: RIOT).
- Then in mid-December, Long Island Iced Tea Corp. changed its name to Long Blockchain Corp. (Nasdaq: LBCC) as it, too, converts into a blockchain outfit.
Those micro caps thirsty for some blockchain juice are joining a growing list of Fortune 500 firms and big global banks that are also investing in blockchain. Those global giants are doing so because a blockchain is a highly secure, cryptographic system that functions as a global distributed ledger. This system not only undergirds Bitcoin and other currencies, but it bypasses banks and governments, operates transparently, and is virtually hack-proof.
That means, almost immediately, many of us will be settling contracts with blockchain. By doing so, we'll avoid bank fees, possible litigation, and a lot of other issues that economists like to refer as "friction." Plus, you can go online and watch these transactions occurring in near real time.
Gartner says blockchain created $4 billion in business value last year. The firm believes that figure will hit $21 billion by 2020 before rising to $176 billion in 2025 and a staggering $3.1 trillion by 2030.
Bear in mind that this is the market value for blockchain-based enterprise applications. It doesn't count the escalating market cap of cryptocurrencies themselves, of which there are now roughly 1,300 with a combined value of $759 billion.
To me, that's just an amazing set of statistics. This is a field that barely existed just nine years ago. But it proves a point I've been making since I got involved in crypto trading in early 2013 - the future belongs to blockchain.
And that's why I think tech investors would do well to look at this company's move into the field...
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Forget Wintel - Now It's Winchain
Microsoft Corp. (Nasdaq: MSFT) has made blockchain technology a key part of its Azure cloud computing platform. The system even comes with easy-to-deploy templates that allow users to plug into the most popular crypto ledgers.
Microsoft also says Azure's built-in blockchain is designed to help developers write enterprise-wide applications that can integrate into existing cloud services.
Designed to provide maximum flexibility, the Azure blockchain platform provides a highly secure ledger of all transactions for a literal permanent record. This "immutable" record means mistakes cannot be corrected with updates or through data deletions - they must be fixed later through a compensating transaction that also remains in the ledger.
To date, Microsoft hasn't said just how much it's earning from the blockchain portion of Azure. But that cloud product is a big winner.
In its most recent fiscal quarter, the firm said Azure sales grew 90%, a rate it has scored in several recent quarters. That makes Azure the fastest-growing part of Microsoft's business.
However, blockchain and Azure are just two of many reasons why Microsoft has become a true cutting-edge tech leader over the last three years...
AI, AR, Legal Cannabis... and More
Another part of Microsoft's cloud unit is another one of our big profit targets here - legal cannabis.
That market is now growing faster than anyone could have imagined a decade ago and will be worth $22.8 billion by the end of this decade. And while many firms hesitate to embrace products that used to be against the law, Microsoft is diving in.
In the summer of 2016, Microsoft invested in Kind Financial, a maker of software that helps state and local governments track the cannabis business.
The key to the legal cannabis industry's success will be found in its ability to adhere to local, state, and federal laws, and Microsoft's software can play a crucial role. Indeed, just about everyone I talk with in the California cannabis community praises Microsoft for this crucial piece of technology that will help legal marijuana companies grow by making sure buyers and sellers comply with rules and regulations.
All of which explains why the firm's Azure cloud platform could end up providing the technology basis for an industry that could grow to become a $50 billion powerhouse by 2020, according to Cowen & Co.
Of course, Microsoft is not a pure play on either cannabis or blockchain. And in this case, that's a good thing.
Microsoft gives us a lot of balance from its Office products, its moves into artificial intelligence and augmented reality, and the growth in its overall cloud computing unit.
No wonder the stock has become such a winner. In 2017, Microsoft gained 37.6%, a fraction short of double the S&P 500's 19% win over the same period. And for those of you who picked up Microsoft when I recommended it as a legal marijuana play in September 2016, you're sitting on 53.9% gains.
And it offers us a kicker - the dividend stands at 2%. But I believe that will rise later this year after President Donald Trump's tax cuts kick in and the company sees a huge improvement in its cash flow.
All that makes Microsoft a profitable investment in both mainstream business and bleeding-edge tech like blockchain and AI.
And it will make you a lot more money in the long run than the likes of Kodak or Long Blockchain.
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The post You Can Profit on Blockchain, Even During Bitcoin's Wild Ride - Here's How appeared first on Strategic Tech Investor.
About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.