1) MicroStrategy Incorporated (NASDAQ:MSTR)
Market Cap as of 27th January: $68.2 billion
Return Over Past 6 Months: ~100.4%
Average Upside Potential: ~62.9%
Number of Hedge Fund Holders: 25
MicroStrategy Incorporated (NASDAQ:MSTR) offers AI-powered enterprise analytics software and services. Its unique approach to Bitcoin investment resulted in a distinct market position. Notably, increased institutional adoption of Bitcoin is expected to significantly benefit MicroStrategy Incorporated (NASDAQ:MSTR) in several ways. With more and more institutional investors entering the cryptocurrency market, demand for Bitcoin is projected to increase, resulting in price appreciation. Given the company’s Bitcoin holdings, any appreciation in Bitcoin’s value will directly increase the company’s asset value.
Also, institutional adoption can result in the development of more sophisticated financial products and services associated with Bitcoin, which is expected to offer MicroStrategy Incorporated (NASDAQ:MSTR) some additional ways to leverage its holdings or generate income. The company’s focus remains on increasing the value generated to its shareholders by leveraging the digital transformation of capital. MicroStrategy Incorporated (NASDAQ:MSTR) announced a strategic goal of raising $42 billion of capital over the upcoming 3 years, comprised of $21 billion of equity and $21 billion of fixed income securities, which it refers to as its “21/21 Plan.” Its proven track record of using intelligent leverage continues to serve as a base to execute its strategic 3-year 21/21 Plan.
Greenlight Capital, an investment management firm, released its Q4 2024 investor letter. Here is what the firm said:
“There is an open debate as to whether Bitcoin will at some point enter the mainstream as an official currency. In fact, there is a bill before Congress for the U.S. to establish a “Strategic Bitcoin Reserve” and buy one million Bitcoins over five years. The bill’s purpose appears to be the use of public funds to ramp up the price of Bitcoin, thereby enhancing the wealth of existing Bitcoin holders. This seems a dubious use of taxpayer funds, but the new administration has a lot of Bitcoin-owning supporters, so it might happen. More likely, cooler heads will decide that the government should not borrow another trillion dollars in the bond market to speculate in Bitcoin and that there is, in fact, nothing strategic about doing so.
One of the biggest owners of Bitcoin is MicroStrategy Incorporated (NASDAQ:MSTR). While MSTR owns a small software business, its principal pursuit is buying Bitcoin. In practice, MSTR is an investment company that buys and holds Bitcoin.2 MSTR trades at a large premium to the value of the underlying Bitcoin it holds. The idea is to raise money from new investors at a premium and use the proceeds to buy more Bitcoin. Since the Bitcoin that MSTR buys costs less than the Bitcoin-implied value of MSTR’s stock, the new investment is dilutive to new investors but accretive to existing investors. MSTR’s promoters have labeled the return to existing investors created by this scheme the “Bitcoin yield”. As Bitcoin itself yields nothing, the Bitcoin yield is simply a measure of the Ponzi finance’s effectiveness. Lately, it has been pretty effective.”
While we acknowledge the potential of MSTR as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than MSTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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