In this article, we discuss the 10 Web 3.0 stocks to buy and hold for the long term. If you want to read about more Web 3.0 stocks, go directly to the 5 Web 3.0 Stocks to Buy and Hold for Long Term.
The internet has truly revolutionized the world. Over the past few decades, the production of low cost smartphones, the increased coverage of internet services, and the proliferation of social media applications have all combined to usher in an era of borderless societies. However, debates around privacy and inequality in this context have combined to push the new generation towards blockchain technology and Web 3.0. The latter is often defined as the next version of the internet with a focus on decentralization, openness, and greater user utility.
Web 3.0 is also reshaping the world of finance. Already, more than five of the largest companies in the United States are technology firms. All of them are in the process of altering their business models to integrate blockchain into their services. DeFi applications, which focus on decentralized payment mechanisms, are gaining popularity as well. This has led to concerns around the extinction of banks and brokerages. However, hacks and frauds around blockchain tech show how the system is not as perfect as developers would make it sound.
In this context, investors are eagerly exploring for stock options to play the Web 3.0 boom. Some of the top Web 3.0 stocks to buy and hold for the long term according to hedge funds include Apple Inc. (NASDAQ:AAPL), Sea Limited (NYSE:SE), and Advanced Micro Devices, Inc. (NASDAQ:AMD), among others discussed below. It is worth understanding the Web 3.0 concept in a little more detail.
What is Web 3.0?
Web 3.0 refers to the third generation of internet services. Although there is no set definition for Web 3.0, the concept can be contextualized in discussions around the first and second generation of internet services. The first generation of internet services was mostly static, with users opening up websites mostly to read or absorb content in video or picture form. The second generation of internet services brought a more interactive web experience to the user where the rise of social interactions was key to the overall internet landscape.
Web 3.0 is the next iteration of the internet where new technologies are reshaping how we interact with the electronic devices around us. For example, artificial intelligence, machine learnings, the Internet-of-Things, and blockchain are all related to the rise of a more connected, data-driven, and privacy-centered internet that is going to change the setup of websites and applications hosted on the internet and how people interact with them.
Source: pexels
Our Methodology
The companies that operate in the Web 3.0 sector and have been on the radar of market experts were selected for the list. Data from around 900 elite hedge funds tracked by Insider Monkey was used to identify the number of hedge funds that hold stakes in each firm.
Web 3.0 Stocks to Buy and Hold for Long Term
10. Lithium Americas Corp. (NYSE:LAC)
Number of Hedge Fund Holders: 19
Lithium Americas Corp. (NYSE:LAC) operates as a resource firm with prime interests in lithium deposits. It is one of the top lithium stocks on Wall Street. Among the hedge funds being tracked by Insider Monkey, Singapore-based investment firm Himension Capital is a leading shareholder in Lithium Americas Corp. (NYSE:LAC) with 2.3 million shares worth more than $68 million.
Lithium is an important raw material used in the manufacture of electronic technologies that are powering the blockchain and Web 3.0 revolution. Lithium Americas Corp. (NYSE:LAC), as one of the key players in the lithium business, could see business skyrocket as the demand for the metal increases as blockchain becomes more mainstream.
Just like Apple Inc. (NASDAQ:AAPL), Sea Limited (NYSE:SE), and Advanced Micro Devices, Inc. (NASDAQ:AMD), Lithium Americas Corp. (NYSE:LAC) is one of the stocks that elite investors are flocking to.
In its Q1 2021 investor letter, Massif Capital, an asset management firm, highlighted a few stocks and Lithium Americas Corp. (NYSE:LAC) was one of them. Here is what the fund said:
“Lithium Americas: The volatility noted above in Lithium Americas Corp. (NYSE:LAC) has resulted in solid returns via our options trades around our core equity position. At the current time, we are short calls on LAC, as we have done multiple times throughout the position’s life, expiring on May 21, 2021, at a $17.5 and $22.5 strike price. The volume of contracts sold at each strike corresponds to the size of the equity position we want should the calls expire in the money, and the underlying equity gets called away from us. The thought process behind this trade construction is that if we know the size of the position we want at a particular price point, there is no reason not to accumulate additional returns by pre-selling the stock we would have sold anyway.
High levels of volatility positively impact the price of options, increasing the premium we can earn from selling covered calls. To date, we have sold covered calls on Lithium Americas Corp. (NYSE:LAC) that have expired worthless four times, yielding a roughly 7% return on the equity position’s current value or 71bps for the portfolio overall. The outstanding covered calls appear to be trending towards a similar worthless expiration. If they do, the covered call trades on LAC will result in us owning the shares with committed capital of -$0.28 per share.
Although we believe in the fullness of time Lithium Americas Corp. (NYSE:LAC) warrants a $30+ valuation, the prices achieved in early January of this year were not justified by the underlying fundamentals. Some will argue we should have sold down our position. We had already established our option positions and believe LAC is an emerging major in the lithium mining industry. Thus, we decided to maintain the position unchanged. Although still relatively high, the current $15 per share valuation is not crazy compared to where we think the firm should be trading based on fundamentals, so we are no longer overly concerned with the position as is.
Lithium Americas Corp. (NYSE:LAC) management also took advantage of the volatility issuing stock on January 22 for $22 a share. The ~$400 million in proceeds will be used to develop Thacker Pass, the US-based clay lithium deposit, which will likely be the largest producing Lithium mine in America when turned on. In our opinion, the stock issuance could not have come at a better time. LAC management has advanced the project through various development stages (de-risking), but with the share issuance, they have significantly reduced the need to bring in an outside partner to develop the asset as the first phase of the project is expected to cost roughly $581 million. After-tax and at an 8% discount rate, the Thacker Pass project’s present value is approximately $2.6 billion (the firm’s current market capitalization is $1.5 billion). Although the share issuance was dilutive, increasing the total shares by 17%, we believe it will, in the long run, prove a forward-looking, value-additive decision by management.
The lithium market remains an area of interest and focus for us. This reflects our belief that the most exciting investment opportunities to capture secular trends in EV’s and batteries are found upstream in the mining industry. It is also a reflection that there is a greater diversity of lithium investment opportunities relative to other battery metals.”
9. Unity Software Inc. (NYSE:U)
Number of Hedge Fund Holders: 36
Unity Software Inc. (NYSE:U) owns and runs a real-time 3D content platform. The company is one of the leading innovators in the virtual reality domain. As the concept of the “metaverse” increases in popularity, evidenced by the popularity of NFTs and Web 3.0, Unity Software Inc. (NYSE:U), as one of the leading players in the sector, is well positioned to gain from the trends.
Unity Software Inc. (NYSE:U) is a top software stock in the finance world. At the end of the fourth quarter of 2021, 36 hedge funds in the database of Insider Monkey held stakes worth $7.4 billion in Unity Software Inc. (NYSE:U), the same as in the preceding quarter worth $7.9 billion.
8. TE Connectivity Ltd. (NYSE:TEL)
Number of Hedge Fund Holders: 41
TE Connectivity Ltd. (NYSE:TEL) makes and sells connectivity and sensor solutions. Elite hedge funds hold large stakes in the company. Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Harris Associates is a leading shareholder in TE Connectivity Ltd. (NYSE: TEL) with 8.8 million shares worth more than $1.4 billion.
The Internet-of-Things will be a big part of the Web 3.0 success and TE Connectivity Ltd. (NYSE:TEL), as one of the top firms in this domain, could witness a windfall of investment as business interest in sensors and connectivity increases.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and TE Connectivity Ltd. (NYSE:TEL) was one of them. Here is what the fund said:
“The portfolio’s quality bias and valuation discipline have generated compelling returns over time with typically strong relative results in more challenging environments as it did through the first three quarters of 2020. However, that same quality bias tends to create a more challenging relative performance environment for the Strategy during periods of sharp economic acceleration, which tend to benefit stocks that are more commodity linked or of lower quality. This has been the case during the vaccine- and stimulus-driven rally experienced late last year and during the most recent quarter. Sectors that lagged in the quarter included information technology (IT), where TE Connectivity Ltd. (NYSE:TEL) performed well but trailed the sector in the first quarter after a strong 2020.”
7. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 44
International Business Machines Corporation (NYSE:IBM) provides integrated solutions and services. The company has slowly transformed from a hardware play into a cloud and artificial intelligence business in recent years. The pivot will help the company in the Web 3.0 era as the market shifts towards machine learning and remote work. IBM is one of the biggest companies working on Web 3.0 projects, in addition to Apple Inc. (NASDAQ:AAPL), Sea Limited (NYSE:SE), and Advanced Micro Devices, Inc. (NASDAQ:AMD).
International Business Machines Corporation (NYSE:IBM) is one of the favorite tech stocks in the hedge fund universe. Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in International Business Machines Corporation (NYSE:IBM) with 3.2 million shares worth more than $440 million.
In its Q4 2021 investor letter, St. James Investment Company, an asset management firm, highlighted a few stocks and International Business Machines Corporation (NYSE:IBM) was one of them. Here is what the fund said:
“International Business Machines Corporation (NYSE:IBM) was not the first company to build computers. The distinction belongs to Sperry-Rand’s subsidiary UNIVAC, which introduced the first commercially successful computers in the early 1950s. In this era, International Business Machines Corporation (NYSE:IBM) did possess the largest research and development department of the business machines industry and quickly caught up, introducing cost-competitive computers a few years after UNIVAC. By the late 1950s, IBM held the dominant market share in computers. IBM also touted a vastly superior sales organization, which used a sales tactic called “paper machines” (the equivalent of today’s “vaporware”). If a competitor’s product was selling well in a market segment that IBM had yet to penetrate, the company would announce a competing product and start taking orders for the “paper machine” long before it was available.
One cannot overstate how powerful International Business Machines Corporation (NYSE:IBM) was in the computer industry in the 1950s and 1960s. Every competitor rightly worried that if their product worked too well for too long, it was only a matter of time before an army of International Business Machines Corporation (NYSE:IBM) salesforce representatives mobilized. In their easily recognizable uniforms of starched white shirts, red ties and blue suits, IBM marketers marched on their customers and offered a more expensive, but much more defensible, choice. “Nobody gets fired for buying IBM” was a common phrase. Even competitors acknowledged that the company excelled at sales. As a UNIVAC executive once complained, ‘It doesn’t do much good to build a better mousetrap if the other guy selling mousetraps has five times as many salesmen.’” (Click here to see the full text)
6. Coinbase Global, Inc. (NASDAQ:COIN)
Number of Hedge Fund Holders: 57
Coinbase Global, Inc. (NASDAQ:COIN) provides financial infrastructure and technology for the crypto economy. Hedge funds have been piling into the stock. At the end of the fourth quarter of 2021, 57 hedge funds in the database of Insider Monkey held stakes worth $3.4 billion in Coinbase Global, Inc. (NASDAQ:COIN), up from 50 the preceding quarter worth $2.9 billion.
Cryptocurrencies are an integral part of Web 3.0 and Coinbase Global, Inc. (NASDAQ:COIN) is one of the top stocks in the blockchain sector. As the new tech becomes more mainstream, Coinbase will gain in popularity as well.
Along with Apple Inc. (NASDAQ:AAPL), Sea Limited (NYSE:SE), and Advanced Micro Devices, Inc. (NASDAQ:AMD), Coinbase Global, Inc. (NASDAQ:COIN) is one of the growth stocks on the radar of institutional investors.
In its Q3 2021 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Coinbase Global, Inc. (NASDAQ:COIN) was one of them. Here is what the fund said:
“Coinbase Global, Inc. (NASDAQ:COIN): We established a new position in Coinbase, the dominant US crypto exchange and brokerage, this quarter. Given the misperceptions and early-stage nature of the industry, I thought it would be helpful for our partners’ understanding to share a report outlining our thesis, which we published on October 31st.
At a high level, we believe the crypto economy is in the middle of “crossing the chasm” into mainstream adoption & use cases, which will result in millions of mainstream users needing to transact in crypto in some form.
Coinbase Global, Inc. (NASDAQ:COIN) is well positioned in the Western, regulated markets to capture this influx – considering their dominant market share / mindshare, their focus on the casual user and thus superior user experience compared to alternatives, and their position as a “toll-booth” for this industry. Longer-term, we also believe Coinbase Global, Inc. (NASDAQ:COIN) has “super-app” ambitions, and will be the primary gateway for both the general population and institutions to interact with the crypto economy…” (Click here to see the full text)
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Disclosure. None. 10 Web 3.0 Stocks to Buy and Hold for Long Term is originally published on Insider Monkey.
