2018 Investment Series Post 24

Everyone loves payday. Just like everyone else, once I get that sweet deposit in the bank it starts burning a hole in my pocket. Before much time I am ready to blow it all on a shopping spree. My store of choice is the stock market, and I’m shopping for the best deals on companies. Here is what I dropped my $1,000 on this Friday, November 23rd.

Overstock.com inc. (OSTK)

The Twenty-Fourth pick of the Let’s Be Millionaires investment series goes to Overstock.com inc.

Overstock.com is an e-commerce company at its roots. The website is similar to Amazon but focuses mainly around home furnishings and other house-related products.

More recently, however, things have gotten interesting for Overstock.com as they moved into the crypto space. Overstock owns tZero, a platform based on blockchain that intends to revolutionize the way that trading, and other financial matters are executed. Even better than the mission itself is that a private equity firm has already taken a large stake in the platform at a valuation of over $1 billion. What is especially interesting about this is that overstock, the platform owner is only valued at around 550 million currently. This discrepancy interests me. Hypothetically the owner of a $1 billion asset should be worth at least that much.

This will be my first investment in the crypto space and should add some nice diversification to the portfolio.

Check out overstock.com website here.

Check out tZero here.

About The Stock

OSTK stock has a long history but since I am mainly investing for the crypto play I will stay focused on the most recent time period. In a lot of ways this stock has been a proxy for the crypto market. It has had a high correlation with the market cap of crypto currencies as a whole (when crypto went up, so did OSTK and vice-versa.)

From mid 2014 to mid 2017 OSTK stock traded in a range between $14 and $24. After mid 2017 the stock began moving to the upside do to the company’s exposure to the crypto space. In July of 2017 the stock traded at $16 a share. Just 6 months later on January 5th the stock peaked at around $85 a share or over 400% higher. Since then those gains have been unwound as the crypto-currency market has tanked and the stock can be purchased for around $17 a share. Annoyingly enough, when I went to purchase the stock on Friday the 23rd the shares were up 10% to $19 a share, making my purchase a bit more expensive.

Of course, things aren’t the same as they were back in mid 2017. The tZero platform has raised hundreds of millions of dollars and OSTK owns that platform. I think the stock is being beaten up too much due to the fall of crypto-currency and should eventually be valued higher.

OSTK currently has negative earnings and therefor does not have a P/E ratio. The company has a market cap of around 550 million.

This stock could be categorized as a international, tech, small-cap growth stock.

The Speculation

My speculation here is that eventually OSTK will not correlate as strongly with the broader cryptocurrency market and should move closer to the valuation of its underlying assets, namely tZero. Right now that would imply significant upside for the stock.

I also like tZero and the mission of the platform. If tZero does end up successful then it really is hard to guess where the stock could end up. A few months ago when shares were trading around $40 a piece an analyst wrote an opinion piece on why shares could appreciate to $115 a share in the not-so-distant future. I won’t hold my breath on that one, but if that occurred it would be a heck of a return.

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