Want to do something risky, provocative, and fun? Invest in small-cap companies with big, bright futures. If you’re wrong in your investment thesis, your principal could plummet. But if you’re right, the sky’s the limit. Let’s look at two tiny companies that might be incredibly valuable down the road.
Silvergate Capital (NYSE: SI) is a small-cap bank at the epicenter of all the institutions trading various cryptocurrencies. And Ontrak (NASDAQ: OTRK) offers virtual coaching to people who have behavioral-health conditions and are looking for change. Here’s why these two small caps are great stocks to own in 2021.
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1. Silvergate Capital facilitates the crypto craze
Opinions on cryptocurrencies vary — to put it lightly. Warren Buffett calls these new currencies “rat poison squared,” while Twitter and Square CEO Jack Dorsey thinks bitcoin will eventually supplant the dollar, the yen, and the euro. I have no dog in this fight, but I do think a lot of money can be made in this modern-day gold rush. And I don’t mean by mining bitcoin. Instead, investors might want to invest in the bank that facilitates all the trading.
That’s what Silvergate Capital does. Silvergate owns and operates the Silvergate Exchange Network (SEN). The bank doesn’t hold any cryptocurrencies on its books — its assets are all cash. Institutions that want to trade cryptocurrencies deposit dollars at Silvergate, and the bank transfers dollars internally between its various accounts. Through its SEN network, all the crypto trading platforms can quickly and easily transfer dollars to their institutional clients, 24/7.
This is free money for Silvergate — the bank pays no interest on all these deposits. And Silvergate makes money in the traditional banking way, by collecting interest on all the cash deposited at the bank.
While bitcoin won’t replace the dollar anytime soon, it’s obviously an asset class now. It’s like gold in that sense — a vehicle for supply and demand. And that’s why many large institutions, companies, and banks are holding and trading bitcoin and other cryptocurrencies. In the process, they’re depositing more and more dollars at Silvergate.
This bank stock rose almost 315% over the past 12 months. Indeed, Silvergate is up about 50% since I wrote about it a little over two weeks ago. And yet it’s still tiny for a financial stock, with a $1.24 billion market cap.
While the current boom in Silvergate stock is probably due to the rising price of bitcoin, a strong network…
Read More:My 2 Top Small-Cap Stocks to Own In 2021