We’re just a few short days out from the launch of our Blockchain Boom model on May 8th.
In the meantime, we thought we’d take a look at some of the companies within our “blockchain universe” to give you an idea of what the model might contain and why.
Keep in mind, the companies mentioned here may or may not be included in the model on release, as we’ll only be including the companies with the highest relative strength.
What’s so great about blockchain?
First of all, let’s quickly cover what blockchain is, and why we’re basing an entire model on it.
Basically, a blockchain is an electronic “ledger” that’s stored on multiple computers. In this way, it’s sort of like “cloud computing” because the data in the blockchain doesn’t just exist on one machine.
The technical details are complex, but the end result is this: blockchain technology offers better digital security, less room for error, lower costs, and faster speeds than any digital technology currently available.
In fact, blockchain tech is so revolutionary that no one really knows its true potential…yet.
It’s a bit like the internet back in ’96. Everyone knew that the “world wide web” was going to be a big deal, but it was impossible to imagine exactly what it was going to become.
It’s likely that, someday in the future, almost all financial transactions and record keeping will be done on some sort of blockchain, as nearly every industry stands to save a lot of money using this new technology.
That’s precisely why we’re launching this model now, before things really start to heat up.
Are blockchain and Bitcoin the same thing?
The simple answer to this question is no.
Bitcoin used the first blockchain, which is why they’re frequently mentioned together, but this is simply because the security blockchain tech offers is the best way to prevent fraud for a system of currency with no central bank.
Most blockchain platforms have no connection to bitcoin or any other cryptocurrency. However, almost all cryptocurrencies use blockchain, simply because it offers the best security.
This is sort of a “win-win” for blockchain companies. Their share prices tend to jump with bitcoin’s price spikes, but we haven’t been seeing many of them dip again when the bubble bursts. This is exactly the kind of data we looked at when selecting our model and building our universe.
Our Blockchain universe
In order to construct the universe from which we’ll be selecting the stocks and ETFs for our model, we looked at every mention of blockchain projects we could find.
Next, we had to separate out legitimate blockchain developers from companies that were just using the name for attention. You might remember last year when “Long Island Iced Tea Corp” changed its name to “Long Blockchain Corp”.
Long Blockchain didn’t actually have anything to do with blockchain whatsoever. After the announcement their prices soared…and then steadily fell. Nasdaq announced they would delist Long Blockchain in early April.
Conversely, our universe contains some very big companies, with some very exciting projects on deck.
Take Amazon (AMZN) for instance. They’re certainly a big player in our blockchain universe, as they’re currently backing blockchain projects across multiple sectors.
Amazon recently launched a series of blockchain “templates”, which allow small and medium sized companies to develop their own blockchain applications on Amazon’s proprietary network.
This significantly increases the chances of a groundbreaking blockchain app being developed for Amazon’s blockchain, and makes Amazon Web Services one of the top contenders in the blockchain market.
Our universe doesn’t just focus on blockchain developers. We’ve also tracked tech companies that provide the tools necessary to make blockchain possible.
Seagate Technology Holdings Inc. (STX), another member of our universe, is a data storage company that manufactures hard drives, servers, and data centers. All necessary components for blockchain developers. On top of this, they’ve expressed a strong desire to become “active participants” in the blockchain revolution.
Seagate even holds about $7.8 billion worth of Ripple. A cryptocurrency that uses blockchain to send money internationally without incurring high transfer fees.
This is a great example of how blockchain companies are somewhat “immune” to price dips in the cryptocurrency market…even when they hold billions of dollars worth of crypto.
Seagate invested in Ripple in 2015, and although Ripple lost 84% of its value between December and March, Seagate’s stock price continued to climb:
Again, these are companies that exist in our blockchain universe, but won’t necessarily be present in our model at launch. Only the stocks and ETFs with the highest relative strength will be included because ETFs and stocks with high relative strength tend to continue outperforming for a significant amount of time thereafter.
Remember, the way we manage money for our clients is we used rules-based models that can be backtested and stress-tested to see how they would have performed in various market conditions. The relative strength approach that we use is adaptive in nature.
It forces us to keep our rotating our clients’ money out of anything that’s not working and into things that are working. It keeps our client’s money in the exchange traded funds that are best addressing the current market condition, as the market evolves. The last thing we want to do is playing by rules that worked in yesterday’s market when the market has evolved into one with different behavior.
To find out our positions, make sure you attend our webinar on May 8th. If you want more info before then, don’t hesitate to make an appointment with us.
Get Our FREE Guide
How to Find the Best Advisor for You
Learn how to choose an advisor that has your best interests in mind. You'll also be subscribed to ADAPT, Avalon’s free newsletter with updates on our strongest performing investment models and market insights from a responsible money management perspective.