The EV company Tesla has invested in bitcoin
Goldman Sachs maintain a basket of cryptocurrency and blockchain exposed large-cap stocks.
The basket has crushed the S&P 500 by 34 percentage points on average with returns of 46% this year.
We explain the strategy for selecting the stocks and list the 19 cypto-exposed companies.
See more stories on Insider's business page.
Investing in cryptocurrencies isn't always easy. Over the years, the process has improved, as more cryptocurrency exchanges and wallets, such as Coinbase and Exodus, have targeted mainstream users, but there are still plenty of challenges to overcome.Most portfolio managers and financial advisors don't manage cryptocurrencies yet, which leaves many investors to take the lead in setting up their own wallets, understanding how to safely store private keys and researching the merits, as well as risks, of a variety of cryptocurrencies.Even once an investor overcomes those hurdles, they then have to come to terms with the volatility of owning cryptocurrencies. As an example, bitcoin's price dropped 22% from all-time highs of $63,770 on April 15 to a close of $49,078 on April 25. The price is currently sitting around $54,800.In addition to the volatility, investors have to get to grips with the quirks of an industry that is relatively unregulated and constantly evolving. That's not to everyone's taste.For some investors it's too much risk. So, what are the opportunities for investors that want to gain exposure to crypto without taking on significant amounts of risk?For the lucky few, who are accredited and institutional investors, they can buy into crypto market investment trusts from providers like Grayscale, who handle some of these risks.Some countries offer investors, both institutional and retail, exposure to cryptocurrency through a simple exchange-traded fund.Another option, which is perhaps most straightforward, is to invest in companies that have exposure to cryptocurrencies and blockchain technology.Most investors are probably already familiar with a subset of companies that own, or trade crypto, such as Tesla (TSLA), Microstrategy (MSTR) and Square (SQ). Goldman Sachs released a new research note on April 26 that lists 19 large-cap stocks with exposure to the cryptocurrency and blockchain space."Our screen yields 19 stocks with market caps greater than $1 billion," Goldman Sachs analyst Ben Snider said. "On average, these stocks have outperformed the S&P 500 by 34 percentage points year to date (+46% vs. +12%) alongside an 86% rise in the price of bitcoin and a 156% rally in the Bloomberg Galaxy Crypto Index."Investors can easily incorporate a holding in these large-cap stocks into their existing strategy, thereby gaining exposure to the world of crypto. The basket of stocks appear to follow the price of bitcoin. These stocks lagged the broader equities market by 10 percentage points when cryptocurrency prices dipped over the past two weeks.
Blockchain-exposed stocks performance from Goldman Sachs April 26 research note
Finding crypto-exposed stocksThe analysts at Goldman Sachs leveraged a three-pronged strategy to find US stocks with blockchain and cryptocurrency exposure. They focused on those with a market value over $1 billion.The strategy involved:1) Text searchThey looked for keywords, such as "blockchain" and "cryptocurrency" in company filings, earnings calls, presentations and news articles over the past 12 months.They also leveraged company descriptions on FactSet and Bloomberg."Any relevant finding warrants 1 point; 10 or more findings warrant 3 points; explicit mention in Bloomberg or FactSet company description warrants 3 points," Snider said.2) Regression beta analysisThe team ran analysis to test for regression beta of these company share prices relative to bitcoin - or, in other words, how much the shares moved if bitcoin moved. They did the same analysis to check the relationship between bitcoin and the broader stock market, as a control.The beta represents the relationship. The higher the beta, the more the change in the value of bitcoin will impact the value of the company's stock. "A beta ranking in the top 25% of stocks warrants 1 point; a beta ranking in the top 10% of stocks warrants 3 points," Snider said.3) Inclusion in third-party blockchain indices and ETFsThey looked for stocks in six third-party blockchain indices and ETFs."Membership in any index warrants 1 point; membership in two or more indices warrants 3 points," Snider said.
A graph of the strategy from the April 26 Goldman Sachs research note
Crypto-exposed stocksOnce a company achieves a score for all three areas, these are then get added together and it receives an overall exposure score."We include in the screen any stocks in the universe with six or more points," Snider said. "Effectively, this means that each constituent must screen as highly exposed in at least two of the three approaches."This analysis resulted in a list of 19 large-cap crypto and blockchain-exposed stocks."On average, these stocks have dramatically outperformed the S&P 500 during the last several months alongside the surge in the price of bitcoin," Snider said. "An equal-weighted portfolio of the stocks has demonstrated roughly 60% correlations with bitcoin and the Bloomberg Galaxy Crypto Index during the last several months, compared with 20% correlations for the S&P 500."We break down the list of the 19 stocks. As a comparison point, the average stock within the list has the following qualities:Market capitalization: $208 billionYear-to-date return: 43%Forward price-to-earnings ratio: 23xBeta to bitcoin (BTC) exposure: 0.39 Total exposure score: 7A median US stock with a market capitalization of over $1 billion will have the following qualities:Market capitalization: $5 billionYear-to-date return: 16%Forward price-to-earnings ratio: 22xBeta to bitcoin (BTC) exposure: 0.03Total exposure score: 0
1. Marathon Digital Holdings, Inc
MARA stock on April 27
Ticker: MARAIndustry group: Software & servicesMarket capitalization: $3 billionYear-to-date return: 209%Forward price-to-earnings ratio: 15xBeta to BTC: 1.62Overall exposure score: 9Source: Goldman Sachs
2. Riot Blockchain Inc
RIOT stock on April 27
Ticker: RIOTIndustry group: Software & servicesMarket capitalization: $3 billionYear-to-date return: 126%Forward price-to-earnings ratio: 20xBeta to BTC: 1.39Overall exposure score: 9Source: Goldman Sachs
3. Microstrategy Incorporated Class A
MSTR stock on April 27
Ticker: MSTRIndustry group: Software & servicesMarket capitalization: $6 billionYear-to-date return: 58%Forward price-to-earnings ratio: 197xBeta to BTC: 0.76Overall exposure score: 9Source: Goldman Sachs
4. Silvergate Capital Corp, Class A
SI stock on April 27
Ticker: SIIndustry group: BanksMarket capitalization: $3 billionYear-to-date return: 55%Forward price-to-earnings ratio: 47xBeta to BTC: 0.71Overall exposure score: 9Source: Goldman Sachs
5. Square, Inc, Class A
SQ stock on April 27
Ticker: SQIndustry group: Software & servicesMarket capitalization: $112 billionYear-to-date return: 13%Forward price-to-earnings ratio: 202xBeta to BTC: 0.20Overall exposure score: 9Source: Goldman Sachs
6. PayPal Holdings
PYPL stock on April 27
Ticker: PYPLIndustry group: Software & servicesMarket capitalization: $312 billion Year-to-date return: 14%Forward price-to-earnings ratio: 58xBeta to BTC: 0.16 Overall exposure score: 9Source: Goldman Sachs
7. Overstock, Inc
OSTK stock on April 27
Ticker: OSTKIndustry group: RetailingMarket capitalization: $3 billionYear-to-date return: 46%Forward price-to-earnings ratio: 53x Beta to BTC: 0.15Overall exposure score: 9Source: Goldman Sachs
8. NVIDIA Corporation
NVDA stock on April 27
Ticker: NVDAIndustry group: RetailingMarket capitalization: $3 billionYear-to-date return: 46%Forward price-to-earnings ratio: 53x Beta to BTC: 0.15Overall exposure score: 9Source: Goldman Sachs
9. InvestView Inc
INVU stock on April 27
Ticker: INVUIndustry group: Software & servicesMarket capitalization: $1 billionYear-to-date return: 115%Forward price-to-earnings ratio: N/ABeta to BTC: 1.15Overall exposure score: 6Source: Goldman Sachs
IDEX stock on April 27
Ticker: IDEXIndustry group: Software & servicesMarket capitalization: $1 billionYear-to-date return: 33%Forward price-to-earnings ratio: N/ABeta to BTC: 0.65Overall exposure score: 6Source: Goldman Sachs
11. Tesla Inc
TSLA stock on April 27
Ticker: TSLAIndustry group: Automobiles & componentsMarket capitalization: $700 billionYear-to-date return: 3%Forward price-to-earnings ratio: 175xBeta to BTC: 0.07Overall exposure score: 6Source: Goldman Sachs
12. JPMorgan Chase & Co
JPM stock on April 27
Ticker: JPMIndustry group: BanksMarket capitalization: $455 billionYear-to-date return: 20%Forward price-to-earnings ratio: 13xBeta to BTC: 0.03Overall exposure score: 6Source: Goldman Sachs
13. Visa Inc, Class A
Visa stock on April 27
Ticker: VIndustry group: Software & servicesMarket capitalization: $492 billionYear-to-date return: 5%Forward price-to-earnings ratio: 40xBeta to BTC: 0.02Overall exposure score: 6Source: Goldman Sachs
14. Bank of New York Mellon Corporation
BK stock on April 27
Ticker: BKIndustry group: Diversified financialsMarket capitalization: $42 billionYear-to-date return: 13%Forward price-to-earnings ratio: 12xBeta to BTC: 0.01Overall exposure score: 6Source: Goldman Sachs
15. Facebook Inc, Class A
FB stock on April 27
Ticker: FBIndustry group: Media & entertainmentMarket capitalization: $856 billionYear-to-date return: 10%Forward price-to-earnings ratio: 26xBeta to BTC: 0.01Overall exposure score: 6Source: Goldman Sachs
16. Mastercard Incorporated, Class A
MA stock on April 27
Ticker: MAIndustry group: Software & servicesMarket capitalization: $384 billionYear-to-date return: 9%Forward price-to-earnings ratio: 48xBeta to BTC: 0.00Overall exposure score: 6Source: Goldman Sachs
17. Broadridge Financial Solutions, Inc
BR stock on April 27
Ticker: BRIndustry group: Software & servicesMarket capitalization: $19 billionYear-to-date return: 7%Forward price-to-earnings ratio: 29xBeta to BTC: -0.01Overall exposure score: 6Source: Goldman Sachs
18. International Business Machines Corporation
IBM stock on April 27
Ticker: IBMIndustry group: Software & servicesMarket capitalization: $127 billionYear-to-date return: 15%Forward price-to-earnings ratio: 13xBeta to BTC: -0.02Overall exposure score: 6Source: Goldman Sachs
19. Coinbase Global Inc, Class A
COIN stock on April 27
Ticker: COINIndustry group: Diversified financialsMarket capitalization: $58 billionYear-to-date return: N/A Forward price-to-earnings ratio: 47xBeta to BTC: N/A (beta scores only calculated for stocks with at least 12 months of price history)Overall exposure score: 6Source: Goldman Sachs
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Restaurant chain Ruby Tuesday filed for bankruptcy after closing one-third of its locations this year.It filed for Chapter 11 bankruptcy on October 7 in the U.S. Bankruptcy Court for the District of Delaware after a troubled year was worsened by the coronavirus pandemic. Stay at home orders and capacity restrictions hit Ruby Tuesday and other casual chains hard, many of which were already struggling. At least nine other chains have also filed for bankruptcy this year, including California Pizza Kitchen and the US arm of Le Pain Quotidien.CEO Shawn Lederman said that this is not the end of Ruby Tuesday, but instead "an opportunity to reposition the company for long-term stability."Here's how the chain went from a single restaurant in Knoxville, Tennessee where it is today. The first Ruby Tuesday was opened by 21 year old Sandy Beall in 1972, right next to the University of Tennessee in Knoxville, where he was a student. University of Tennessee.
Photo by Joe Robbins/Getty Images
Source: The New York Times
As a student, Beall managed three Pizza Hut franchises. When the owner had a heart attack, he sold the restaurants and gave Beall $10,000 in Pizza Hut stock, telling him to start his own business A Pizza Hut location, which is owned by Yum Brands Inc, is pictured ahead of their company results in Pasadena, California, U.S., July 11, 2016.
The first restaurant, now closed, was a "burger and beer joint" according to the New York Times. Foodbeast
A fraternity brother and investor suggested the name Ruby Tuesday, after the Rolling Stones song. In this March 24, 2016 file photo, members of The Rolling Stones, from left, Mick Jagger, Charlie Watts, Keith Richards and Ron Wood pose for photos from their plane at Jose Marti international airport in Havana, Cuba.
Ramon Espinosa File via AP
Beall also visited New York City to get ideas and look at potential competition, including TGI Fridays. TGI Fridays.
John Lamparski/SOPA Images/LightRocket via Getty Images
Over the first few years, Beall opened restaurants at a rate of one every nine months. Raymond Boyd/Getty Images
In 1982, Beall sold the chain to Morrison Restaurants Inc, a cafeteria and food service chain, for $15 million, and remained in charge. Ruby Tuesday.
AP Photo/Mary Altaffer, File
Source: The New York Times, Ruby Tuesday
Ruby Tuesday had more than 300 units by 1996, when parent company Morrison Restaurants Inc. split into three separate entities, one of which was Ruby Tuesday Inc, still headed by Beall. Ruby Tuesday.
Jeffrey Greenberg / Universal Images Group via Getty Images
Source: Nation's Restaurant News, The New York Times
In 2000, Ruby Tuesday Inc sold all of the other restaurant chains under the brand, leaving room to focus on building more Ruby Tuesdays. Don Bartletti/Los Angeles Times via Getty Images
By the time it turned 30 in 2002, Ruby Tuesday was the seventh largest casual dining restaurant chain in the US. Despite spending little on advertising it was competing with big names like Red Lobster and Outback Steakhouse. Rachel Askinasi/Insider
Source: Restaurant Hospitality
At that point, Ruby Tuesday specialized in large portions for inexpensive meals with a strategy of "We Feed America for Under $10." In 2001, the average lunch check was $9, and the average dinner bill was $12. Ruby Tuesday/Facebook
In 2007, just before the recession, Ruby Tuesday underwent a total redesign to a more upscale look, away from "roller skates on the wall and the bad food," Beall said. By 2009, the company had spent more than $100 million on the upgrades, including serving higher end food and offering a wider wine selection. Ruby Tuesday menu.
Source: The New York Times
Ruby Tuesday had the misfortune of attempting to upgrade into a more formal and expensive dining experience just as the recession hit stores across the board, and competitors fought to offer the best deals. In 2008, the chain closed more than 50 locations. A close sign is seen in the parking lot of a closed business as Ohio implements phase one of reopening dentists, veterinarians and elective surgeries in Columbus, Ohio.
In 2012, Ruby Tuesday had 896 restaurants and 43,000 employees, with stock prices slowly rising, it looked like a potential comeback. That year, Beall stepped down. Raymond Boyd/Getty Images
In 2017, Ruby Tuesday was acquired by private equity firm NRD for $2.40 per share, or about $335 million. NRD Capital.
Then in 2020, Ruby Tuesday was not spared by COVID-19 and lockdowns. David J. Phillip/AP Photo
In August, Business Insider reported that Ruby Tuesday had closed more than one-third of its restaurants, leaving a total 298 still open. Reporter Irene Jiang noted that the chain's prospects didn't look good even before the pandemic, going through five CEOs in five years. Ruby Tuesday.
Source: Business Insider
Business Insider also reported that Ruby Tuesday suddenly stopped paying pensions in July to more than 100 retirees before declaring insolvency on September 2. Ruby Tuesday.
AP Photo/Mary Altaffer
Source: Business Insider
On October 7, the chain announced it had filed for bankruptcy. Ruby Tuesday says it will continue business as usual, though the filing said that more closures could be coming soon. Ruby Tuesday.
Samantha Lee/Business Insider
Source: Business Insider