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| MicroStrategy will be the stock of the decade from my point of view. I will admit right out that I am bias as I have been a holder of the security for the past year. What I am writing is not advise to go out and purchase anything it but to encourage others to learn about it and come to a conclusion. If you own something as volatile as Bitcoin or MSTR you will sell in a panic and lose money if there is not a good understanding of why these are good things to own.
I will also say in my experience the more someone uses bitcoin and learns about it the more they like it. It took me 10 years to really see how great it is. A lot of that is because when I started it was much harder to use and exchanges built around it were very shady. I have never met anyone who thinks bitcoin is bad that has actually made a single transaction or knows how it works. The more ignorant people are on the subject the more dismissive they are. Criticism is ok but it should be grounded in knowledge, 99% of the critics don't understand bitcoin or even know how to use it. Its like people from the city constantly complaining about farming being bad and how it should be done that don't know the difference between a chisel plow or a moldboard or how to even drive a tractor.
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Anyway on to MicroStrategy which to appreciate you must have a basic appreciation of why bitcoin is a superior monetary asset to the dollar and why central banks do not act in the interest of the general population. That is another discussion altogether.
The financial strategy of MSTR is extremely powerful and well thought out while being relatively simple.
Secure fixed rate low interest largely uncollateralized long term loans and use those to buy Bitcoin. The most recent loan for 600 million is due in 2031 and has a fixed interest of rate 0.875%. They have many loans structured in a similar way while there are some variations in each one . When shares are issued to buy more bitcoin it is done in additive fashion not a dilutive one. Going back to May of last year when I first started studying MicroStrategy intensively it took 88 shares to equal 1 bitcoin.(if my memory is correct) Now it takes 82. How many stocks can you find that are anti dilutive while returning 575% over a 1 year period? In addition to borrowing money all profits from the software business of MSTR are put into bitcoin as well.
Another great part of the stock is accessibility. Not all countries have bitcoin ETFs available but nearly everyone can buy MSTR so it is acting as a leveraged bitcoin etf for many as it did me last year. Speaking of leverage MicroStrategy offers leverage to the price of bitcoin. As of today MicroStrategy is up 575% over the past year while bitcoin is up 149%
Going forward MicroStrategy has big things coming that can potentially boost it up even more so than just the price of bitcoin increasing on its own. First of all it is now large enough to be included in the S&P 500. If it voted in nearly every person that has a managed brokerage account in America and many abroad will have exposure to MSTR through mutual funds and index funds. So even those that hate bitcoin will be indirectly investing in it through MSTR(and many are already doing so). This will grow MSTR, allow them to buy more bitcoin taking supply of bitcoin of the market while pumping up the share price. This has the potential to create a so called "fly wheel effect" the share price goes up MSTR buys bitcoin with more loans, bitcoin is pulled of the market increasing the price of bitcoin thus increasing the share price more allowing more loans to be taken out pulling more bitcoin off the market and pumping the price of bitcoin etc etc
The whole idea is to borrow melting ice cubes (dollars) buy the hardest monetary asset ever in existence and keep seeing your market valuation increase while your debt melts away. Lets assume inflation per year is 5% if you are borrowing money at 1% that is a actual interest of -4%. You are literally being paid to borrow money at this point. When you consider that you are borrowing and buying a asset that goes up on average 2300% a year over the past 9 years this is a incredible trade.
The downside of MSTR is that the pullbacks will be harsh but you cannot have great growth without great volatility. Compare the risk of MSTR to all the zombie companies in the S&P 500 and the over priced apple stock with a pe ratio of 26.443 Nvidia with pe off 213.173 or Microsoft with 37.52 it becomes clear where the real risky and bloated investments are. Why put money into this when bitcoin is the killer asset? People will soon realize this and the brokerage mangers who say bitcoin is to risky will either change there tune or be out of a job real soon.
Edited by turbo diesal 3/17/2024 21:46
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MicroStrategy stock of the decade
