With Bitcoin forever in the news, its returns for an investor have diminished in 2019. Added to this is the extreme levels of volatility seen, with swings of 10% not uncommon during a day.
The most common reason I hear for investing in Bitcoin is the possibility of short-term riches. While this may be the case, it is unlikely. Therefore, I would much prefer to invest in companies that people have fallen out of love with, the aim being high capital returns over the next few years.
Someone on the other line
My first pick is BT (LSE: BT-A). This giant, UK-based telecommunications firm actually trades in over 180 countries around the world. Its share price has fallen over the past couple of years as it has struggled to hit financial targets amid greater competition in the marketplace.
Investors have also flagged concerns over the debt levels in the business, standing at around £12bn.
While I acknowledge the concerns, I believe the stock is now undervalued (trading under 200p). Its sector has large barriers to entry, which will protect BT from competition, and can make use of its huge scale to exploit any efficiencies to be had.
One example of this is the planned roll out of the 5G network, for which BT has a clear advantage in speed-to-market and distribution than other players.
This may not provide a huge rally in the stock in the very short term, but fundamentally I believe that it could return to levels seen only a couple of years ago of 400p. This would provide a 100% return for investors going in at current levels.
Invest in those who invest?
My second pick is Hargreaves Lansdown (LSE: HL). The business operates in the financial services space, predominately through offering stock and fund trading through its online platform to retail investors.
The company is robust, with financial reports showing growth over the past five years on all lines, giving it a post-tax profit of just under £250m last year. However, I think now could be a good time to invest in the business as the share price has been stagnant following the issues seen with Neil Woodford and his fund.
In short, HL promoted Woodford’s funds for years, before performance meant it had to halt redemption of one of his funds. This was not an issue for institutional investors, who are familiar with such contingency plans for illiquid stocks, but it was for retail investors. As most of the retail investors had entered via HL, blame was put on the firm.
I do not feel this short-term blip is a fundamental problem for HL and therefore buying at the moment could be advantageous when the market forgets the Woodford story and focuses back on HL’s strong financial performances.
Overall, I feel these two shares offer strong growth prospects for investors, without the volatility of Bitcoin!
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Jonathan Smith has no positions in the companies mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.