The end of the decade (and the start of a new one) is a time for self-reflection, both in your personal and in your investing life. Now, while I can’t help you with the former, I do have some thoughts on the latter. Let’s look at some options that investors have going into 2020
The cryptocurrency is probably the best-performing asset of the last decade, but does that mean that investors should buy it for the next 10 years? I think the volatility in the price of Bitcoin, coupled with the fact that there seems to be no objective way to assess its intrinsic value makes it much more of a speculative play than a reasonable investment.
I think it’s pretty clear that while Bitcoin delivered outstanding returns for those very few lucky enough to own it before it really took off, gambling with your money by buying it now is not the best way forward.
Just because the Sirius Minerals (LSE: SXX) share price has fallen by over 83% since the beginning of the year doesn’t mean that it cannot lose 100% of its current 3.5p a share value. When it comes to determining the intrinsic value of a company, one of the first things that analysts looks at is its balance sheet and the cash that it has on hand to finance its activities.
Sirius Minerals shocked investors earlier this year when it reported that a $500m (£382m) bond offering had fallen through. This meant that a further $2.5bn (£19.1bn) loan that was contingent on the bond offering is now in question. Without this financing, there is no chance that Sirius will be able to launch its flagship polyhalite mine in Yorkshire.
In other words, Sirius Minerals has no mine, no financing ability and a dwindling pile of cash. Furthermore, as my colleague Alan Oscroft writes, any future financing deal is likely to require equity, which would be dilutive to existing shareholders. For these reasons, I think that investors should give Sirius a wide berth.
Instead, I think that investors would be better served by shares of Lloyds Banking Group (LSE: LLOY). Stocks reacted positively to the election news on the morning of December 13, and I think that this is a harbinger of things to come. Even though Brexit will undoubtedly pose big challenges for the UK financial sector, I think finally having a resolution to the impasse will provide some much-needed relief for banks.
What’s more, I think that large banks like Lloyds are comparatively better-placed to deal with any fallout from Brexit than the smaller challenger banks that have sprung up in recent years. Financials stocks will also be buoyed up now that the prospect of a left-leaning Labour government has been avoided.
Shares of Lloyd’s currently have a dividend yield of 5.15%, which outstrips the FTSE 100 average of 4.26%. This dividend is also well-covered, which should inspire confidence for income investors.
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Stepan Lavrouk has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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.