It wasn’t too long ago that Bitcoin bulls were proclaiming the virtual currency had finally come of age as a safe-haven asset to rival the likes of gold.
I thought such proclamations were rubbish then, and price action over the past few months has affirmed my scepticism. Despite the rising chances of a no-deal Brexit, a raft of patchy macroeconomic data, and more recently the prospect of military action in the Middle East, cryptocurrencies across the board continue to lose value.
Bitcoin, for instance, has plummeted exactly 25% in value since the end of June, and further falls at the start of this week are pulling it close to the psychologically critical $10,000 marker. Any fall below this technical level could spur fresh waves of selling, and particularly so given the eagerly-awaited launch of a cryptocurrency-based ETF in the States (a critical development for the future of the asset class) remains elusive.
Clearly, Bitcoin has a long way to go before it can be considered a good hedge against ongoing Brexit uncertainty or the long-term economic implications of EU withdrawal. A better way to invest to protect yourself against ripples in the UK economy would be to buy DS Smith (LSE: SMDS), in my opinion.
The box maker derives the lion’s share of revenues — more than 80%, to be exact — from outside of these shores thanks to its presence in some 37 countries. It has invested heavily to boost its global footprint, whether via its recent entry in the US or its longstanding expansion across emerging markets in Central and Eastern Europe.
And it has plenty of financial firepower to continue diversifying its geographic profile. Its net debt/EBITDA ratio sits at a shade over 2 times, while cash creation remains at eye-popping levels too (free cash flow boomed 84% in the last fiscal year).
Growth PLUS dividends
This broad territorial footprint — allied with its focus on hot growth areas like FMCG and e-commerce — is allowing the packaging giant to maintain a steady ship as many of its UK-focused Footsie colleagues, whether it be Lloyds or Sainsbury’s or Marks & Spencer, struggle because of the stuttering UK economy.
Just this month, DS Smith affirmed that it “continues to progress well despite… continued macro-economic uncertainty,” the business adding that “expectations for overall financial performance remain unchanged.”
Unsurprisingly, City brokers expect earnings to keep rattling higher over the medium term, albeit by mid-single-digit percentages. And this leads to predictions of perky dividend growth, thus yields sit at a chubby 4.7% and 4.9% for the years to April 2020 and 2021 respectively.
What’s more, based on these growth estimates, DS Smith trades at a mega-low forward P/E ratio of 10.3 times right now. All things considered, it appears as if the market is grossly undervaluing the firm’s potential to deliver brilliant returns in the years ahead, and I’m sorely tempted to buy more of the stock at current prices. I honestly believe it’s a share that could help me achieve my goal of retiring early.