A Note From Michael: Today’s report is all about one way to play blockchain technology for big profits. But it won’t be the last time I bring you a blockchain play. Far from it. In fact, my team is at the DC Blockchain Summit 2018 as I write this. If I know my guys, they’re actively digging up new investment ideas that I can then bring to you. We’ll share some of what they find in tomorrow’s “Weekender” report. So watch for that.
Indeed, Starbucks Chairman Howard Shultz recently took to the airwaves to let everyone know that his coffee company is getting into the blockchain business.
“I think blockchain technology is probably the rails in which an integrated app at Starbucks will be sitting on top of,” he said during an interview on Fox Business.
Blockchain is the digital and decentralized ledger behind Bitcoin and most other cryptocurrencies. Crypto traders depend on blockchain’s transparency and unchanging nature to record all their transactions. Now industries beyond digital coins and even fintech are exploring how to use the technology. Blockchain is potentially the perfect technology for everything from running global supply chains to keeping track of medical records.
Instead, he talked about the possibility of expanding digital customer relationships using blockchain, or even the possibility of launching a proprietary crypto coin. “I believe that we are heading into a new age, in which blockchain technology is going to provide a significant level of a digital currency that is going to have a consumer application,” he said during an earnings call.
Hold on, buddy.
That sounds an awful lot like gimmickry to me – tweaking some technology and then using the “blockchain” name to rebrand an already existing customer rewards program.
That’s not going to “move the needle” on a big company like Starbucks – and it doesn’t make the Seattle company a blockchain investment.
As Clara Peller would have put it back in the 1980s, there’s no “beef” here.
However, there’s another company out there that didn’t just talk about the blockchain in the past week or so, but made some noticeable moves with it.
It’s making blockchain technology a key part of its business – and it’s doing so in a huge and growing market.
Plus, now is the perfect time to buy.
I make my case below…
Not Yet a Blockchain Leader
Both microcaps and a growing list of Fortune 500 firms and big global banks are investing in blockchain.
Those global giants are doing so because blockchain is a highly secure, cryptographic system that functions as a global distributed ledger. This system not only undergirds Bitcoin and other currencies, but it bypasses banks and governments, operates transparently, and is virtually hack-proof.
Many of us soon will be settling contracts with blockchain. By doing so, we’ll avoid bank fees, possible litigation, and a lot of other issues that economists like to refer as “friction.” Plus, you can go online and watch these transactions occurring in near real time.
Gartner says the blockchain created $4 billion in business value last year. The firm believes that figure will hit $21 billion by 2020 before rising to $176 billion in 2025 and a staggering $3.1 trillion by 2030.
Bear in mind, this is the market value for blockchain-based enterprise applications. It doesn’t count the escalating market cap of cryptocurrencies themselves, of which there are now roughly 1,300 with a combined value of nearly $800 billion.
To me, that’s just an amazing set of statistics. This is a field that barely existed just nine years ago. But it proves a point I’ve been making since I got involved in crypto trading in early 2013 – the future belongs to blockchain.
Now I didn’t mean to diminish Starbucks itself when I compared it to Kodak’s blockchain foolishness up top.
The global coffee chain has been big on technology ever since it put Wi-Fi in its stores back in 2001, when most people were still on dial-up.
In fact it’s a company I like a lot – and recommended to you as a play on mobile technology back in 2015.
Now if Starbucks goes beyond customer reward system and starts using blockchain to reduce inefficiencies in its supply chain – as a recent linkup with the Qtum crypto coin suggests could happen – then we’ll have a different story here.
But as for now…
Here’s the Beef
Chinese e-commerce powerhouse JD.com Inc. (Nasdaq ADR: JD) – an under-the-radar competitor to Alibaba Group Holding Ltd. (NYSE: BABA) – just announced plans to start using a blockchain platform later this spring to track beef imports from Australian meat supplier InterAgriGroup Pty Ltd.
Now, the idea is to give Chinese meat buyers more transparency into the beef production process by making it traceable on a blockchain. The technology will record a spectrum of information – from where the livestock was bred and raised to where the meat was processed and how it was transported.
That’s big for JD when you consider that China imported $737.3 million of Australian beef in 2016, according to market analysts at Meat & Livestock Australia. In total, the global meat market is worth about $90 billion.
And that number is going to soar in the coming years.
By 2030, per-capita meat consumption in the developing world is expected to surge by 30%.
In the five years through the end of 2016, China’s imports of beef and veal jumped nearly tenfold to 825,000 metric tons per year. That made China the world’s second-biggest importer of red meat, trailing only the United States.
Beef is becoming mainstream in China. Average annual consumption is now up to 5.5 kilogram per person. Just think what will happen when Chinese consumption approaches U.S. consumption, which is six times higher.
And China’s favorite place to shop for agriculture assets is nearby Australia.
The Food Blockchain
At the end of last year, JD, Walmart Inc. (NYSE: WMT), IBM Corp. (NYSE: IBM), and Tsinghua University National Engineering Laboratory for E-Commerce Technologies launched the Blockchain Food Safety Alliance. That organization is dedicated to finding ways to use blockchain tech to improve food safety and transparency across the food supply chain.
“We’re increasingly implementing blockchain-enabled traceability solutions to give consumers confidence that they are buying safe, reliable products for their families,” JD.com Chief Technology Officer Chen Zhang said. “Consumers in China don’t just want quality imported products, they want to know that they can trust how and where their food is sourced, and blockchain helps us deliver this peace of mind.”
So with JD.com we have a company that’s using blockchain to streamline the supply chain – a capital-intensive, time-consuming, data-heavy process that requires both a shared level of trust and airtight cryptographic online security. In other words, this is exactly what this technology was designed for – making JD a superior blockchain play.
Now, blockchain isn’t the only bleeding-edge technology JD puts to use to get its goods to their end markets. It’s this maverick approach that makes this company stand out…
The First Fully Automated Warehouse
In Kunshan, just outside Shanghai, JD recently demoed what is likely the world’s first fully automated warehouse.
A drone gently drops goods into the shipping facility, a robot loads the goods into a self-driving, self-charging car, and that car delivers those goods to the customer’s door. Plus, JD just announced plans to open a second fully automated warehouse – this one 13 times bigger – in Xi’an.
Last month, JD test-delivered 1,000 packages by drone at colleges in Beijing, Hangzhou, and Xi’an. That demo showed off what’s doable in terms of using drones to complete the supply chain’s all-important “last mile” – the path from fulfillment center to a customer’s front door.
The point here is that JD pushes the tech envelope, and plows a large portion of its earnings back into R&D.
In his 2017 third-quarter earnings call, JD.com CEO Richard Liu said, “Any excess return beyond our expectations will be reinvested. Roughly 30% to 40% of those excess returns back into the business and half of that will be in technologies.”
JD recently slightly missed on fourth-quarter earnings expectations – and it dropped like a rock… 10%. However, this is a company that’s growing revenue at 30% to 40%.
Sales, at $16.93 billion, were up 34% from 2017. And active customer accounts grew by a solid 29%. Those numbers are more important than profit growth at this point.
This company is scaling up and looking to go big in China’s e-commerce market. That sector’s worth was $420 billion in 2015 – 20% larger than the market here at home – and is expected to grow to $956 billion by 2022.
It’s pretty simple: As the second-largest e-commerce site in China, JD is a play on the nation’s booming consumer class. While the world’s most populous nation has its problems, that trend isn’t slowing down anytime soon.
And now there’s a blockchain twist.
To me, that all adds up to a stock on sale after that 10% drop.
It’s one to buy on dips, accumulate, and then watch as your fortune grows.
Have a great weekend, all.
P.S. Investing in blockchain-related companies is one way to triple your money in the next few years. Investing in cryptocurrencies themselves is another way to make money from this multitrillion-dollar profit opportunity. To get started, go here.