2021 was a wild ride for the crypto sector. Record-breaking gains were followed by large pullbacks, which were followed by more gains and more pullbacks…

And this crypto play was not immune. After soaring 460% in 2020, it tumbled down… jumped back up… and ended up losing 67% on the year.

Does that mean it should be written off?

Not so fast.

In this week’s special “Readers Choice” edition of Stock of the Week, I run this beaten-down stock through my GVI (growth-value-income) system… and, well, I have an interesting take on it.

Knowing the types of stocks I look for, you might be surprised to hear what I have to say about it.

Click the image below to watch.

And thank you for sending in your tickers! Keep them coming… It’s always interesting – and informative – to see what readers are looking at. I’ll be sure to run another one through my system soon. Send them to mailbag@manwardpress.com.

Transcript

Hi, everyone, and welcome to another Stock of the Week.  

I’ve got a really good one because it’s from you guys. You’ve sent it in to me. So I’m going to analyze it, as I do each week, and do feel free to send more of these in. But I really enjoyed analyzing this one because it’s not the usual.  

The company’s CleanSpark. I had some problems with this one, I’m afraid. But before I get to those, let me tell you what the company does: Bitcoin mining – obviously Bitcoin, blockchain… all the rage – and energy technology solutions.

Their argument is that in mining for Bitcoin – because you know how it is, computer graphic cards have to be used to create new Bitcoins – what they’re saying is, “We are not using energy in a… well, what should I say… in an untransparent way. We’re using it in a way which might actually benefit future generations because it’ll lead to innovation the way in which we do it.”  

Now, it’s a smart argument. I’m not sure if Congress are going to buy it. The company’s software, they say, is capable of enabling a microgrid to be scaled to the user-specific needs.  

Now, you and I don’t need to understand any of that. What we need to understand is they are mining Bitcoin. They generate revenues from this particular digital currency, okay?

So what is the play here? What is the angle? Well, the angle, as you well know, is the price of Bitcoin’s fallen off, and so a company like this, its share price, you’d expect to fall off. But if you’re a long-term believer in Bitcoin, then you’d see a company like this who’s got the ability to mine or create new Bitcoins – and especially if it’s doing it efficiently – as something of a good play on Bitcoin without owning the crypto itself directly.

So what are the financials? Well, I got a problem with the financials, I’m afraid. But there is some good news coming in a moment. So on a valuation basis, revenue-growth basis, income-generation basis, I’m afraid it’s a 2.  

Cash return on capital invested (CROCI)… a lot of capital being invested, not much cash coming back, I’m afraid. And it’s dropped 55% in the last six months.  

So it doesn’t go into my way of picking stocks that I do for the GVI Investor research that I provide you guys. Instead, because it’s a viewer pick, I’m going to look at it slightly differently, which is, “Look, what about as a speculative play?” That’s what the viewer’s asking, okay?  

Now, I don’t think it’s going to go bust. That’s what the Altman-Z tells me. And you can see that it’s had this phenomenal ride up of 464% in 2020. 2021 was negative. So far this year, it’s off as well.

So is there any play here? Is there something positive to look forward to? Well, I think there might be. I think there might be.  

When you look at some of these figures, you’ll say, “Alpesh, what are you doing? You don’t look at things with negative cash return on capital invested, return on equity.”  

But this is one of your picks, remember, one of the subscribers. So I’m just analyzing it for you.

You know, it’s got a few bits of good news – free cash flow, for instance. Gearing’s not too bad. The borrowing, basically, not too bad, either. So those things, it seems relatively undervalued. Forecast price-to-earnings, price to profitability, that’s ridiculously low. And turnover is forecast to grow. So you’ve got that potential growth. It’s undervalued.  

What’s the angle? What’s the angle? And as you can see, turnover has increased, so has borrowing. So like I said, the financials weren’t the bit that excited me, and cash flow really does worry me, but it doesn’t look like it’s going to go bust or anything.  

So like I said, there’s some positives there, okay? No, forget the financials. What got me was, if you’re going to look at this, and like I said, it’s a viewer pick is CleanSpark, then I’d say, I guess what you are really playing for is that it’s bottomed out at where it is now, which is pretty much at where it was in July of 2020.

So you’ve got a little time machine with the share price now. You’ve gone back in time, and what you’re saying is, “Listen, I think it could go back to, say, the 2,000 level or even higher.” And that’s your play, all right? What you’re saying is, “Look, momentum is going to pick up again, as it’s done in the past. It really has hit rock bottom.” I mean, obviously, you might argue it could go at April 2020 levels, but what you’re saying is, “Now I think we’ve got this play up.” If you double your money, you might want to take your initial capital out, so all you are left with is profits to keep running.  

I suspect the viewer concerned had bought this probably at a higher peak and is now thinking, “Do I hold onto it now that I’m down 50-odd percent or whatever?”

So, like I said, higher-risk, speculative. It’s not the type I would have in my GVI Investor research service for a simple reason: The kind of stocks I pick there, I want to give me a good night’s sleep, and I want to get my returns from good, solid cash flows, good income, good valuations, good revenue growth. So whilst it doesn’t meet that, I hope that analysis is something you’ve liked and enjoyed.

Thank you very much for sending it in as a viewer and as a viewer pick. Well, I applaud you for doing it, and thank you all for watching. I’m Alpesh Patel, as you know, behind GVI Investor. So on the private newsletter, you’ll see the analysis that I give for what I think are really top-quality stocks which won’t give me sleepless nights, which won’t make me lose 55% in a very short space of time and will be good for my pension, okay? So it’s good to give a different comparison to what some of the speculators do.  

If you like the technical analysis and you want more of this kind of analysis, which is more on the speculative side, then hey, just give us some feedback, and I’ll bear that in mind.  

Thank you all very much.