Shares of Overstock.com (NASDAQ: OSTK), an online home-goods retailer and developer of blockchain solutions via its subsidiaries, catapulted as much as 14% higher during Thursday's trading session following the release of a 13F filing with the Securities and Exchange Commission (SEC). Within those filings was news that a well-known investor had become a major stakeholder in Overstock.
Continue Reading Below
Filings with the SEC showed that Soros Fund Management, headed by investing mogul and billionaire George Soros, purchased 2,472,188 shares of Overstock during the fourth quarter, effectively becoming its third-largest shareholder. While Soros made no comment on the purchase -- and it should be stated that 13F filings describe the activity that billionaires made during the previous quarter and are thusly 45 days old -- it's nonetheless been the impetus behind today's significant move higher.
For those who may not recall, Overstock CEO Patrick Byrne has been floating the idea of selling Overstock.com and taking the proceeds to fund blockchain projects for its subsidiaries. Overstock arguably is the best-known retailer to embrace cryptocurrencies. Whereas a small handful of big-name companies accept bitcoin, Overstock accepts a half-dozen different virtual currencies as payment.
Personally, the move by Soros is somewhat baffling. Even though Overstock has galloped higher by 262% over the trailing year -- meaning patient investors have been handsomely rewarded -- the fundamental story behind Overstock makes as little sense now as it did back when the company was valued around $20 a share. Historically, Overstock has struggled to turn a profit with any consistency or grow its sales at a quicker pace than a mid-single-digit percentage. That's primarily a function of Amazon.com running circles around its online e-tailing competition, as well as the relatively slow-growth nature of home goods.
What's more, the company's marginal profits have been completely erased in recent quarters by losses associated with spending on its blockchain projects. Considering that blockchain has yet to catch on with enterprises in anything more than demos and small-scale projects, Patrick Byrne's vision of going all-in on blockchain is exceptionally risky.
My suggestion? Keep your distance from Overstock as an investment.
10 stocks we like better than Overstock.comWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Overstock.com wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of February 5, 2018
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Sean Williams has no position in any of the stocks or cryptocurrencies mentioned. The Motley Fool owns shares of and recommends Amazon, but has no position in any cryptocurrencies mentioned. The Motley Fool has a disclosure policy.