Strategy: A Potential Millionaire-Maker Stock for Long-Term Investors

Thanks to the rise of Bitcoin (CRYPTO: BTC), capital markets are evolving. The world's top digital asset, which has a market capitalization of about $1.5 trillion, is blending with the traditional financial services industry. Investors are taking notice.

Strategy (NASDAQ: MSTR), co-founded by billionaire Michael Saylor, is the perfect example of this. Although its shares are now trading 66% below their peak, the company's unusual playbook makes it a potential millionaire-maker stock for long-term investors.

Image source: The Motley Fool.

This is not your typical company

Strategy does run a software business that generates hundreds of millions of dollars in annual revenue. It's introducing artificial intelligence (AI) features for its enterprise customers in an attempt to benefit from the major tech trend shaping the economy.

However, in terms of the real value of the company, that legacy software business has become an afterthought. Its main financial activity is now being a Bitcoin treasury. As of Friday, Strategy owned nearly 844,000 Bitcoins valued at a total of about $65 billion. It's the single largest holder of the digital asset.

The business regularly taps equity and fixed-income markets to raise capital, which it uses to purchase more Bitcoin. One of Strategy's most successful offerings, called STRC (Short Duration High Yield Credit), has raised $10.5 billion since its launch in July last year. The business also issues more common stock during periods when it's trading at a notable premium to the total value of the Bitcoin it owns.

Management has no intention of slowing down. It wants to remain the key facilitator of the flow of fiat currency into Bitcoin.

Can you handle the volatility?

Since Aug. 10, 2020, the day Strategy first purchased Bitcoin, the company's share price has risen by 1,240%. Bitcoin, on the other hand, is up 574% during the same period. Strategy's capital markets activities make it a leveraged Bitcoin play. The stock experiences more volatile price swings than the cryptocurrency, which some investors might already view as being too volatile to comfortably hold.

But the long-term upside potential is hard to ignore. Saylor, who now serves as Strategy's executive chairman, predicts that by 2046, Bitcoin's price will be $21 million per coin. That would be a 271-fold increase from its current price in the neighborhood of $77,000. Assuming Strategy is able to continue opportunistically raising capital to buy more crypto, that Bitcoin's price keeps trending upward over time, and that management operates with proper risk management practices, this stock could be a monster winner in the long run.

Investors who have the conviction and who can allocate a larger initial sum to Strategy shares, while also adopting dollar-cost averaging, could turn this stock into a millionaire-making opportunity. Of course, getting that type of return out of this investment would also require the patience and discipline to hold this position for the next decade and beyond.

Neil Patel has positions in Strategy. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.