Investors looking to be at the cutting edge of market innovation are interested in learning more about Non-Fungible Tokens (NFTs).
First, let’s back up and understand what an NFT is. An item that is non-fungible is one that cannot be exchanged for an identical item. Art is a prime example. Leonardo da Vinci’s Mona Lisa is a non-fungible item, because there is no duplicate with which it can be exchanged. Fiat currencies and cryptocurrencies on the other hand, are fungible. I can trade a dollar for a dollar, a peso for a peso, and a cryptocoin for a cryptocoin.
NFTs are gaining traction in digital art. NFTs allow artists to sell ownership rights of their respective digital assets. This is all backed by the blockchain, where the ownership and transaction history are stored. Real money is flowing into this nascent and risky sector as digital asset owners seek to monetize their creations. I won’t rehash what happened with Beeple, but it clearly illustrates that there is money to be made.
Naturally, crypto bulls are keenly watching this emerging space, searching for opportunities. One method is to find stocks that have an NFT component to their business. What follows is a list of seven such stocks crypto bulls should keep an eye on.
- Cinedigm (NASDAQ:CIDM)
- Funko (NASDAQ:FNKO)
- Takung Art (NYSEAMERICAN:TKAT)
- ZK International Group (NASDAQ:ZKIN)
- WISeKey (NASDAQ:WKEY)
- Oriental Culture Holding (NASDAQ:OCG)
- Liquid Media (NASDAQ:YVR)
NFTs: Cinedigm (CIDM)
Cinedigm is a company that manages and distributes rights to movies, television, and short form content. Prior to the recent NFT intrigue related to the company, very few investors would have heard of this stock. So before crypto bulls do consider it, I should caveat that the company has a historical net deficit of $467.2 million. That may not sound like a massive sum given the numbers flowing around markets these days. But Cinedigm booked only roughly $23 million in revenues in the last 9 months of 2020. In that same period it recorded a net loss of $56.1 million in that same period.
All this is to say that Cinedigm is not a strong company.
That fact is evidenced by its $1.19 share price.
Investors really want to know how Cinedigm is connected to the NFT space. Back in March, Cinedigm announced that it was actively developing commercial NFT products. The company announced that it is working “to build a suite of products that will enhance the monetization of [their] and [their] partner’s existing assets, and ultimately provide enhanced value to our overall streaming channel businesses.”
The company is trying to develop four NFT products and plans to announce at least one in April. The company will remain interesting, if nothing else.
Funko is a company with a much more relevant shot at NFT success than Cinedigm, mentioned above. Firstly, its share price is roughly a respectable $20, due to the fact that the company is simply more stable. Funko sells figurines and other pop art collectibles that it licenses the rights to. In the fourth quarter of 2020 Funko recorded $226.5 in revenues and a net income of $14.9 million. The company’s EBITDA rose by 29%. The takeaway here is that it is a strong company grasping at straws and considering a pivot into NFTs.
Instead, the company is strategically approaching NFT as a part of its larger business. On April 1, 2021, Funko announced that it had acquired a majority stake in TokenWave. TokenWave is the developer of TokenHead which is an app for listing and tracking NFTs. TokenHead gets around 100,000 visitors per day and Funko intends to release its initial NFT products in June on the platform.
Funko’s licensing assets make it a strong play in the NFT space, and it seems like one of the stronger stocks to consider for NFT exposure.
Takung Art (TKAT)
Takung Art has a very interesting story. The company operates by offering investors shared ownership of Asian and other fine art. Physical, tangible art including paintings, calligraphy, jewelry, and precious gems among others. The company was not associated with the digital ownership rights that NFTs represent.
Then, in mid-March Takung Art became suddenly synonymous with the NFT art world. This was ironic, given that Takung Art is not associated with the NFT space in any form according to subsequent reports.
What’s interesting is that markets have afforded TKAT a premium, as though it is a name in the hot NFT space. Shares had been flat for years and traded around $1-2 until the company became entwined with NFT rumors. Prices rose meteorically to end trading above $53 by March, 23. The funny thing is that they haven’t completely receded to pre-rumor levels. TKAT stock is still trading at around $20. Perhaps Takung Art will actually try to capitalize on the insanity, and issue some sort of NFT.
I think that’s the reason that speculation persists and continues to hold share prices high. I’m honestly surprised the company hasn’t yet issued a public offering of stock to capitalize on the frenzy. Or perhaps it will actually bring NFTs into its business, issue stock, raise a bunch of capital and pivot into NFTs. All in all, quite the story.
ZK International Group (ZKIN)
ZK International is a company which traded flat for all of 2019 and 2020. The company’s operations were driven by sales of stainless steel coil and strip. Not exactly the most likely entry point into NFTs, to say the least. Further, the company recorded record high revenue in February, so it doesn’t seem that a business pivot was completely necessary.
Nevertheless, the company had irons in the NFT and DeFi fire prior to gaining NFT traction in mid-February. In fact, ZK International Group began blockchain projects back in late 2020. But it wasn’t until the company announced it had signed NBA player Dwight Howard to its DeFi project that it really spiked.
ZKIN stock would jump again after it announced that its xSigma subsidiary would develop an NFT platform in mid-March. The company’s strategy is to sign exclusive talent to its platform, and then leverage NFT rights using that talent.
On April 15, 2021, ZK International announced exclusive NFT launches for NBA players Dwight Howard and Michael Beasley. While the plan is interesting, I can’t imagine that those particular NBA players have much sway in NFT markets. Nevertheless, ZKIN stock has spiked in the middle of the previous two months on similar news. Perhaps it will pop again on this news.
WISeKey is another interesting company and stock for crypto bulls to keep their eye on in relation to non-fungible tokens. The company has been focused on digital security, cybersecurity, identification, and authorization of people and objects.
However, in the span of the last month or so it has made a big pivot into the NFT space. It started on March 18, when WISeKey announced NFTs for digital identity verification of objects and ownership of digital and tangible assets.
WISeKey already had already carved a niche for itself in which it secures higher-end objects like wine, jewelry, collectibles, watches and art among others. The company is extending that protection to the NFT digital realm.
The company is attempting to carve out a first-mover advantage in the luxury segment of NFTs. It attempted an NFT auction of a Hublot watch. On April 6, WISeKey announced another Hublot watch NFT. The winner will take ownership of the watch’s digital representation.
The company is doing the same kind of NFT auction with another timepiece called the Astronomia Sky. Whether this niche is sustainable has yet to be seen. However, the company has seen success early in the project.
Oriental Culture Holding (OCG)
Oriental Culture Holding might just be another company that has been caught up in the NFT rumor mill. It is very similar to Takung Art in that respect. It is also an art site and listing service. The company site lists paintings, clay teapots, jade sculpture, stamps, coins and other collectibles.
OCG stock looks to have been pulled upward in price by little more than rumor. A Reuters report in mid-March highlighting the idea that art companies would be swept up in the NFT frenzy mentions OCG stock. The company’s website however, makes no mention of plans to enter into the NFT space.
Therefore, Oriental Culture Holding is a very speculative play on NFTs. It makes one wonder what the management at such companies must be thinking when their firm is swept up in NFT headlines. Tread carefully.
Liquid Media (YVR)
Liquid Media Group is a company that hopes to help independent video game and film IP creators to monetize their creations. The company signed a deal to distribute Atari’s PC/Console hybrid, called the Atari VCS.
Like many other NFT plays, it saw a spike in its share price roughly a month ago. The company shrewdly issued nearly 1.8 million shares of stock at pretty much the height of the NFT buzz. It ended up receiving $6.0 million in gross proceeds from that move.
Then, at the end of March, the company announced plans to create the world’s first multi-token IP platform. Like many NFT plays, the Liquid Media Token Platform project intends to help “support the evolving needs of film, entertainment and gaming industry professionals, and capture opportunities to conceptualize and create content once, then monetize it in perpetuity.”
It will be interesting to see how the company fares over time, along with the other NFT projects on this list.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.”