January 8, 2020
Summary
- Hut 8 Mining Corp. is a bitcoin mining company with over 3,000 mined bitcoins in its treasury.
- Bitcoin has quadrupled from the end of September 2020, increasing the value of Hut 8’s bitcoins on the balance sheet to about $115 million USD from $32 million.
- Bitcoin miners like RIOT have seen their market caps rise over 800%, while Hut 8’s market cap has only risen half as much.
- In addition to having the largest reserves of bitcoins in the bunch, Hut 8 has one of the highest current mining capacities.
- This makes Hut 8 extremely undervalued compared to its peers, and once the company is discovered by more investors, its stock price should reflect a valuation closer to the other bitcoin miners.
Introduction
Bitcoin (BTC-USD) is a digital currency which has quadrupled in price in a four months’ time. Cryptocurrency has gone from an obscure notion to the cusp of mainstream acceptance in a relatively short period of time, with lots of bumps in between.
Mainstream acceptance is what I believe is one thing that is driving the current rise in bitcoin in relation to the dollar. This can be seen recently with JPMorgan’s (NYSE:JPM) establishment of a price target on the value of 1 bitcoin of $146,000 long term.
My usual articles are long. I’ll attempt to get to the point with this one. I’ll not expound on whether bitcoin or cryptocurrencies in general are a good or bad thing, or whether it is here to stay. Although there are fascinating discussions going on about these matters, I wanted to write this piece quickly to alert those who might be interested in a stock I consider undervalued before the company is discovered by more investors and the valuation gap shrinks.
I’ll compare a few bitcoin mining companies, explain why I think Hut 8 Mining Corp. (OTCQX:HUTMF) is undervalued in comparison, and why I think this is the case.
Hut 8 Mining Operations in Alberta, Canada
Source: Hut 8 Mining’s Facebook Page
I’m always searching for undervalued companies that I think will be money-making investments. A good deal of the hunt consists of spotting trends in the market, finding the leaders of that trend, and then finding companies that are also in the same category yet are lagging in stock performance. If I think the discount is unjustified and is mostly related to a lack of investor awareness, the stock might be a buy.
Hut 8 is a great example of this situation:
- Bitcoin is hitting all-time highs, and the trend toward acceptance of bitcoin is going mainstream;
- RIOT Blockchain (RIOT), a publicly-traded bitcoin miner, has seen its stock rise from $2 to over $20 in just 4 months.
- RIOT had about 830 bitcoins in its treasury at last count, and a current mining capacity of 842 PH/s (petahashes/second), while Hut 8 has 3007 bitcoins in its own treasury at last count and a current mining capacity of 1031 PH/s.
- Hut 8 is undiscovered, and when it gets discovered by more and more attention drawn to the bitcoin story and its own assets, I believe the company’s stock price should rise to something approaching fair value.
Hut 8 Mining’s Goals
Hut 8 has a straightforward mission:
Hut 8 is a bitcoin mining company with industrial scale operations in Alberta, Canada. Hut 8 provides investors with direct exposure to bitcoin through both its bitcoin mining operation and by holding its bitcoin balance. By owning Hut 8, investors avoid the technical complexity or constraints of purchasing the underlying cryptocurrency. Investors avoid the need to create online wallets, wire money offshore, and safely store their bitcoin.”
Source: Hut 8 Website
Per the company,
The name “Hut 8” refers to the building at Bletchley Park where Alan Turing created his world-changing Enigma decoding machine during World War II.
His work saved millions of lives, transformed cryptography and laid the foundation for Blockchain.”
Source: Hut 8 Website
Hut 8 at Bletchley Park where Alan Turing broke the Enigma Code during WWII.
Source: Hut 8’s Facebook Page
Hut 8 has recently installed new management, including an experienced new CEO in November of 2020, and two new board members and a head of investor relations in December 2020. Hut 8 trades on Canada’s largest stock exchange, the TSX (under the ticker symbol HUT)
While some other crypto miners have pursued growth at all costs, which has meant spending all of the bitcoin as fast as they produce it, Hut 8 has been squirreling away a lot of the Bitcoin that it has mined. Yet despite their stated intention to focus on growing their bitcoin balance, Hut 8 has still managed to grow their operations as well, to a sizable current mining power of 1,031 PH/s.
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Hut 8 Mining (HUTMF)
