3 No-Brainer Stocks to Buy With $100 Right Now
Over the long run, Wall Street is a bona fide wealth-building machine. But when the lens is narrowed to just a few months or a couple of years, its outlook is far less predictable.
Since this decade began, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have traded off bear and bull markets on a couple of occasions. In the wake of the 2022 bear market, which saw the growth-oriented Nasdaq Composite shed 33% of its value, all three major indexes have rocketed to new all-time highs.
While some investors might be leery of putting their money to work with the indexes at or near a record high, patience and perspective are invaluable allies. Over time, every stock market correction and bear market has eventually been put into the rearview mirror by a bull market rally. This means value can always be found for long-term-minded investors, no matter how pricey the broader market is perceived to be at any given time.
Image source: Getty Images.
Furthermore, most online brokers have made it easier than ever for retail investors to put their money to work on Wall Street. Many have eliminated minimum deposit requirements and commission fees on common stock trades. This means any amount of money -- even $100 -- can be the perfect amount to invest.
If you have $100 that you're ready to invest, and this is cash you're certain won't be needed to pay bills or cover emergency expenses, the following three stocks stand out as no-brainer buys right now.
Starbucks
The first phenomenal stock that makes for a genius buy if you have $100 that's ready to be put to work right now is coffee chain Starbucks (NASDAQ: SBUX).
Although Starbucks has been as steady as they come in the restaurant space for decades, it's officially hit a rough patch. During the March-ended quarter, the company reported a 4% global comparable-store sales drop and notably reduced its sales forecast for the year to the "low single digits" from a previous forecast that had called for sales growth of around 10%.
While there's no sugarcoating that this was about as bad of a quarter as can be imagined, Starbucks has clear-cut competitive advantages that it can use to right the ship and deliver for its patient shareholders.
To begin with, Starbucks has historically shown that it has exceptional pricing power due to the loyalty of its customers. The company hasn't shied away from increasing its drink and food pricing to offset higher labor and material costs.
Another reason investors should expect Starbucks to bounce back in a big way is its Rewards Membership. The company closed out March with 32.8 million active Rewards Members in the U.S., which was up a modest 6% from the prior-year period.
Rewards Members are likelier than non-Rewards customers to have larger tickets, as well as use mobile ordering and/or have their credit card information stored on their smartphone. In other words, these are customers Starbucks has effectively "trained" to expedite the ordering process and quickly move in-store and drive-thru lines. As long as Rewards Membership is increasing, Starbucks is in great shape.
Don't overlook Starbucks' innovative capacity, either. During the COVID-19 pandemic, the company completely revamped its drive-thru experience to personalize interactions with video on its ordering boards. It also introduced new food and drink pairings on its menu to encourage higher-margin purchases. Though some of its newer drinks may not have hit home with consumers in the latest quarter, it has a history of product innovation that produces far more winners than losers.
Shares of Starbucks can be pounced on by opportunistic investors for 19 times forward-year earnings, which works out to a 32% discount to its average forward-year earnings multiple over the last five years.
PubMatic
A second no-brainer stock that's begging to be bought with $100 right now is cloud-based programmatic adtech company PubMatic (NASDAQ: PUBM).
The prevailing concern for any ad-driven company is the health of the U.S. economy. Though economic data continues to point to modest expansion, select predictive indicators, such as the first decline in U.S. M2 money supply since the Great Depression, suggest the U.S. economy may be nearing some turbulence. If the U.S. economy falls into a recession, advertising revenue would almost certainly decline.
On the other hand, economic expansions and recessions aren't linear events. Whereas no recession since World War II ended has surpassed 18 months in length, there have been two periods of growth that topped the decade mark. Ad-driven stocks tend to be excellent investments for patient investors.
What makes PubMatic so attractive is that its stomping ground, digital advertising, is the fastest-growing niche of the ad market. PubMatic helps publishing companies sell their digital display space via video, mobile, and connected TV channels. All of these segments have the potential to deliver sustained double-digit sales growth.
Another factor working in PubMatic's favor is the decision its management team made years ago to build out its own cloud-based programmatic ad platform. While costly and time-consuming, the decision to not rely on a third-party platform means that as PubMatic's sales scale, it'll be able to hang onto more of its revenue. Translation: PubMatic's operating margin should be higher than many of its peers.
This is a company that's also flush with cash. PubMatic has been generating positive cash flow for more than nine years and closed out March with $174.1 million in cash, cash equivalents, and marketable securities, with no debt. It's been able to utilize some of this cash to repurchase its stock, which should provide a boost to its earnings per share (EPS).
While PubMatic's forward price-to-earnings (P/E) ratio of 56 might seem unsightly, consensus estimates call for an annualized EPS growth rate of 67% over the next five years. In short, PubMatic remains a bargain for growth-seeking investors.
Image source: Sirius XM.
Sirius XM Holdings
The third no-brainer stock you can confidently buy with $100 right now is satellite-radio operator Sirius XM Holdings (NASDAQ: SIRI).
Similar to PubMatic, the health of the U.S. economy is paramount to Sirius XM's success. Most radio operators are reliant on advertising to pay their bills. In addition to ads, Sirius XM counts on promotional subscriptions that come with new vehicle purchases to translate into self-pay subscribers. If the U.S. dips into a recession, or new vehicles sales weaken, it would likely lead to fewer self-pay conversions.
Wall Street is currently down on Sirius XM because the company reported a decline of approximately 359,000 subs (about 1% of its base) during the March quarter. While this is not what management or current investors want to see, there are multiple reasons to believe Sirius XM can potentially double from its current share price.
Perhaps the most obvious reason to trust in Sirius XM as an investment is its pricing power. As the only licensed satellite-radio operator, it hasn't had any trouble increasing subscription prices on its members from time to time.
In addition to being the lone satellite-radio operator, Sirius XM generates its revenue differently than other radio providers. While most terrestrial and online radio providers get most of their sales from advertising, Sirius generated only 19% of its first-quarter revenue from ads. The bulk (78%) of its revenue comes from subscriptions. The advantage of subscriptions is more predictable operating cash flow in any economic climate.
Another competitive advantage for Sirius XM is the transparency of its cost structure. While content and revenue share costs are going to vacillate from one quarter to the next, equipment and transmission expenses tend to remain fixed and/or predictable no matter how many subscribers Sirius XM nets -- and Wall Street loves predictability.
The feather in the cap for Sirius XM is its attractive valuation and 3.5% yield. Investors can scoop up shares right now for a little north of 9 times forward-year earnings. This represents an all-time low forward earnings multiple for Sirius XM.
Should you invest $1,000 in Starbucks right now?
Before you buy stock in Starbucks, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Starbucks wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $580,722!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of May 13, 2024
Sean Williams has positions in PubMatic and Sirius XM. The Motley Fool has positions in and recommends PubMatic and Starbucks. The Motley Fool has a disclosure policy.
