Volatility and uncertainty are par for the course on Wall Street. During the first four years of this decade, the Dow Jones Industrial Average, S&P 500And Nasdaq Composite has fluctuated between bear and bull markets in recent years.
But for more than a century, time has proven to be an undefeated ally of investors. While we will never know in advance when stock market corrections or bear markets will begin, how long they will last, or how steep the decline will be, we do know that all of Wall Street’s major stock indexes rise over time and eventually put these setbacks in the backseat. In other words, for long-term investors, there’s no such thing as a “bad” time to put their money to work on Wall Street.
Best of all, a majority of online brokers have broken down the barriers that previously prevented retail investors from participating in this long-term wealth creator. Most brokers have completely eliminated minimum deposit requirements and commission fees for common stock trades, meaning that any amount of money – even the $10 you have in your wallet – can be the perfect amount to invest.
If you have $10 ready to be put to work, and it’s not cash you need to cover basic expenses or your bills, the following three stocks stand out as a no-brainer purchase for the second half of 2024.
Sirius XM Holdings
The first wonderful company that stands out for the right reasons and can be confidently bought by investors at $10 for the second half of 2024 (and beyond) is a satellite radio operator. Sirius XM Holdings (NASDAQ: SIRI).
Besides the fact that I was recently fired, Nasdaq-100The main concern surrounding Sirius XM stock is the health of the auto market. Sirius XM relies on the purchase of new vehicles to convert a certain percentage of its promotional listeners into self-paying subscribers. If auto sales and/or the U.S. economy weaken, Sirius XM is likely to see a decline in self-paid subscriber conversions.
While being cyclical can sometimes be a crutch for the company, it has a number of competitive advantages up its sleeve.
The clearest catalyst for Sirius XM is that it is the only licensed satellite radio operator. Although Sirius XM still faces competition for listeners with terrestrial and online radio companies, because it is a satellite radio monopoly, Sirius Historically, the company has managed to increase the monthly service price without scaring away its subscribers.
Arguably the biggest differentiator between Sirius XM and other radio operators is the way it generates revenue. For terrestrial and online radio companies, advertising is responsible for the lion’s share of revenue. As for Sirius XM, less than 19% of first-quarter revenue came from advertising. This is notable considering that advertisers are quick to cut back on spending at the first sign of trouble for the U.S. economy.
By comparison, Sirius XM generated 78% of its first quarter revenue from subscriptions. The company’s subscribers are much less likely to cancel their service than companies that will reduce their advertising spend. On paper, Sirius XM has an easier path to navigate during periods of economic uncertainty.
Finally, Sirius XM Holdings is cheaper than ever as a publicly traded company. Investors can now buy shares for eight times full-year earnings, which represents a discount of more than 50% to the average earnings multiple over the past five years.
Nio
A second no-brainer stock that long-term-oriented investors can comfortably add to their portfolios at $10 for the second half of the year (and well beyond) is the China-based electric vehicle (EV) manufacturer. Nio (NYSE: NIO).
Nio, like most EV makers, has plummeted from its all-time high. As competition in the EV industry increases, Nio and its peers have had to lower their prices, which has had a detrimental effect on margins. Even though Nio won’t be able to overcome the challenges overnight, the risk-versus-reward profile for the company now appears to clearly favor optimists.
Innovation has been Nio’s driving force. The company introduces at least one new EV model per year and focuses primarily on affluent consumers. The affluent are less likely to change their purchasing behavior if economic growth slows or reverses.
Notably, the company’s sales have increased since the introduction of the NT 2.0 platform. Nio’s launch of NT 2.0, which improved/added a number of advanced driver assistance features, is a key reason why deliveries have increased 51% so far this year, as of May 2024, compared to the comparable period in 2023. Demand certainly hasn’t been an issue, which is more than can be said for some EV manufacturers.
Nio also has a competitive advantage with its Battery-as-a-Service (BaaS) solutions. With BaaS, drivers can charge, swap, upgrade and even lease batteries for their Nio EVs. Expanding BaaS helps keep EV buyers loyal to the brand, lining the company’s pockets with a potentially higher margin revenue stream.
The final piece of the puzzle is that Nio is properly capitalized. It ended March with $6.3 billion in cash, cash equivalents and marketable securities. Even accounting for continued losses, Nio’s cash likely accounts for about 60% of its current market cap. As noted, the risk-versus-reward profile favors upside.
Warner Bros. Discovery
The third no-brainer stock begging to be bought at $10 for the second half of 2024 is none other than media titan Warner Bros. Discovery (NASDAQ: WBD). This is the company created from the combination of WarnerMedia, a spin-off of AT&Tand Discovery in April 2022.
Things have been far from perfect since Warner Bros. Discovery came out of his shell. The advertising landscape has been uncertain, and historically high inflation has prompted the Federal Reserve to implement its most aggressive rate hike cycle since the early 1980s. For companies with significant debt (ahem, Warner Bros. Discovery), this means future deals or refinancing could be more expensive.
Despite these challenges, it appears the light at the end of the tunnel for Warner Bros. Discovery to become brighter.
For starters, the second half of 2024 should be a bright spot for ad-driven companies. A significant increase in political spending soon after the 2024 election cycle would impact advertising revenue for Warner Bros.’ Legacy Networks segment. To stimulate discovery.
In addition, Warner Bros. demonstrated that its streaming segment has significant pricing power. In an effort to make its direct-to-consumer (DTC) segment profitable, the company has increased its monthly subscription price. As a result, the global average revenue per user is increasing, as is the global number of DTC subscribers. With conscious cutbacks, the streaming segment should soon make a positive contribution to the operating result.
This is also a company that is taking steps to reduce its outstanding debt. Warner Bros. generates enormous amounts of cash flow (more than $3 per share per year), which can be used to improve financial flexibility.
While it may be difficult to see the trees for the forest, the core of Warner Bros. remains. Discovery is strong and there is a clear strategy to improve business results.
Should You Invest $1,000 in Sirius XM Now?
Before you buy shares in Sirius XM, here are some things to consider:
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Sean Williams has positions in AT&T, Sirius XM and Warner Bros. Discovery. The Motley Fool has positions in and recommends Nio and Warner Bros. Discovery. The Motley Fool has a disclosure policy.
3 No-Brainer Stocks to Buy With $10 for the Second Half of 2024 was originally published by The Motley Fool
