In 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 few years, the outlook is much less predictable.
Since the beginning of this decade, the Dow Jones Industrial Average, S&P500And Nasdaq Composite have traded bear and bull markets a few times. In the wake of the 2022 bear market, which saw the growth-oriented Nasdaq Composite lose 33% of its value, all three major indexes have soared to new all-time highs.
While some investors may be hesitant to put their money to work while the indices are at or near record highs, patience and perspective are invaluable. Over time, every stock market correction and bear market has eventually been put in the rearview mirror by a bull market rally. This means that value can always be found for long-term investors, no matter how pricey the broader market is perceived to be at any given time.
Additionally, 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 for common stock trades. This means that any amount of money – even $100 – can be the perfect amount to invest.
If you have $100 you want to invest, and this is cash that you’re confident won’t be needed to pay bills or cover emergency expenses, then the following three stocks stand out as a no-brainer purchase right now .
Starbucks
The first phenomenal stock that makes a genius purchase if you have $100 ready to be put to work now is the coffee chain Starbucks (NASDAQ:SBUX).
Although Starbucks has been as stable as they come in the restaurant world for decades, it has officially hit a rough patch. During the quarter ended March, the company reported a 4% global comparable store sales decline and significantly lowered its sales forecast for the year to the “low single digits” from a previous forecast that had called for sales growth of approximately 10%.
While there’s no evidence that this was about as bad a quarter as one might imagine, Starbucks has clear competitive advantages that it can use to right the ship and deliver results for its patient shareholders.
For starters, Starbucks has historically demonstrated exceptional pricing power due to the loyalty of its customers. The company has not hesitated to raise beverage and food prices to offset higher labor and material costs.
Another reason why investors should expect Starbucks to make a big recovery is its Rewards membership. The company ended March with 32.8 million active Rewards members in the US, a modest 6% increase from the same period last year.
Rewards members are more likely than non-Rewards customers to have larger tickets, mobile ordering and/or to have their credit card information stored on their smartphone. In other words, these are customers that Starbucks has effectively “trained” to speed up the ordering process and quickly move the lines in the store and drive-thru. As long as Rewards membership increases, Starbucks will be in great shape.
Don’t forget Starbucks’ ability to innovate. During the COVID-19 pandemic, the company completely revamped its drive-thru experience to personalize interactions with video on order boards. It also introduced new food and drink combinations to its menu to encourage higher-margin purchases. While some of its newer drinks may not have reached consumers this past quarter, the company has a history of product innovation that produces far more winners than losers.
Shares of Starbucks could be targeted by opportunistic investors at 19 times full-year earnings, which represents a 32% discount to average earnings over the past five years.
PubMatic
A second no-brainer stock that’s now begging to be bought at $100 is a cloud-based programmatic adtech company PubMatic (NASDAQ: PUBM).
The overriding concern for any advertising-driven company is the health of the U.S. economy. While economic data continues to point to modest growth, select predictive indicators, such as the first decline in the U.S. M2 money supply since the Great Depression, indicate that the U.S. economy may be approaching some turbulence. If the U.S. economy enters a recession, advertising revenues will almost certainly decline.
On the other hand, economic expansions and recessions are not linear events. Although no recession since the end of World War II has lasted longer than eighteen months, there have been two periods of growth that exceeded the ten-year mark. Ad-driven stocks tend to be excellent investments for patient investors.
What makes PubMatic so attractive is that its platform, digital advertising, is the fastest growing niche of the advertising market. PubMatic helps publishers sell their digital display space across video, mobile and connected TV channels. All these segments have the potential to deliver sustainable double-digit revenue 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 advertising platform. Although costly and time-consuming, the decision not to rely on a third-party platform means that PubMatic will be able to retain a greater portion of its revenue given the volume of sales. Translation: PubMatic’s operating margin should be higher than many of its competitors.
This is a company that also has cash. PubMatic has been generating positive cash flow for more than nine years and ended March with $174.1 million in cash, cash equivalents and marketable securities, with no debt. It has been able to use some of this money to buy back its shares, which should boost earnings per share (EPS).
While PubMatic’s price-to-earnings (P/E) ratio of 56 may seem unsightly, consensus estimates call for annual earnings per share growth of 67% over the next five years. In short, PubMatic remains a bargain for investors looking for growth.
Sirius XM Holdings
The third simple stock you can now buy with confidence for $100 is a satellite radio operator Sirius XM Holdings (NASDAQ: SIRI).
As with PubMatic, the health of the U.S. economy is critical to Sirius XM’s success. Most radio operators rely on advertising to pay their bills. In addition to advertising, Sirius XM relies on promotional subscriptions that come with the purchase of new vehicles, which translate into self-pay subscribers. If the US enters a recession, or new car sales weaken, this would likely lead to fewer self-pay conversions.
Wall Street is currently lower on Sirius While this isn’t what management or current investors want to see, there are several reasons to believe that Sirius XM could potentially double from its current share price.
Perhaps the most obvious reason to trust Sirius XM as an investment is its pricing power. As the only licensed satellite radio operator, it has had no problem raising subscription prices for its members from time to time.
Sirius XM is not only the only satellite radio operator, but it also generates its revenue differently than other radio providers. While most terrestrial and online radio providers generate the majority of their revenue from advertising, Sirius generated only 19% of its first quarter revenue from advertising. The majority (78%) of turnover comes from subscriptions. The benefit 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 costs and revenue shares will fluctuate from one quarter to the next, equipment and transmission costs often remain fixed and/or predictable regardless of how many subscribers Sirius XM just has – and Wall Street Loves predictability.
The great thing about Sirius XM is its attractive valuation and 3.5% yield. Investors can now scoop up shares for just over nine times next year’s earnings. This represents an all-time low profit level for Sirius XM.
Should You Invest $1,000 in Starbucks Now?
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Sean Williams has positions in PubMatic and Sirius XM. The Motley Fool holds and recommends positions in PubMatic and Starbucks. The Motley Fool has a disclosure policy.
3 No-Brainer Stocks to Buy Right Now with $100 was originally published by The Motley Fool
