As 2022 showed, Wall Street can be unpredictable. When the curtain closed, the iconic Dow Jones Industrial Average, all-encompassing S&P 500, and growth-driven Nasdaq Composite, respectively lost 9%, 19%, and 33% of their value. It was the worst performance for each index since 2008.
However, the closest thing to a guarantee offered by Wall Street is that patience pays handsomely. Despite more than three dozen double-digit percentage corrections in the S&P 500 since the beginning of 1950, every single one of these declines (save for the current bear market) was eventually whisked away by a bull market rally. In short, bear markets are a phenomenal opportunity to buy stakes in great businesses at a discount.
The best thing about putting your money to work on Wall Street is that you don’t need a huge pile of cash to begin building wealth. With most online brokerages canning minimum deposit requirements and commission fees, any amount — even $200 — can be the ideal figure to invest.
So if you have $200 ready to invest right now and won’t need this money for bills or to cover emergencies, the following three stocks stand out as no-brainer buys.
The first no-brainer stock that’s ripe for the picking with $200 is the largest electric utility stock by market cap, NextEra Energy (NEE 1.18%). While it won’t deliver the supercharged growth rates you’d potentially find with tech stocks, NextEra Energy is the equivalent of a growth stock among electric utilities.
With the stock market navigating its way through a period of heightened uncertainty, putting your money to work in basic necessity stocks can be a smart idea. Regardless of whether you own or rent a home, you’ll almost certainly need electricity to power your appliances. Electricity demand doesn’t change much each year, which allows NextEra and its peers to pretty accurately forecast their annual cash flow. This transparency is what allows management to put aside money for new infrastructure projects and acquisitions without impacting profitability.
The reason NextEra Energy is effectively a growth stock within the utility sector is its renewable energy focus. There isn’t a utility in the country that’s generating more capacity from solar or wind power. NextEra’s Energy Resources segment ended 2022 with approximately 19 gigawatts (GW) of renewable energy backlog and expects to develop between 32.7 GW and 41.8 GW of combined wind, solar, energy storage, and wind repowering projects from 2023 through 2026.
On one hand, investing in renewable energy projects isn’t cheap. NextEra frequently leaned on historically low lending rates to fuel wind and solar projects. On the other hand, these clean-energy sources have reduced the company’s electricity generation cost. The result is a roughly 10% annualized adjusted earnings growth rate over the past 10 years. Comparatively, most electric utilities are growing by a low single-digit percentage.
NextEra Energy is also ahead of the curve on Capitol Hill. If legislation were to require electric utilities to meet certain clean energy standards in the future, NextEra would have a huge head start.
Including its dividend, NextEra Energy has delivered a positive total return for its shareholders in 19 of the past 21 years. Those are good odds for patient investors.
Another beaten-down stock that stands out as a no-brainer buy for folks with $200 ready to invest is media stock Paramount Global (PARA 3.33%).
The biggest drag for Paramount Global over the past year is the growing expectation that the U.S. will enter a recession. Media stocks are cyclical, with legacy TV segments often reliant on advertising revenue. When the U.S. economy weakens or shifts into reverse, it’s not uncommon for ad revenue and ad-pricing power to decline. Recessions can also bode poorly for the U.S. box office, which would be bad news for Paramount’s film entertainment division.
However, the flip side to this argument is that economic downturns are usually short lived when compared to periods of expansion. This simple numbers game allows ad revenue for Paramount’s legacy TV Media segment to modestly expand over time.
But let’s be real: Investors buying into Paramount are likely doing so to take advantage of its rapidly growing streaming operations. Paramount’s direct-to-consumer (DTC) subscriber count soared by 20 million in 12 months to 67 million, as of the end of September. Although this is a money-losing division at the moment, ongoing subscriber gains and future price hikes could push this streaming segment to a profit sooner than later.
Perhaps the most interesting puzzle piece in Paramount’s DTC portfolio is Pluto TV. This is the nation’s leading free, ad-supported streaming service. In the event that the U.S. economy continues to weaken, Pluto TV would be a strong candidate to gain subscribers, given that its monthly price of $0 can’t be beat. As Pluto TV’s subscriber count rises, Paramount Global should enjoy stronger ad-pricing power.
Lastly, Paramount’s film segment breathed new life last year, thanks almost entirely to Top Gun: Maverick and the nearly $1.5 billion it brought in globally at the box office. Although the success of this movie is going to be difficult to top, it’s certainly put Paramount’s movie division back on the radar.
The third no-brainer stock investors can confidently buy with $200, even following its sizable recent rebound, is social media stock Meta Platforms (META 3.03%). Meta is the company that was once known as Facebook.
There are two sizable headwinds that Meta has been battling over the past year. The first was touched on above: ad spending weakness. Roughly 97.5% of the company’s $116.6 billion in revenue last year came from advertising.
The other concern has been Meta’s exorbitant spending on metaverse innovations. The company’s Reality Labs segment lost $13.7 billion last year and $24.9 billion over the past two years.
Now for the good news: Meta is a social media behemoth that’s nowhere close to being unseated from its perch. Its monthly active user (MAU) count continues to climb, with 3.74 billion MAUs visiting at least one of its owned social media assets during the fourth quarter. Facebook, WhatsApp, Instagram, and Facebook Messenger are consistently among the most-downloaded social media apps in the world. More often than not, Meta should possess exceptionally strong pricing power with advertisers.
Another reason to like Meta, even after its big run, is the company’s ability to pull levers. The company’s 2023 guidance called for total operating expenses of $89 billion to $95 billion, which is down $5 billion from its prior forecast on both the top and bottom of the range. Spending approximately $5 billion less than what was previously expected this year, coupled with a share repurchase program of up to $40 billion, sends a clear message to investors that CEO Mark Zuckerberg has listened to their concerns.
It’s also worth noting that Meta Platforms’ balance sheet and operating cash flow are sturdy enough to support aggressive investments via Reality Labs. Meta closed out 2022 with $30.8 billion in net cash, cash equivalents, and marketable securities. It also generated $50.5 billion in net cash from its operating activities, before various investing and financing activities. Though Reality Labs’ losses are unsightly, Meta’s ad business is still a cash cow.
At 15 times forward-year earnings, Meta Platforms remains a steal for long-term investors.