3 no-brainer stocks to buy with $400 right now
Ready or not, stock market volatility is back! January saw heavy tech Nasdaq Compound and broad-based S&P500 undergo their strongest corrections since the early stages of the coronavirus pandemic in March 2020.
But where there is increased volatility, there are almost always opportunities for long-term investors. With each previous correction eventually erased by a bull market rally, declines in the broader market represent the perfect time to put money to work.
Best of all, you don’t need a mountain of cash to take advantage of these market declines. Any amount of money – even $400 – can be the perfect amount to build wealth during corrections.
If you have $400 ready to invest, which won’t be needed to cover emergencies or pay bills, the following three stocks are just begging to be bought right now.
Buying industry leaders that follow sustained double-digit growth trends is often a recipe for success in a correction. That’s why the provider of cloud-based customer relationship management (CRM) software solutions Salesforce.com (NYSE: CRM) made such a purchase without the fuss.
CRM software is what consumer-facing businesses use to improve existing customer relationships and increase sales. It can handle simple tasks, such as managing product or service issues and accessing real-time customer information, to more complex tasks, such as overseeing an online marketing campaign or performing predictive sales analytics for a new product or service. CRM software is a natural fit for the service industry, but it has found many avenues for growth in the industrial, financial, and healthcare sectors in recent years.
Salesforce is the dominant player in CRM software. According to a report by IDC, Salesforce accounted for 23.9% of global CRM spending in the first half of 2021 and was the top CRM solutions revenue driver for the eighth consecutive year. In fact, the next four top CRM players don’t even add up to Salesforce’s nearly 24% share. It has consistently gained market share for years, making it unlikely to be dethroned as the go-to CRM solution provider anytime soon.
Along with its dominant market share, the company’s growth is also a reflection of CEO and co-founder Marc Benioff making careful acquisitions to expand the company’s ecosystem and reach. Some of the most notable and successful purchases include MuleSoft, Tableau, and Slack Technologies. The Slack acquisition was completed last July and gives Salesforce access to a wide range of small and medium-sized businesses. In addition to expanding its revenue stream, Slack gives Salesforce the ability to cross-sell its solutions.
Few mega-cap companies have grown more consistently over the past two decades. With Benioff predicting sales could drop from $21.3 billion at the end of fiscal 2021 to at least $50 billion by fiscal 2026, any significant drop in Salesforce stock is an opportunity for investors patients to jump.
Another no-brainer buy with $400 for opportunistic investors is regional banking giant American bank (NYSE:USB).
Like all banking stocks, US Bancorp is very cyclical, but that’s not a bad thing. Even though banks are under pressure due to increased loan/credit delinquencies when recessions inevitably occur, these periods of contraction tend to last only a few months to a few quarters. By comparison, expansion periods are almost always measured in years. In other words, buying bank stocks allows investors to profit from the expansion of the US or global economy over time.
In addition to having a numbers advantage, US Bancorp also benefits immensely from its digital presence. Arguably, no major bank has had more success moving basic banking transactions online or to its mobile app. During the fourth quarter (ended Nov. 30), the company completed 81% of all transactions digitally, with 66% of all loan sales coming from online or mobile sources. This represents an increase from only 45% of all loan sales conducted digitally, as of January 1, 2020. Digital transactions are significantly more profitable for the business, and they have allowed US Bancorp to further reduce expenses by consolidating some of its branches.
While not the most interest rate sensitive major bank, US Bancorp is also expected to see a solid increase in net interest income as the Federal Reserve begins its rate hike cycle. With January 12-month inflation hitting a 40-year high of 7.5%, higher lending rates are a given. This means more money for banks with variable rate loans outstanding.
Finally, investors can appreciate US Bancorp’s stable and conservative management team. Where monetary central banks have previously been drawn to risky derivatives markets, US Bancorp has focused primarily on the bread and butter of banking: loan and deposit growth. This allows it to rebound quickly from recessions and produce one of the highest asset returns in banking.
A third obvious stock that can be bought with $400 right now is a biotech company. Novavax (NASDAQ: NVAX).
Novavax is one of more than a dozen drugmakers that have been working on therapies to treat coronavirus disease 2019 (COVID-19). But unlike many vaccine developers, Novavax’s lead vaccine, NVX-CoV2373, has reached rarefied territory when it comes to efficacy.
To date, three key studies have been published. In March and June last year, Novavax announced that its large-scale studies in the UK and US/Mexico had produced vaccine efficacies (VE) of 89.7% and 90.4%, respectively. Then, earlier this week, Novavax released data on adolescents, which showed its vaccine delivered an 82% EV against the delta variant (the dominant variant at the time of the study). Only three COVID-19 vaccine developers have reached the 90% VE mark, and Novavax is one of them. This makes it a logical choice to become one of the key players in the global vaccination campaign.
Another thing to consider is that the SARS-CoV-2 virus that causes COVID-19 has continued to mutate and produce new variants. It is therefore likely that COVID-19 will become an endemic, flu-like disease. While this is not good news for the world, it is great news for Novavax and its drug development platform. Instead of NVX-CoV2373 being just a one-hit wonder for initial inoculations, Novavax stands to benefit from a recurring revenue stream dependent on booster shots, variant-specific vaccinations, and perhaps even combination vaccines ( for example, a flu and COVID-19 reminder combined in one shot).
The only reason Novavax is so cheap (less than 4x expected earnings per share in 2022) is because the company delayed a number of key regulatory filings for its COVID-19 vaccine last year, and it’s ran into problems while ramping up production this year. Although not all problems are ideal, it is important to recognize that these problems are short-term in nature. Novavax has an extremely effective vaccine that should have no trouble becoming a key solution over time.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.