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Investing on Wall Street has been quite the adventure since this decade began, with all three major indexes alternating between bear and bull markets in successive years. Although the broad-based S&P 500 and growth-powered Nasdaq Composite managed respective gains of 24% and 43% in 2023, both indexes are still below their record-closing highs set more than two years ago.
To short-term traders, this lack of progress is undoubtedly disappointing. But for long-term-minded investors, any notable dip in the major indexes represents a surefire buying opportunity. That’s because every stock market correction, bear market, and crash throughout history (save for the 2022 bear market) has eventually been recouped by a bull market rally.
What’s especially noteworthy about putting your money to work on Wall Street is that you don’t need a mountain of cash to make an impact. Most online brokerages have completely done away with minimum deposit requirements and commission fees for common stock trades on major U.S. exchanges. This means any amount of money — even $100 — can be the perfect amount to put to work.
If you have $100 ready to invest, and you’re absolutely certain this isn’t cash you’ll need to pay bills or cover emergency expenses, the following three stocks stand out as no-brainer buys right now.
Bank of America
The first exceptional stock investors can confidently buy with $100 right now is money-center giant Bank of America (NYSE: BAC), best known as BofA.
If there’s a knock against bank stocks, it’s their cyclicality. This is to say that the operating performance of domestic banks hinges on the health of the U.S. economy. With a couple of money-based metrics signaling a strong likelihood for a recession in 2024, there’s the potential for loan losses and credit delinquencies to rise.
However, perspective is a powerful tool for investors. If your investment horizon is longer than a few months, bank stocks have historically treated you well. Whereas all 12 recessions following World War II have been short-lived (nine of 12 have lasted mere months), economic expansions are typically measured in multiple years. This suggests BofA is going to benefit from the steady expansion of its loan portfolio over time.
What makes Bank of America especially attractive at the moment is its interest rate sensitivity compared to America’s other money-center banks. The Federal Reserve has increased its federal funds target rate by 525 basis points since March 2022, representing the steepest rate-hiking cycle in over 40 years. Cumulative rate hikes have added billions of dollars in net interest income each quarter for BofA.
As I’ve noted previously, Bank of America deserves credit for its steady investments in technology. Three-quarters of the company’s customer base is now banking digitally, with nearly half of all loan sales completed online or via mobile app. Digital transactions are considerably cheaper for the company than in-person interactions. Continuing to invest in digitization initiatives should improve Bank of America’s operating efficiency.
Lastly, BofA stock is cheap. It can be purchased right now for about 10 times forward-year earnings and is trading right around its book value ($33.34/share). Historically, buying high-quality bank stocks at or below their book value has been a smart move.
Paramount Global
A second no-brainer stock that can be bought right now with $100 is media company Paramount Global (NASDAQ: PARA).
Legacy media companies like Paramount are fighting two key battles. To begin with, they’re navigating a fickle advertising environment. Weaker ad spending in 2023 weighed on Paramount’s TV Media segment. The other issue is the large operating losses tied to Paramount’s burgeoning streaming services. Legacy media companies are being forced to adapt as a result of ongoing cord-cutting by viewers, but it’s coming at the expense of their bottom line.
While these are both tangible reasons Paramount’s stock has been clobbered, there are also a couple of reasons for value investors to consider snagging shares on the cheap.
Not to sound like a broken record, but patience does wonders for ad-driven businesses. Since economic expansions last considerably longer than recessions, advertisers are going to possess reasonably strong pricing power more often than not. Don’t forget that 2024 is also an election year, and political ads usually boost overall ad spending.
What could be even more of a catalyst for Paramount in 2024 is the potential operating improvement of its streaming segment. Paramount has demonstrated a willingness to increase subscription prices and rein in expenses to push the segment toward profitability.
To add to the above, Paramount owns Pluto TV, the leading ad-supported, free streaming platform. If the U.S. dips into a recession this year, “free” becomes an incredibly enticing price point. For context, Pluto TV had 80 million monthly active users as of the end of March 2023.
For investors willing to look to the horizon, Paramount Global is a media giant capable of $2 (or more) in annual earnings per share. With the company trading 60% below its book value and at roughly 12 times forward-year earnings, a strong case can be made that it’s a screaming bargain.
Alibaba
The third no-brainer stock to buy with $100 right now is China’s leading e-commerce company, Alibaba (NYSE: BABA).
The biggest headwind with China stocks tends to be regulatory risks. China’s oversight of its largest companies can sometimes be stringent and unpredictable. Further, China’s strained relationship with the U.S. doesn’t help, either.
Skeptics are also liable to point to the departure of former CEO Daniel Zhang as a cause for concern. After steering the ship as CEO for eight years, Zhang stepped down in December 2022 to head Alibaba’s cloud division. However, his new role lasted less than a year. When key executives leave big businesses, it’s not uncommon for Wall Street and investors to be more critical of that business in the short run.
However, there are three reasons growth and value seekers should consider overlooking these headwinds.
The first is the absolute dominance of Alibaba’s e-commerce platform. China’s burgeoning middle class gives e-commerce sales an exceptionally long growth runway. According to the International Trade Administration, Alibaba’s Taobao and Tmall account for almost 51% (combined) of e-commerce share in the world’s No. 2 economy by gross domestic product.
The second meaningful catalyst for Alibaba is its rapidly growing cloud services segment. Based on estimates from Canalys, Alibaba accounted for 34% of cloud infrastructure service spending in China in the first quarter of 2023. Similar to e-commerce, this is a longtail opportunity for Alibaba to generate double-digit sales growth.
The final reason investors can jump at the opportunity to snag shares of Alibaba is its historically cheap valuation. If Alibaba’s gargantuan net cash, cash equivalents, and short-term investments position is backed out of the equation, shares of the company can be purchased for a record-low multiple of 5 times forward-year earnings. Even with the noted regulatory risks, the reward potential here is palpable.
Should you invest $1,000 in Bank of America right now?
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Sean Williams has positions in Bank of America. The Motley Fool has positions in and recommends Bank of America. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
3 No-Brainer Stocks to Buy With $100 Right Now was originally published by The Motley Fool
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