Over the long run, the stock market has proved to be a superior wealth creator. Though commodities like gold and oil, along with housing and Treasury bonds, have produced positive nominal returns for investors, none of these other asset classes have come close to delivering the annualized returns that stocks have generated over the last century.
With the three major stock indexes recently hitting fresh all-time highs, some investors might be leery of putting new money to work on Wall Street. But with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite eventually (key word!) erasing every notable downturn they've had throughout history, anytime can be the ideal moment to invest if you have a long-term mindset.
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Putting your money to work on Wall Street is especially fruitful given that most online brokers have removed barriers that had previously kept retail investors on the sidelines. More specifically, minimum deposit requirements and commission fees for common stock trades on major U.S. stock exchanges are now a thing of the past. This means any amount of money -- even $500 -- can be the perfect amount to put to work on Wall Street.
If you have $500 that's ready to invest, and you're absolutely certain this isn't cash you'll need to pay bills or cover emergencies as they arise, the following three stocks stand out as no-brainer buys right now.
Visa
The first exceptional business that makes for a surefire buy if you have $500 that's ready to be put to work on Wall Street is payment-processing leader Visa (V 0.43%).
Every publicly traded company has headwinds it contends with, and Visa's is simply that it's cyclical. This is to say that it ebbs-and-flows with the health of the U.S. and global economy. If the U.S. were to dip into a recession, aggregate spending and the total number of transactions facilitated by Visa would be expected to decline. At the moment, a couple of predictive indicators, including a meaningful drop in U.S. M2 money supply, suggest there's a real possibility for a downturn in the U.S. economy.
Thankfully, the economic cycle is a two-sided coin that's not proportionate. Since World War II ended in 1945, nine of 12 U.S. recessions were resolved in less than a year, while the remaining three failed to surpass 18 months in length. Most periods of economic growth stick around for years, which allows Visa to take advantage of a steady ramp in aggregate consumer and enterprise spending.
Something else to add to the above is that Visa's management team has kept the company focused solely on payment facilitation. While some of its payment-processing peers double dip and also generate interest income as lenders, these companies endure the added risk of credit delinquencies and loan losses during recessions. Visa doesn't have to worry about setting capital aside to cover loan losses during short-lived economic downturns, which is a key reason why it's able to sustain a profit margin of greater than 50%!
Despite its size (a $574 billion market cap), Visa has such an extensive growth runway beyond the borders of the U.S. that it should be able to sustain a double-digit earnings growth rate. Cross-border volume in the March-ended quarter surged 16%, which speaks to just how underbanked most emerging markets are. Visa has the abundant operating cash flow needed to organically or acquisitively expand its infrastructure in fast-growing emerging markets.
Further, Visa is the undisputed market share leader in credit card network purchase volume in the U.S. No other payment processor grew its share more than Visa following the Great Recession.
Okta
The second no-brainer stock that's begging to be bought right now by opportunistic investors with $500 is cybersecurity company Okta (OKTA -0.15%).
The biggest obstacle Okta will have to overcome is a security breach the company experienced late last year. Okta had to own up to the fact that hackers accessed sensitive information from its platform. While breaches are less than ideal for a company whose sole purpose is to protect against them, there are, nevertheless, multiple reasons for patient investors to be excited about the future.
On a broader scale, cybersecurity is effectively a basic need service for any business that has an online or cloud-based presence. Robots and hackers don't care how well or poorly the economy and/or the stock market are performing. They want sensitive information and will stop at nothing to get it. The responsibility of protecting this data is increasingly falling to third-party providers, such as identity verification solutions provider Okta.
The primary reason to be optimistic about Okta's future is that its Cloud Identity platform is cloud-native and reliant on artificial intelligence (AI) and machine learning (ML). In other words, it's overseeing countless events each day and learning how to spot and respond to potential threats. We've seen a number of endpoint cybersecurity providers lean on AI and ML solutions to strengthen their platforms.
Okta is also still very early in its expansion. During the company's Investor Day in November 2022, management spoke of an $80 billion addressable market in identity verification. Two years after this meeting, Okta is on track to generate about $2.5 billion in annual sales. It has ample opportunity to expand its market share in the coming years.
As I've previously pointed out, Okta's 2022 acquisition of Auth0 will likely prove critical to its long-term success. Auth0 gives the company beefed-up representation in the $30 billion addressable market for Customer Identity, and is playing a key role in pushing Okta's influence beyond the borders of the U.S.
Wall Street's consensus calls for Okta's earnings per share (EPS) to more than triple to $5.20 over the next four years.
Image source: Getty Images.
Pfizer
A third no-brainer stock to buy with $500 right now is none other than pharmaceutical titan Pfizer (PFE 1.63%).
Over the last two years, one of Wall Street's largest drug developers became a victim of its own success. During the COVID-19 pandemic, Pfizer was one of a handful of companies to successfully develop a vaccine (now known as Comirnaty). It also developed an oral treatment (known as Paxlovid) to lessen the severity of COVID-19 symptoms in patients that tested positive. Collectively, Comirnaty and Paxlovid generated more than $56 billion in sales in 2022. This year, they're expected to combine for just $8 billion in revenue.
Though this rapid ascent and decline in Pfizer's sales clearly has Wall Street and investors off-kilter, it's important to look at just how far Pfizer has progressed from where things stood just a few years earlier.
In 2020, the company reported nearly $42 billion in total sales. Meanwhile, the midpoint of its sales guidance in 2024 is $60 billion. That's an estimated sales increase of 43% in four years, which is pretty impressive for a large-scale pharma company.
More importantly, Pfizer's novel drugs beyond its COVID-19 therapies have continued to grow at a steady pace. Excluding Comirnaty and Paxlovid, Pfizer's sales jumped by 11% on a constant-currency basis in the first quarter. The core driver was its oncology segment, which delivered 19% operational sales growth. The superstar here was advanced prostate cancer drug Xtandi, which grew sales by 23% from the prior-year period, and is currently pacing an annual run-rate of almost $1.7 billion in revenue.
Additionally, Pfizer closed its $43 billion acquisition of cancer-drug developer Seagen in December. Although this buyout is expected to weigh on EPS in 2024, this combination should yield meaningful cost savings in future years. Not to mention, it's also going to rapidly expand Pfizer's oncology pipeline.
With Pfizer's supercharged yield of 6% not in any danger, and its shares valued at just 10 times forward-year earnings, the stock looks like a plain-as-day bargain.
