The coronavirus disease 2019 (COVID-19) has completely changed how we as a society operate. Ideas that seemed almost unthinkable as recently as six weeks ago, such as the shutdown of nonessential businesses across the country to lessen the transmission of COVID-19, are now a reality. And the physical and financial toll associated with the coronavirus is very real.
As of this past Saturday, April 11, close to 1.8 million cases of COVID-19 had been reported worldwide, with the death toll from this respiratory illness approaching 110,000. The U.S. accounted for more than 20,000 of those deaths and approximately 30% of all confirmed cases.
As you can imagine, being the epicenter of the outbreak has put plenty of stress on the financial system. Almost 17 million people have filed for unemployment benefits within the past three weeks, while the stock market was thrust into bear market territory in less than four weeks' time.
But if there is a light at the end of the tunnel, at least from a financial standpoint, it's that every last bear market in history has proved to be a surefire buying opportunity for investors. Although it can sometimes take a while to completely erase a bear market from memory, the stock market always manages to do so, which is why it's the greatest wealth creator on the planet.
While it's understandable that not everyone is going to have disposable cash to put to work right now because of the aforementioned economic disruption, if you do have investable cash, now is the time to go on the offensive.
And despite what you might have heard, you don't need to be a millionaire to make money in the stock market. If you have, say, $10,000 you can put to work right now, here are five of the smartest stocks you can buy with that cash.
One of the smartest moves investors can make is to ride Warren Buffett's coattails to big gains, which has historically been a good idea. According to Berkshire Hathaway's (BRK.A 1.66%) (BRK.B 1.71%) 2019 shareholder letter, the per-share market value of Buffett's company has grown 2,744,062% (not a typo) over the past 55 years.
The not-so-subtle secret why Berkshire Hathaway is such a great investment is simple: you get Warren Buffett as your portfolio manager. Buffett's ability to locate undervalued businesses with competitive advantages, and to not be tempted to sell those investments, has translated into mammoth gains for investors. In fact, nearly $400 billion in value has been created by Buffett for his shareholders over his many decades at the helm.
A bet on Berkshire Hathaway is also a bet on the health of the U.S. economy. Buffett loves cyclical industries such as banks and information technology (i.e., Apple), meaning a growing U.S. economy tends to be a positive for Buffett's portfolio and Berkshire's share price.
Another no-brainer way to put $10,000 work right now is with social media giant Facebook (META 1.70%). While there's no question that Facebook's ad revenue will take a short-term hit with nonessential businesses closed, there are two very good reasons to buy on any significant weakness.
First of all, Facebook is the go-to source for social media advertising. Although there are other platforms where businesses can go to reach viewers, Facebook offers instant access to 1.66 billion daily active users and 2.5 billion monthly active users. No other platform even comes close to these figures, which gives Facebook a virtually insurmountable competitive edge (as well as plenty of ad-pricing power).
And second, Facebook isn't even close to monetizing all of its platforms yet. The roughly $70.7 billion in sales that Facebook generated in 2019 was derived from ads on Facebook and Instagram. This is a company that still hasn't monetized WhatsApp or Facebook Messenger. As owner of four of the seven most-visited social platforms, Facebook is sitting pretty.
Credit-services provider Visa (V 0.12%) is another smart stock to add to your portfolio. This is a company that holds the lion's share (53%) of U.S. credit card market share by network purchase volume, which is an enviable position given the key role consumption plays in driving U.S. gross domestic product growth. Between 2009 and 2018, the amount of credit card payments traversing its networks grew by around 150% to almost $2 trillion a year.
Similar to Berkshire Hathaway, Visa is also a play on a growing U.S. economy. Since recessions tend to be short-lived and economic expansions often last many years, Visa, a company dependent on payment processing fees, tends to see its business grow far more often than it contracts.
One last thing to note is that Visa solely focuses on its role as a payment processor and doesn't lend. Although some of its peers do lend, Visa's choice not to ensures that it isn't directly exposed to credit delinquencies when periods of instability do arise. This is why Visa's profit margin is a jaw-dropping 53% over the trailing 12 months.
While buying established companies is a great way to put $10,000 to work, it's never a bad idea to mix in early-stage growth stories with unique advantages. That's why healthcare solutions company Livongo Health (LVGO) is a stock investors should be buying.
Livongo Health's primary task is to help diabetes patients be healthier. Arguably the biggest task for the 34.2 million people in the U.S. with diabetes is simply staying on top of their disease. Through the use of artificial intelligence and copious amounts of data, Livongo Health provides tips to these patients to better help them manage their illness. In effect, Livongo helps diabetics change their behaviors to live a better life.
Not only does this sound great on paper, but it's translating into big-time growth. Last year, Livongo's diabetes member count nearly doubled to 222,700, with its enterprise client count up 95% to 804. More recently, Livongo preannounced sales data for the first quarter that topped its own guidance (at the midpoint) by about $5 million. Now on the cusp of recurring profitability, Livongo is a name investors will want to add for at least the next decade.
Finally, what list of the smartest stocks to buy wouldn't have e-commerce giant Amazon.com (AMZN 2.07%) on it?
Amazon has been one of the few companies that's really excelled during the COVID-19 crash, with consumers choosing to buy as much as possible online and from the comfort of their homes. Amazon was responsible for an estimated 38% of e-commerce sales last June, according to eMarketer, and has buffered its retail margins by signing up more than 150 million people worldwide as Prime customers.
But make no mistake about it, cloud-service segment Amazon Web Services (AWS) is where this company's real growth lies. Cloud margins are many times higher than retail margins, which is a good thing considering that AWS is growing more than twice as fast as Amazon's e-commerce operations. As AWS becomes a larger component of total sales, Amazon's cash flow is going to skyrocket. Among mega-cap stocks, it might be the most no-brainer buy of them all.