This past two months have been quite the emotional rollercoaster for investors. Since the benchmark S&P 500 hit an all-time record closing high on Feb. 19, 2020, we've witnessed:
- The fastest descent into a bear market in history.
- The quickest descent to a 30% decline ever (the S&P 500 lost 34% in 33 calendar days).
- The highest CBOE Volatility Index reading ever recorded.
- The eight-largest single-session point gains for the S&P 500, as well as 10 of its 13-biggest single-day point declines.
Beyond just breaking stock market records, we've also witnessed 22 million Americans lose their jobs in a four-week span, and watched as West Texas Intermediate crude oil prices turned negative. Suffice it to say that the proliferation of the coronavirus disease 2019 (COVID-19) has led to some truly unprecedented economic responses.
But there is light among the darkness for long-term investors.
You see, every single stock market correction and bear market in history has eventually been wiped away by a bull market rally. Sometimes it takes just weeks to erase downward moves in the stock market, while other, steeper corrections can take years to erase. The point being that high-quality companies tend to grow their operating profits over the long run, which is what pushes all of the major U.S. indexes higher. That makes any significant correction in the stock market a surefire opportunity to buy top stocks at a discount.
What you might not realize is that you don't need to have Warren Buffett-type money to make money in the stock market. With most brokerages removing transaction fees, it's easier than ever for investors to put spare cash to work in equities. If you have even $300 in disposable cash that you won't need to pay bills or for emergencies, then it could be the perfect time to open a position in the following top stocks.
Like most social media website, eyeballs drive ad revenue, which is how Pinterest primarily makes its money. Last year, Pinterest wound up adding approximately 70 million users worldwide, with preliminary first-quarter data for 2020 showing it added at least another 30 million monthly active users (MAUs). What's particularly notable is the engagement Pinterest is generating beyond the walls of the United States. Of last year's 70 million new MAUs, roughly 90% of them came from international markets. This is relevant considering that average revenue per user (ARPU) more than doubled in overseas markets in 2019, and international markets offers the greatest opportunity for continued double-digit ARPU growth.
Pinterest is also just getting its feet wet with e-commerce and has only recently begun emphasizing video. Video has shown to be far more engaging to users that static photos, while e-commerce provides a platform for smaller businesses to engage with and sell to Pinterest's 365 million MAUs.
With Pinterest expected to turn the corner to recurring profitability very soon, it's a name investors can feel comfortable adding $300 to right now.
Biotech stocks rarely offer consistency, but that's not the case with rare-disease drug developer Alexion Pharmaceuticals (ALXN).
First off, all of the indications that Alexion aims to tackle are of the ultra-orphan variety. In other words, they're extremely rare, and as such have little or no competition. That opens the door for Alexion to bask in a long runway of cash flow, assuming its therapies meet their primary endpoint in clinical studies.
Secondly, drugmakers like Alexion are virtually immune to economic contractions and recessions. Although COVID-19 has been a clinical research disruptor for some drug developers, it's worth noting that patients with chronic illnesses who needed medicine in March are likely to need those same medicines in April and beyond. This creates predictable levels of cash flow for a company like Alexion.
Third and finally, Alexion improved its financial outlook by introducing Ultomiris in 2019. Ultomiris is a next-generation therapy that'll eventually replace Soliris, the company's blockbuster drug that netted almost $4 billion in sales last year. Since Ultomiris is a protein that's recycled through a patients' body, it only needs to be injected every eight weeks, as opposed to every two weeks with Soliris. In effect, Alexion secured exclusivity for the ultra-rare indications it serves for many more years to come.
Another company that we're watching blossom before our eyes into a true juggernaut is point-of-sale and payment solutions provider Square (SQ 3.95%). While there's little doubt that Square's point-of-sale services will take a hit from a major decline in near-term spending, the long-term outlook in a post-COVID-19 environment remains encouraging, with a tripling in annual sales possible over the next five years.
Last year, Square saw the dollar amount of purchases on its network grow by 25% to just over $106 billion. What's most notable about this growth is that it's not being entirely driven by small or medium-sized businesses as in year's past. Rather, large sellers accounted for 55% of gross payment volume in 2019. If Square is starting to catch on with larger sellers, the company's accelerated growth rate may be sustainable for years to come.
What's more, Square's Cash App has been an absolute beast in the growth department for the past two years. The number of active Cash App users has more than tripled to 24 million, with the average revenue being generated per Cash App user doubling to north of $30. The introduction of the Cash Card, a prepaid debit card that allows users to spend the balance of what's in their Cash App account, and the launch of equity investing tied to Cash App accounts, is proving a game-changer for Square.
Innovative Industrial Properties
Even the high-growth cannabis space can be the perfect place to put $300 to work, assuming you "weed" through the sea of unprofitable companies. This is why marijuana-focused real estate investment trust (REIT) Innovative Industrial Properties (IIPR 2.44%), one of the most profitable pot stocks on the planet, is worth buying.
Like most REITs, Innovative Industrial Properties' goal is to acquire assets within a specific industry (in this case cannabis) and lease those properties out for an extended period of time. IIP winds up benefiting by receiving years of predictable rental income, and is also able to pass along annual rental increases and property management fees that are based on rising annual rental rates.
To date, IIP owns 55 properties in 15 states, with more than 99% of its 4.1 million square feet of assets leased out for a weighted average of 16 years. As of February 2020, the company's average return on invested assets was 13.2%, implying a complete payback on its invested capital in about 5.5 years. It's figures like this that allow IIP to be the only pure-play pot stock that pays a dividend.
One last point worth mentioning is that IIP has been behind many sale-leaseback agreements with U.S. multistate operators (MSO). Since marijuana remains illegal at the federal level in the U.S., and will likely remain so regardless of whether President Trump wins reelection or if Democrat Joe Biden wins in November, IIP will continue to hold its competitive advantage in offering sale-leaseback agreements to U.S. MSOs.