It's been a trying time to be an investor in the stock market. Despite more than a decade of stellar returns, investors' memories have been marred by what's happened over the short term. Namely, the stock market crash caused by the coronavirus disease 2019 (COVID-19) that wiped 34% off of the broad-based S&P 500 in a matter of 33 calendar days. It was the steepest descent into a bear market in history, and it led to record-breaking volatility, as measured by the CBOE Volatility Index.
Yet, no matter what the stock market throws our way, one constant remains: the success of long-term-oriented investors. Although we can't discern where the market will bottom or how long a bear market will last, history has definitely shown that, when given the proper amount of time, bear markets have always proved to be excellent buying opportunities for investors.
And remember, you don't have to be rich to get rich investing in the stock market. If you have even $1,000 in disposable income that isn't needed for bills or emergency savings, putting it to work in the following three stocks would be an incredibly smart move.
One thing I'll never do is apologize for beating the drum on companies I believe are game-changers for your portfolio, and that's exactly what I see robotic surgical system developer Intuitive Surgical (ISRG 2.13%) becoming over the next decade (and beyond).
Though Intuitive Surgical makes a handful of assistive devices, it's best known for its da Vinci surgical system. This system is used by surgeons in soft tissue applications to minimize incision length and, hopefully, lead to quicker patient recovery times. By the end of March 2020, the company had 5,669 da Vinci systems installed worldwide, which is far more than its competitors on a combined basis. This simply means that if a hospital or surgical center purchases one of these pricey machines for $0.5 million to $2.5 million, there's virtually no concern about future customer churn.
What's most exciting about the business model, though, is that it's built to improve its operating margins over time. Early on, Intuitive Surgical generated most of its revenue from selling its da Vinci systems. While pricey, they're a relatively low-margin source of sales given how intricate and costly these system are to build. Where the company generates the majority of its sales today is from selling instruments and accessories with each procedure, as well as in servicing its systems. Both of these revenue segments generate far better margins than system sales, and as the number of installed systems increases worldwide, the percentage of total sales derived from these higher-margin revenue streams will grow.
Intuitive Surgical already possesses the lion's share of urology and gynecology procedures, but it has plenty of room to grow its share in thoracic, colorectal, and general soft tissue surgeries. Having proved the surgical precision of the da Vinci system over two decades, I believe a double-digit compound annual growth rate is possible throughout this entire decade.
Another extremely smart way to deploy $1,000 in cash for the long run is to buy already-depressed shares of Walt Disney (DIS 3.98%).
The so-called "Happiest Place on Earth" has been more like a nightmare for investors in 2020, with the company's theme parks closing for extended periods of time due to COVID-19, along with movie theaters and its Disney cruise ships. In other words, the disruption from the coronavirus has been palpable in the company's operating results. But overlooking Disney because of issues that could plague the company for between six to 24 months would be an insult to what it has built over many decades.
Maybe the most defining reason to buy Disney stock is the company's brand engagement. This isn't just a business. It's a business that transcends generational gaps and forms an emotional attachment with consumers that keeps them loyal to the brand for long periods of time. Sure, folks might be avoiding theme parks right now because they view them as petri dishes for the coronavirus, but that's not going to keep lifelong Disney fans away from eventually visiting the park or enjoying the Disney brand in a number of other ways.
Speaking of those "other" ways, Disney launched its streaming Disney+ service only six months ago, but it has managed to increase its subscriber count to more than 50 million as of the second week of April. That's the power of the Disney brand in action. Between streaming services and its theatrical brands (Star Wars, Marvel, and Pixar), Disney has plenty of ways to grow beyond its theme parks.
What's more, it's been some time since investors could pick up Disney at such an attractive valuation. Even though Wall Street's estimates remain fluid because of COVID-19, the Street sees revenue growing nearly 40% between 2020 and 2023, with cash flow per share skyrocketing more than 160% to over $10 by 2023. The time to buy Walt Disney is right now.
You may have also noticed that bank stocks have been exceptionally weak since the coronavirus pandemic began, with Wells Fargo (WFC 2.14%) pushing to a new 52-week low, and threatening a decade low, earlier this week.
Why are bank stocks being shown so little love? Blame it on the Federal Reserve moving its federal funds rate back to an all-time low as well as unemployment levels spiking. Lower rates mean less in the way of net interest income for banks, while rising unemployment will almost certainly lead to an increase in loan delinquencies. More specifically, Wells Fargo is also still reeling from creating 3.5 million unauthorized accounts to satisfy aggressive cross-selling goals at its branches. However, these issues are the perfect time to snap up a quality money-center bank at its lowest valuation in about a decade.
One thing we know about banking consumers is that they have a relatively short memory span. Bank of America was hit with a bevy of lawsuits regarding its mortgage practices following the financial crisis. It also attempted to boost noninterest revenue in 2011 by charging a monthly fee so members could use their debit cards. Today, though, this is all a distant memory. Bank of America is thriving now, just as Wells Fargo will be in two or three years' time.
Wells Fargo has also always been especially good at attracting affluent clientele. Well-to-do banking clients have a lesser chance of being adversely impacted by economic contractions and are therefore less of a risk for delinquency on loans. Wells Fargo shouldn't have difficulty in continuing to court people with money.
Though I'm not entirely certain where the bottom might be, I feel confident in suggesting that, at 62% of its book value, Wells Fargo stock will be notably higher in five or 10 years than it is now.