There's little question that 2020 is going to be a year that people will be talking about for a long time to come. It's been an especially volatile year for Wall Street and investors.
In a roughly four-month span between mid-February and mid-June, the benchmark S&P 500 experienced about 10 years' worth of volatility. It took less than five weeks for the broad-based index to lose more than a third of its value, which marked the fastest descent from an all-time high in history. Then, over the following 11 weeks, the stock market rebounded ferociously, erasing much of its losses. In fact, the technology-heavy Nasdaq Composite has gone on to hit multiple record closing highs.
If there's one thing that the coronavirus disease 2019 (COVID-19) pandemic has taught investors, it's the importance of thinking long term. No matter how grim things may look, every single correction in history prior to COVID-19 has eventually been erased by a bull-market rally.
The best part about investing in the stock market is that you don't need a mountain of cash to get started. If you have even $300 you can set aside for investments that won't be needed to pay bills or for emergency purposes, you have more than enough to begin growing your wealth. If you have $300 (or more) that you're looking to put to work, consider following in the footsteps of clever investors and buy these three stocks.
Sometimes, the most intriguing long-term opportunities are brand-name companies hiding in plain sight. One such company that fits the bill as a clever buy is pharmacy-chain giant CVS Health (CVS 0.24%).
Unlike most healthcare companies, CVS Health is a bit more exposed to the COVID-19 pandemic than its peers. Because CVS has a retail presence and has seen less in the way of preventative services of late (e.g., vaccines), it could see revenue weakness throughout much of 2020. But this short-term weakness is exactly what smart investors are going to overlook because there are a handful of long-term growth catalysts that should have investors excited.
In 2018, for instance, CVS Health completed its acquisition of health insurer Aetna. Generally speaking, health insurance isn't a fast-growing industry. But when dealing with thin retail margins at the front end of CVS' stores, this deal offers a plethora of benefits. It'll increase CVS' organic growth rate, provide cost synergies that should lift operating margins, and can help the company keep Aetna's tens of millions of members loyal to the CVS brand.
CVS Health is also rolling out personalized medicine initiatives, which'll include the opening of approximately 1,500 HealthHUB health centers around the country. These neighborhood wellness centers should aid in driving foot traffic and may help promote brand engagement in an increasingly digital world.
Trading at just over eight times next year's forecast earnings per share, CVS Health is ripe for the picking.
Clever investors have also been loading up on payment-processing giant Visa (V 0.62%) amid the market volatility.
Similar to CVS Health, Visa is going to experience some hiccups in the quarters to come. The company has already cautioned that consumer spending on its network dipped considerably in late March. Additional economic evidence, such as U.S. retail sales figures for May, suggest that while things are improving, the U.S. economy isn't simply going to bounce back overnight. That could mean a challenging 2020 for Visa.
But adjust those binoculars beyond 2020 and you'll see plenty of reasons to be excited about Visa's future. For instance, Visa is a company that typically grows during periods of economic expansion. Although recessions are an inevitable part of the economic cycle, the U.S. economy spends a considerably longer period of time expanding than contracting. In other words, a bet on Visa is really a bet on the long-term expansion of the U.S. economy and consumption.
Visa also has plenty of opportunity to spread its wings beyond the borders of the United States. In 2016, it did so inorganically by acquiring Visa Europe, thereby bolstering its merchant count and fee profile. It can also grow organically by expanding its payment-processing infrastructure in underserved markets, such as the Middle East and Africa. An estimated 85% of all transactions globally still are conducted in cash, so Visa offers sustainable double-digit growth potential.
Lastly, take note that Visa acts solely as a payment facilitator and not a lender. During recessions, this means it isn't directly exposed to loan delinquencies, which is a big reason its operating margin is often around or above 50%.
Clever investors are also buying companies that are under the radar, such as cybersecurity play Ping Identity (PING), which went public in September 2019.
Keeping with the theme, Ping is going to face some near-term COVID-19-related hurdles as the shutdown of nonessential businesses has likely minimized the need for certain security solutions or slowed new enrollees. However, this near-term weakness should be overlooked considering the important role Ping's solutions will play moving forward.
To be clear, cybersecurity was already growing quickly well before COVID-19. But with businesses shifting to remote settings in the wake of the coronavirus pandemic, the need to protect enterprise clouds and data has grown immensely. What Ping does is provide smart identification-verification solutions for enterprises.
What allows Ping Identity to stand out from the crowd is the company's use of artificial intelligence and machine learning. If Ping's identity solutions detect that something might be awry with a login attempt, it may require two-factor authentication before granting access. This ability to recognize potential threats and evolve is what should allow Ping to become a cybersecurity giant.
Considering that it's already profitable and fully capable of sustained 15% to 20% annual sales growth, Ping has the look of a long-term winner.