There's little question that this has been a challenging year to be an investor. Even long-term investors have had their resolve tested like never before, with the coronavirus disease 2019 (COVID-19) pandemic pushing the broad-based S&P 500 lower by a whopping 34% in 33 days. This marked the quickest and steepest such decline from an all-time high in the stock market's history.
But at the same time, this volatility has provided a ray of hope and validated the convictions of long-term investors. That's because the S&P 500 has regained a significant portion of what was lost, while the technology-heavy Nasdaq Composite blasted to new all-time highs. Buying game-changing businesses and sticking with your investment thesis over the long haul continues to be a winning formula.
Maybe the best thing about investing in the stock market is that you don't need to be rich to get started or compound your wealth. If you've got $3,000 in disposable cash that won't be needed for emergencies or bills, you have more than enough to take charge of your financial future and invest it into the following three no-brainer buys.
When you think of no-brainer buys, chances are that electric utilities aren't what comes to mind. However, NextEra Energy (NEE 0.05%) isn't your run-of-the-mill utility company. It's returned 385% for its shareholders over the past 10 years, which is double the return of the benchmark S&P 500 over this period.
As you can probably imagine, one of the key advantages of owning utility stocks is predictability. With few exceptions, consumers and businesses tend to consume a relatively consistent amount of electricity each month, which allows NextEra to accurately estimate its cash flow. This plays a key role in NextEra apportioning capital for projects and ensuring that it maintains profitability while doing so.
But what really allows NextEra to stand out is the company's leading-edge focus on renewable sources of energy, which certainly helps when your primary market is the Sunshine State (Florida). No electric utility is generating more capacity from wind or solar energy than NextEra, and it should stay this way for the foreseeable future. The company is reinvesting $50 billion to $55 billion in capital expenditures through 2022, and has plans to install an additional 30 million solar panels by 2030, which should allow for an additional 10,000 megawatts of generating capacity.
Also aiding NextEra Energy is the Federal Reserve's pledge to keep its federal funds rate at record-low levels through 2022. This is allowing NextEra to lean on debt-fueled financing for its green-energy projects with minimal interest expense.
With an 8.4% compound annual earnings growth rate over the past 15 years, NextEra has proved to investors that it's a no-brainer buy for their portfolio.
If a more traditional growth stock is your thing, then might I suggest social media up-and-comer Pinterest (PINS 1.29%), which went public a little over a year ago.
There's no doubt that Facebook is the social media kingpin, and that getting the formula for success right online isn't as easy as it sounds. But that doesn't mean there isn't an exceptionally long growth runway for Pinterest to thrive.
First of all, Pinterest has done an exceptional job of attracting new users. Whereas Twitter's user growth stalled out, Pinterest's monthly active user (MAU) count is up 102 million to 367 million MAUs over the past five quarters, ended March 31, 2020. Best of all, almost all of this user growth has come from international markets. Even though average revenue per user (ARPU) is substantially lower in overseas markets relative to the U.S ($2.66 in the U.S. versus $0.13 in international markets as of Q1 2020), another way to look at this data is it gives Pinterest the opportunity to double its international ARPU many times over to drive ad-pricing power.
Pinterest should also have little trouble generating revenue from its relatively nascent e-commerce venture. With the company's platform built on the idea that users will share their interests and ideas with the world, it only makes sense to allow small and medium-sized businesses the opportunity to capitalize on these interests via e-commerce. Pinterest is using suggestive technology to help consumers find similar products to their pins, as well as order directly from their interest board or through a traditional search.
This e-commerce push should get a real shot in the arm in the quarters to come as COVID-19 forces the closure of brick-and-mortar retailers and has sent small business owners into the digital realm looking for customers.
Pinterest is a company with 10-bagger potential over the next decade, in my view.
A third no-brainer stock to buy with $3,000 is companion animal insurance provider Trupanion (TRUP -0.18%).
Why Trupanion? First off, just take a peek at some of the most pertinent U.S. pet industry statistics. For more than a quarter of a century, the American Pet Products Association has kept tabs on U.S. pet spending, and not once over this time span has spending fallen from one year to the next. Mind you, this includes the Great Recession and the dot-com bubble. This year, U.S. pet industry expenditures are expected to total an estimated $99 billion, which includes $29.3 billion in veterinary care and product sales.
Furthermore, surveys have consistently shown that our pets are treated as family members. Back in 2007, a Harris poll found that 88% of people viewed their pets as family. By 2016, this was up to 95%. As a longtime pet owner myself, let me affirm that wallets freely open up to ensure the health and well-being of our four-legged family members.
What makes Trupanion so intriguing is that insurance policy penetration on companion pets only stands at between 1% and 2% in North America. There are roughly 84.9 million households in the U.S. that own a pet, which means well over 83 million potential untapped clients just in the U.S. for Trupanion.
While there's no question that we'll see an increase in competition in the companion animal insurance space, Trupanion has built up rapport with the veterinary community and has established partnerships at the medical service level that should prove invaluable in growing its business.
Despite operating in a traditionally slow-growing industry, Trupanion has 50 consecutive quarters of 20%-plus sales growth under its belt and has the real potential to double its sales every five years if it can continue to retain existing customers and enroll new subscribers.