This has been one of the most volatile years on record for the stock market, but it remains the greatest wealth creator over the long run. Though housing and commodities have had moments throughout history where they've outperformed the broader market, no asset generates wealth more consistently over the long term than stocks.
The interesting thing about investing is that every sizable decline in the stock market represents a buying opportunity. Every official correction in the benchmark S&P 500 (i.e., an unrounded decline of at least 10%) has eventually been wiped away by a bull market rally. With equities recently pulling back from their all-time highs, there's still plenty of opportunity for investors to put their cash to work.
Best of all, you don't need to start with a mountain of cash to build wealth in the stock market. Since most online brokerages have reduced or eliminated minimum-balance requirements to open an account, you can begin charting your financial future with $300.
If you have $300 at the ready that won't be needed to cover an emergency or pay bills, here are four great stocks you can buy right now.
Generally speaking, I'm not a huge fan of buying into initial public offerings (IPOs), but Palantir Technologies (NYSE:PLTR) is an exception to the rule. The company, which provides data-mining services for the U.S. government and businesses, opted for a direct listing on Sept. 30, rather than a traditional IPO. This means existing shareholders sold their stock, rather than investment banks handling the affair.
The result was a valuation that wasn't inflated into the heavens (ahem, Snowflake). As of the closing bell on Tuesday, Oct. 6, investors could pick up shares of Palantir for around 21 times projected sales this year. That might sound expensive, but considering that Palantir's sales growth is accelerating, it's actually on the low end of sales multiples for high-growth tech stocks.
Though Palantir's Gotham platform, which the government uses to identity patterns within datasets, has generated $258 million of the $481 million in sales during the first half of 2020, it's actually the Foundry platform, which was launched in 2016, that offers more long-term growth potential. Foundry's data analytics are already being used by Airbus, BP, and Credit Suisse, to mention a few brand-name companies. If Palantir continues to diversify its client portfolio beyond its current 125 customers, it could easily offer multibagger potential in the years to come.
Elanco Animal Health
You may have heard me say this a few times before, but never bet against the U.S. companion-pet industry. That's why putting your $300 to work in companion-animal and livestock-therapeutics company Elanco Animal Health (NYSE:ELAN) would be a smart idea.
Think about this for a moment: Over the past quarter of a century, there hasn't been a year-on-year decline for U.S. pet expenditures, as measured by the American Pet Products Association. In 2020, an estimated $99 billion will be spent on companion animals, which includes just over $30 billion on veterinary-care costs and products. Pets are almost universally viewed as members of the family, and owners have proved they'll open their wallets to ensure the health of their family member.
What makes Elanco Animal Health so intriguing is that it recently completed the acquisition of Bayer's animal health segment for $7.6 billion. Purchasing this unit allows Elanco to slot in as the second-largest animal healthcare company. More importantly, the deal bolstered Elanco's exposure to the companion-animal segment and will result in between $275 million and $300 million in annual cost synergies, with two-thirds of these savings expected to be realized within 30 months.
Considering that U.S. pet expenditures rise every year, Elanco Animal Health is a logical long-term play in a highly recession-resistant industry.
Planet 13 Holdings
Over the next decade, marijuana should be one of the hottest growth industries on the planet. This is particularly true for the U.S., the No. 1 cannabis market in the world by annual sales. If you've got $300, the marijuana stock to buy is unique in the entire industry: Planet 13 Holdings (OTC:PLNH.F).
Whereas most multistate operators are focused on expanding to as many legalized states as possible, Planet 13's approach is different. Its SuperStore, just west of the Strip in Las Vegas, Nevada, is the largest dispensary in the world at 112,000 square feet. On top of a boatload of selling space, it houses a restaurant, events center, and consumer-facing processing center. It's essentially Disneyland for cannabis enthusiasts, and no other dispensary in the U.S. offers this appeal.
As someone who visited the SuperStore in 2019, I can also speak to the incorporation of technology to ease the checkout process, the inclusion of personalized "budtenders" to aid in the buying process, and the perfect store layout, which places high-margin derivative products by the entrance and checkout line.
Planet 13 will soon have a second location open just 10 minutes from Disneyland in California, and pre-announced record quarterly sales for the third quarter earlier this week. The approximate $124 average ticket from Q3 is more than 50% higher than where the average ticket stood when the SuperStore opened for business in November 2018.
Although Visa is susceptible to slowdowns in spending during recessions, the important thing to remember about cyclical companies is that periods of expansion often last much longer than periods of contraction. For instance, Visa's sales growth may have slowed a bit during the Great Recession, but it soared in the 11-year economic expansion that followed. Owning Visa ties your portfolio to the expansion of U.S. and global spending over the long term.
It should be noted that Visa is purely a payment facilitator and not a lender. The company may not be able to double dip during periods of expansion by charging interest on outstanding loans, but it also doesn't have to worry about credit delinquencies during economic contractions and recessions. Not having to set aside capital for loan-loss provisions is a big reason Visa maintains a profit margin of 50% or higher.
Additionally, don't overlook Visa's international growth runway. It scooped up Visa Europe in 2016 and has a multidecade opportunity to expand its infrastructure into underbanked regions of the world, like Africa, the Middle East, and Southeastern Asia.