It's possible that investors may never see a year as volatile as the one they've experienced in 2020. The unprecedented coronavirus disease 2019 (COVID-19) pandemic led to record levels of uncertainty and sent the broad-based S&P 500 tumbling by as much as 34% during the first quarter.
But where there's volatility, there's also opportunity for long-term-minded investors. The COVID-19 crash reminded investors of how beneficial it can be to own proven industry leaders, rather than throwing darts at unproven companies and hoping for the best.
If you have, say, $3,000 at your disposal, which won't be needed to cover bills or emergencies, you have more than enough to buy the following four proven stocks right now.
Social media giant Facebook ( FB 3.34% ) has received a bad rap of late. It's been the target of ad boycotts due to its filtering of perceived hate speech, and may be targeted by the U.S. government for antitrust practices. But when push comes to shove, there's not a safer stock tech stock to buy in the social media space.
Look at it this way: Facebook reported 2.7 billion monthly active users in the June-ended quarter, along with 3.14 billion family monthly active users. Family users includes the company's owned assets Instagram and WhatsApp. Advertisers understand that there isn't a platform where they can reach more targeted eyeballs at one time than Facebook. That gives the company exceptional pricing power, and is the fuel behind its consistent double-digit growth.
What's more, Facebook is behind four of the six-most-visited social sites on the planet: Facebook, WhatsApp, Instagram, and Facebook Messenger (not in that order). Interestingly, though, Facebook is only monetizing its namesake site and Instagram with ads at the moment. WhatsApp and Facebook Messenger are largely untapped, which'll provide years of added growth for Facebook.
Want an easy way to make money? Buy shares of Mastercard ( MA 4.13% ), forget about your holding, and check back in five to 10 years. Historically, that's been a surefire way for investors to make bank.
Mastercard may trail rival Visa by a significant amount in the U.S., but being the No. 2 in payment processing share in the largest economy in the world is still an enviable position to hold. Let's not forget that the length of economic expansions far outlasts contractions and recessions. Mastercard shareholders might take their lumps for a few quarters during a recession, but they're likely to benefit from multiple years of expansion following a contraction.
Mastercard also has a longer growth runway than most folks might realize. While there's little question that developed markets play a key role in pushing profits higher, more than three-quarters of all global transactions are still conducted in cash. This should allow Mastercard to push into underbanked regions of the world and bolster its share of the payment processing space outside the U.S.
As one final note, Mastercard is a processor and not a lender. This means there's no direct negative impact when credit delinquencies rise.
Bristol Myers Squibb
Another smart use of $3,000 would be to put it to work in Big Pharma Bristol Myers Squibb ( BMY 1.53% ). The exceptional margins associated with drug stocks make them a smart bet for long-term investors.
Maybe the most exciting development for Bristol Myers Squibb was the acquisition of Celgene, which closed last November. Celgene developed and sold multiple myeloma drug Revlimid, which has grown into one of the world's top-selling therapies. Revlimid has excellent pricing power and has benefited from label expansion, increased duration of use, and better cancer-screening diagnostics that have led to earlier diagnoses. Revlimid is protected from an onslaught of generic competition until the end of Jan. 2026, meaning there's a long period of juicy cash flow still to come.
Bristol Myers can also look forward to growth opportunities for blockbuster cancer immunotherapy Opdivo and leading oral anticoagulant Eliquis. Opdivo, in particular, is currently being tested in dozens of monotherapy and combination studies. If even a small handful of these trials proves successful, Opdivo's long-term peak potential could be in excess of $10 billion annually. In short, Bristol Myers is a money machine for its shareholders.
Great investments don't come more proven than Warren Buffett's Berkshire Hathaway ( BRK.A 2.18% )( BRK.B 2.06% ). Since 1965, Berkshire Hathaway's stock has averaged an annual gain of 20.3%, leading to an aggregate return, through 2019, of 2,744,062%. Put another way, $100 invested at the beginning of 1965 would have been worth more than $2.7 million by the end of 2019. I'd call that a successful operating model.
One reason for Berkshire Hathaway's success is Warren Buffett's penchant for buying into cyclical businesses. Buffett isn't a big fan of diversification, with he and his team placing more than 90% of the company's invested assets into information technology, financials, and consumer staples. However, owning cyclical businesses is a smart move for long-term investors, as it allows them to play the numbers. Since periods of expansion last much longer than recessions, Berkshire's holdings will grow more years than not.
Berkshire Hathaway also benefits from the Oracle of Omaha's conservative investment approach. Buffett's company always has a boatload of cash at the ready to pounce on perceived-to-be bargains. Also, the Oracle of Omaha and his right-hand man Charlie Munger have proved more than willing to repurchase Berkshire Hathaway stock, which should be beneficial to shareholders.