Following five months of back-and-forth debate between the Democrat-led House of Representatives and the Republican-majority Senate, an $892 billion fiscal stimulus deal was reached last week.
Pending the president's signature, this much-anticipated and long overdue stimulus package will provide $284 billion to the Paycheck Protection Program, lift federal unemployment benefits by $300 a week through mid-March, and allocate funds for the distribution of coronavirus disease 2019 (COVID-19) vaccines. It'll also provide well over 100 million Americans with another round of direct stimulus.
According to the text of the bill, qualified taxpayers can expect to receive up to $600, which is half the amount paid out via the CARES Act.
For some taxpayers, this money will be used to pay bills, bolster an emergency fund, or put food on the table. But for other qualifying recipients who aren't in a cash bind, putting their stimulus check to work in the following three unstoppable stocks might be the smartest move they can make.
Megacap stocks often have premium valuations because their business models are time-tested and unstoppable. That's why, even with its market cap closing in on $800 billion, your stimulus money can be put to work with confidence in social media giant Facebook (NASDAQ:FB).
As of the end of September, Facebook had 2.74 billion monthly active users and 3.21 billion family monthly active people. This family figures includes unique monthly users from other owned assets, such as WhatsApp and Instagram. There's not a social platform on the planet that really comes close to these active user figures. As a result, Facebook is the default go-to for advertisers looking to reach a targeted audience.
The craziest thing about Facebook is that it's still in the relatively early innings of its growth phase. While it's generating big bucks from ads on Facebook and Instagram, it's hardly monetized Facebook Messenger and WhatsApp. In total, the company owns four of the six most-visited social platforms in the world, and Facebook is only monetizing two of those four at the moment. When the company decides to open the proverbial floodgates, revenue and operating cash flow could reasonably double in less than four years.
Furthermore, Facebook has the opportunity to expand its revenue stream beyond advertising. The company will be launching its own cryptocurrency (Facebook Libra) in 2021, and could use Libra as a platform to bolster interest in Facebook Pay. It's also possible Facebook could use one of more of its platforms for content streaming services in the future.
The possibilities are endless for the most dominant company in the social media space.
Visa is the perfect example of a company that can be purchased and set on cruise control for a long time. That's because it's a company with big numbers in its sails. Although recessions are an inevitable part of the economic cycle, periods of economic expansion last considerably longer than recessions. Thus, Visa, a company driven by payment processing fees, generates more income over time as U.S. and global gross domestic product march higher. It's a numbers game, and Visa is always on the winning side over the long run.
Visa's success is also a reflection of its focus on payment processing and avoidance of lending. While some of its peers have chosen to double dip during periods of economic expansion, allowing them to collect interest income and processing fees, Visa has declined to join them. It's actually been a smart move, because inevitable recessions and economic contractions lead to rising credit delinquencies and charge-offs. Since it doesn't lend, rising credit delinquencies have little to no impact on Visa. This is a big reason why its profit margin is often above 50%.
Similar to Facebook, Visa's growth runway remains wide open. Approximately three-quarters of all global transactions are still being conducted in cash. This means Visa has plenty of opportunity to expand its infrastructure into developing and emerging markets that are still relatively underbanked.
Don't let its size fool you -- Visa is still very much a growth stock.
Johnson & Johnson
Though I'm not a big fan of chasing coronavirus vaccine stocks, Johnson & Johnson's experimental vaccine offers a potentially huge competitive advantage: It's the only vaccine being tested as a single-dose treatment. J&J is expected to report the interim results of its phase 3 study in January. If it were to demonstrate a vaccine efficacy that's similar to the two vaccines to have already received emergency use authorization in the U.S., J&J's one-dose vaccine could quickly gobble up share from the two-dose treatments.
But even beyond COVID-19 vaccines, Johnson & Johnson is set up for success. The company's three operating segments -- healthcare products, medical devices, and pharmaceuticals -- all bring something important to the table. For example, healthcare products may be slow-growing, but this segment provides strong pricing power and highly predictable cash flow. Meanwhile, the medical device segment is a long-term growth play on the aging of America. Lastly, pharmaceuticals have a finite period of exclusivity, but they generate the bulk of J&J's margins.
Johnson & Johnson might also be the most financially stable company in the United States. It's one of only two publicly traded companies to have a AAA credit rating, according to Standard & Poor's, and has grown its adjusted operating earnings in each of the past 36 years.
Nothing stops this train, which is why J&J makes for such smart buy with your stimulus money.