Investing in the stock market has been nothing short of a roller-coaster ride for the past year. During the first quarter of 2020, the benchmark S&P 500 lost more than a third of its value in roughly one month. It's now spent the past 10.5 months in all-out rally mode.
Although predicting short-term market moves is impossible to do with any ongoing accuracy, we do know that operating earnings growth tends to drive high-quality companies higher over the long run. This means that no matter how pricey the market may appear, it's never a bad time to put money to work in equities, as long as you have a long investing runway.
The best part about building wealth in the stock market is you don't need to be rich to get started. If you have $500 that you can spare for investments, which won't be needed to pay bills or cover emergencies, you have more than enough capital to buy the following three smart stocks right now.
Considering the insane revenue and profit multiples regularly placed on biotech stocks by Wall Street and retail investors, cancer-drug developer Exelixis (EXEL 1.15%) looks like a genius place for investors to put $500 to work right now.
For the time being, Exelixis is riding high on the coattails of its lead drug Cabometyx, which is approved to treat first-and-second-line renal cell carcinoma (RCC) and second-line hepatocellular carcinoma (HCC). These two indications should be more than enough to drive Cabometyx above $1 billion in annual sales in 2021 or 2022.
Exelixis continues to advance Cabometyx in approximately six dozen clinical trials, as well. One of those studies, CheckMate-9ER, examined its lead drug in combination with Bristol Myers Squibb's cancer immunotherapy blockbuster Opdivo in first-line RCC. Even though this is an indication that Cabometyx is already approved to treat, this combo getting the green light from the U.S. Food and Drug Administration gives Exelixis the opportunity to expand its first-line RCC share. If even a handful of these six dozen ongoing clinical trials pans out, Cabometyx can be a multi-billion dollar cancer drug.
Quietly, Exelixis has built up a $1.5 billion mountain of cash and cash equivalents, and is also targeting new compounds in development beyond Cabometyx. With a price-to-earnings-growth ratio (PEG ratio) near 1, it offers plenty of growth and value for patient investors.
In case you haven't noticed, marijuana stocks are on fire in recent months. But there's still plenty of value to be had, if you're willing to dig beyond the half-dozen pot stocks that seem to get all the attention. That's why small-cap multistate operator Jushi Holdings (JUSHF -6.84%) can be such an impressive long-term investment.
The interesting thing about Jushi is the company's approach to expansion. Instead of planting its proverbial flag in as many legalized states as possible, management has chosen to focus on three markets -- Pennsylvania, Virginia, and Illinois. What these states have in common is that they're all limited license issuers. Pennsylvania and Illinois cap the number of dispensary licenses they're going to issue, while Virginia apportions licenses based on territories. The point is, by focusing on these three states, Jushi will have little trouble building up its brand and won't face a lot of competition while doing so.
As of Jan. 22, Jushi has 16 operating dispensaries nationwide, including four in the Land of Lincoln (Illinois topped $1 billion in sales in its first year since legalizing adult-use weed). The company plans to open approximately 10 to 12 new locations in 2021, and should have more than enough capital to do so after a couple of recent capital raises.
Management also has a strong vested interest in the company's success. Of the first $250 million raised by Jushi, approximately $45 million came from insiders and executives. When management has skin in the game, good things tend to happen.
A final smart stock you can buy right now, even with its price-to-earnings ratio historically high, is Starbucks (SBUX 2.98%).
While there are plenty of fundamental reasons to buy into the Starbucks growth story, some of the best reasons to be excited about this company are intangible. For instance, it's one of the most recognized brands around the world, and is the fifth most-admired company, according to Fortune. There are only so many companies in the retail and food space that create the level of attachment and engagement with consumers that Starbucks is capable of. That alone is worth the premium, as long as you're willing to hold long-term.
From a financial standpoint, the reason Starbucks is looking a bit rough around the edges has to do with the challenges it's faced due to the coronavirus pandemic. Some of its stores have closed to in-store traffic, or simply closed for weeks due to outbreaks. Even so, the average ticket price in the fiscal first quarter for comparable stores in the U.S. was up 19%. This suggests the company's core customers are eager to get out and enjoy the Starbucks experience. It's also likely a reflection of the company's targeted, high-margin food offerings that cater to healthier lifestyles and the on-the-go lunch crowd.
Also, don't overlook Starbucks' opportunity in China. Average ticket and comparable-store sales were up 9% and 5%, respectively, in the fiscal first quarter, with Starbucks guiding for (drum roll) 27% to 32% comparable-store sales growth in China for full-year 2021. China really looks to be the primary growth driver for Starbucks this decade.