There's no denying that, despite its record-breaking volatility over the past year and change, the stock market is the greatest wealth creator on the planet. Taking into account the dot-com bubble, Great Recession, and coronavirus crash, the broad-based S&P 500 has still delivered average annual total returns (i.e., including dividends) of more than 10% since 1980.
Maybe the best thing about investing in stocks is that you don't need to start with a fortune to earn one on Wall Street. If you can spare $50, which won't be needed to pay bills or cover an emergency, you have more than enough to get started in the market or add to your existing portfolio. Here are five of the best stocks you can buy right now with $50.
Satellite-radio operator Sirius XM (SIRI 1.30%) may not be the growth stock it was more than a decade ago, but it's built a business model that's designed to grow cash flow and operating margin over time.
What makes Sirius XM unique is its subscription-based model. Whereas terrestrial and online radio operators are predominantly reliant on advertising for a majority of their revenue, Sirius XM generates most of its sales from satellite-radio subscriptions. This is important because contractions and recessions are an inevitable part of the economic cycle.
When the U.S. economy heads in reverse, ad revenue dries up quickly. By comparison, Sirius XM actually grew subscription revenue in 2020 by adding 909,000 net users for the year.
The Sirius XM operating model also benefits from a range of relatively fixed costs. Although the company regularly negotiates payment for talent and can pay varied levels of royalties, its costs for equipment and transmission are more or less fixed. This means operating margins should expand over time as the company's subscriber base heads higher.
OrganiGram made waves just two weeks ago when British American Tobacco announced that it was taking a 19.9% equity stake in the company. The duo will be working together to develop next-generation adult-use cannabis products, with a focus on cannabidiol (CBD). For OrganiGram, a company that's already leveraging its future heavily toward higher-margin derivative products, the partnership with BTI could open up doors to the lucrative European market.
Something else investors will appreciate about OrganiGram is the flexibility of its supply chain. Since OrganiGram is a major supplier with only one cultivation facility (Moncton, New Brunswick), it's able to adjust its output and expenses more seamlessly to match prevailing domestic demand than its peers. This should result in higher operating margins over the long run.
Kirkland Lake Gold
Despite having a rough go of late due to higher Treasury yields, physical gold should do fairly well with Joe Biden in the White House. The Biden administration's stimulus spending, coupled with the Federal Reserve's monthly bond-buying activity, should increase the U.S. money supply and pressure the dollar. Since gold and the dollar have an inverse relationship, the lustrous yellow metal should be buoyed up.
As for Kirkland Lake, it has everything you'd look for in a mining stock. The company's three producing mines produced at an all-in sustaining cost (AISC) of $800 per gold ounce in 2020, which is among the lowest in the industry. The cash flow Kirkland is generating from its more than $900 margin over AISC allowed it to repurchase 20 million shares of its common stock and triple its quarterly dividend.
Furthermore, Kirkland Lake has the best balance sheet of any gold stock. It ended last year with almost $848 million in cash and no debt. It's a cash flow powerhouse that would be the perfect home for a $50 investment.
Ping specializes in identity verification. The company's cloud-based solutions rely on artificial intelligence to grow smarter over time at identifying potential threats to enterprise data. Since more businesses than ever have adapted to remote work, demand for cloud-based identity protection should be on a long (and unstoppable) upswing.
Similar to Sirius XM, Ping's operating model benefits from the predictability of subscriptions. Despite taking its lumps in 2020, with some of its clients opting for one-year subscriptions as opposed to multiyear plans, Ping's subscriptions generated a gross margin of 86% during the fourth quarter, and annual recurring revenue growth came in at 15% for the full year.
Ping may not be growing as quickly as some of its peers, but investors are being compensated with one heck of a discount relative to sales. With most cybersecurity stocks valued at 20 or more times sales, opportunistic investors can scoop up shares of Ping at less than seven times projected revenue in 2021.
Teva Pharmaceutical Industries
Over the past five years, Teva has faced a mountain of hurdles. Its previous management team settled bribery claims, the company was hit with a number of lawsuits regarding the role it played in the opioid crisis and in generic-drug price-fixing, and it's been challenged by a very high debt load. But there's light at the end of the tunnel, and turnaround-specialist CEO Kare Schultz is leading the charge.
Since taking over in late 2017, Schultz has slashed annual expenditures by about $3 billion and managed to reduce net debt from north of $34 billion to less than $24 billion. The expectation is that Teva's net debt could dip below $15 billion by the end of 2023. Financially, it's in much better shape than it was just a few years prior.
At the same time, Schultz is helping to expand the company's brand-name drug division and improve volume for its bread-and-butter generics segment He will undoubtedly play a key role in negotiating a settlement for its handful of lawsuits, too. At just four times forward-year earnings, Teva looks like a serious bargain.