For the past 14 months, stock market volatility has been above historic norms (thanks, coronavirus!). Despite this, all three major U.S. indexes have rocketed to all-time highs.
The reason? Over time, operating earnings growth drives equity valuations higher. We're never going to be able to predict what happens in the short run with any accuracy, but buying game-changing businesses and holding onto them for long periods of time tends to be a surefire moneymaking strategy.
But here's what most folks overlook: You don't need a gigantic pocketbook to build wealth on Wall Street. If you have $200 you can spare, which won't be needed to pay bills or cover an emergency, you have more than enough to start or further your trek toward financial independence. Here are some of the smartest stocks you can buy right now with $200.
One of the best ways for patient investors to put $200 to work right now would be to buy data-mining specialist Palantir Technologies (PLTR -2.68%). The company isn't exactly cheap at 42 times last year's sales but it's growing so quickly that it has a good chance to grow into its big shoes, so to speak.
Palantir is a dual-threat company. Its Gotham platform is designed to help the U.S. government mine through copious amounts of data so it can plan missions and keep its citizens safe. Multiple branches of the U.S. government have existing or pending contracts with the company. In total, 56% of its roughly $1.1 billion in sales last year were brought in by Gotham.
There's also the company's Foundry platform, which provides large-scale data analytics for predominantly medium- and large-sized businesses. Without getting too deep into company speak, Foundry allows businesses to aggregate and visualize their data to better streamline their operations. Foundry ended 2020 with 24 customers in the Global 300, implying it has a long runway to land new clients.
What both Gotham and Foundry bring to the table is a reliance on artificial intelligence (AI). Palantir's software solutions lean on AI to grow smarter all the time. Being able to adapt to a dynamic world and economy is what's helped Palantir hang onto its biggest clients.
What should investors expect from Palantir? Look for bigger businesses to latch on, but at the same time, the company's concentration of sales from its biggest customers may decline. By mid-decade, Foundry has the potential to be Palantir's core growth driver. Sales growth could reasonably remain in the 30%+ range for much of the decade.
Another exceptionally smart way to put $200 to work right now is by focusing on U.S. marijuana stocks. Even though Canadian pot stocks are more well-known, it's the U.S. multistate operators (MSO) that have a clear path to fast double-digit growth rates and recurring profitability. The cannabis stock that looks particularly cheap at the moment is Cresco Labs (CRLBF 4.64%).
Not to sound like a broken record, but Cresco Labs is also a dual threat. On one hand, it has its retail segment, which is common for pretty much all MSOs. Not including two pending acquisitions, Cresco has 24 operational dispensaries at the moment, with 29 total licenses in its back pocket. If the aforementioned deals close, it'll have more than 30 open dispensaries and the ability to have close to four dozen retail stores.
Perhaps the most interesting thing about Cresco's retail approach is that it's targeting a handful of limited-license markets. It's maximized its presence in Illinois (10 stores) and Ohio (5 stores), each of which caps the number of retail stores allowable in their respective states. By focusing on these limited-license markets, Cresco is giving itself the best possible chance to scoop up market share in billion-dollar markets.
On the other hand, Cresco has the cannabis industry's leading wholesale operations, which accounted for just over half of its 2020 sales. Wall Street appears to be discounting Cresco Labs relative to its peers because wholesale produces lower margins than retail. The thing is, Cresco's wholesale segment has access to more than 575 dispensaries in California, the largest marijuana market in the world by annual sales.
Investors can currently scoop up shares of Cresco for about 2.5 times forward-year sales, which is well below the industry average for U.S. MSOs. That's a big-time bargain folks shouldn't pass up.
Bristol Myers Squibb
For those of you who aren't big risk takers, consider putting your $200 to work in pharmaceutical stock Bristol Myers Squibb (BMY 0.34%). Would you be surprised if I mentioned that Bristol Myers is a dual threat, with both acquisitive and organic growth driving its top and bottom line higher?
On the acquisition front, Bristol Myers completed its purchase of drug developer Celgene in November 2019. Celgene primarily focused its efforts in oncology and immunology, with multiple myeloma superstar Revlimid leading the way.
Since its approval by the U.S. Food and Drug Administration (FDA) more than a decade ago, Revlimid has been growing annually by a double-digit percentage. It has benefited from label-expansion opportunities, longer duration of use, improved cancer-screening diagnostics, and strong pricing power.
Last year, Revlimid bought in $12.1 billion of Bristol Myers' $42.5 billion in worldwide product sales. The best part is it's protected from a full onslaught of generic competition until the end of January 2026. This gives Bristol Myers Squibb almost five more years to rake in the cash flow from this blockbuster.
On the organic-growth front, all eyes are on blood thinner Eliquis, which was co-developed with Pfizer, and cancer immunotherapy Opdivo. Eliquis has become the leading global oral anticoagulant, with Bristol Myers recognizing nearly $9.2 billion in sales in 2020 (up 16%). Meanwhile, Opdivo's sales retraced slightly to $7 billion last year. Nevertheless, Opdivo is being examined in dozens of clinical trials as a monotherapy or combination therapy, which offers plenty of hope for future label-expansion opportunities.
The bottom line is that investors can buy shares of Bristol Myers Squibb for about eight times Wall Street's forward-year consensus earnings, which is downright cheap. They'll also net a cool 3.1% dividend yield for their patience.