Just when you think volatility has been put in the rearview mirror, it resurfaces on Wall Street. But despite some wild swings in high-growth companies of late, one truth remains: Long-term investors have been rewarded handsomely for their patience. Even after the benchmark S&P 500 lost 34% of its value in 33 calendar days last year, it took mere months for all of these losses to be erased by the new bull market.
Yet even with the S&P 500 within striking distance of an all-time high, value can still be found. And I'm not just talking about the high-profile companies with share prices in the hundreds of dollars. Some of the most attractive and smartest investment opportunities currently sport a single-digit share price. Shares of the following three stocks can all be purchased under $10, and they're arguably some of the smartest investments on Wall Street.
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Annaly Capital Management
For value investors and dividend income seekers, there are few better values on Wall Street right now than mortgage real estate investment trust (REIT) Annaly Capital Management (NLY +1.03%).
In a nutshell, mortgage REITs like Annaly borrow money at lower short-term lending rates and use that capital to buy assets with higher long-term yields, such as mortgage-backed securities. The difference between this higher long-term yield and the lower short-term borrowing rate is known as net interest margin, or NIM. The wider the NIM, the more money Annaly gets to pocket. Pretty simple, right?
The wild card for mortgage REITs like Annaly is interest rates. When the yield curve flattens, mortgage REITs often seen their NIMs shrink. Meanwhile, when the yield curve is steepening -- i.e., an instance where long-term yields rise and short-term yields remain flat or decline -- Annaly tends to expand its NIM. During the early stages of an economic recovery, it's normal for the yield curve to steepen. Put another way, the current conditions just about couldn't be better for Annaly and its peers.
Another thing that makes Annaly such an intriguing buy for conservative investors and income seekers is its reliance on agency securities. An agency asset is one that's backed by the federal government in the event of default. Even though agency assets offer lower long-term yields than non-agency assets, the safety of this governmental protection allows Annaly to use leverage to pump up its profits.
Annaly Capital Management isn't going to double your money overnight, but it's averaged around a 10% dividend yield for more than two decades. This is a prudent and time-tested management team that continues to deliver for its shareholders.
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Jushi Holdings
For you supercharged growth-seeking investors, say hello to U.S.-focused marijuana stock Jushi Holdings (JUSHF 5.91%).
I can understand that some people are still are bit gun-shy about dipping their toes in the cannabis space given that the bubble burst in 2019 and it remains an illicit drug at the federal level in the United States. However, the federal government has been clear that it's going to let states dictate regulation. This should allow cannabis to be one of the fastest-growing industries in the country over the next five to 10 years.
What's allowed U.S. multi-state operator Jushi Holdings to stand out is the company's core focus on three markets: Pennsylvania, Illinois, and Virginia. The latter assigns retail licenses based on jurisdiction, whereas the former two states limit the number of dispensary licenses they'll issue. Though Jushi isn't confining itself to limited-license states, it is giving itself a good chance to build up its brands and create a loyal following, all while facing as little competition as possible.
Even though it's a relatively small company with fewer than 20 open dispensaries, Jushi's management team hasn't been afraid to pull the trigger on acquisitions. In fact, Jushi has been a busy bee on the buyout front in recent months. It's beefed up its presence in Pennsylvania and Virginia and dipped its toes in the water in California, the largest marijuana market in the world by annual sales.
Just what sort of growth should Jushi's shareholders expect? According to the company, sales will grow from shy of $81 million in 2020 to between $205 million and $255 million in 2021. By 2024, Wall Street believes annual revenue will hit $629 million. The company's market cap this past weekend was just $683 million.
Image source: Sirius XM.
Sirius XM
Lastly, for folks who want a nice balance of growth, value, and a sprinkling of dividend income, satellite-radio operator Sirius XM Holdings (SIRI +0.00%) is one of the smartest stocks to buy.
To get the obvious out of the way, Sirius XM is a legal monopoly; there are no other satellite-radio operators. But this doesn't mean it's devoid of competition. On paper, all terrestrial radio and online operators are potential competitors.
Where Sirius XM pulls away from the pack is how it generates the bulk of its revenue. Whereas terrestrial and online radio platforms rely almost entirely on advertising for revenue, Sirius XM generates most of its sales from subscriptions. In the March-ended quarter, $1.61 billion of its $2.06 billion in total revenue was derived from subscriptions, with $354 million in ad revenue. During recessions, ad revenue can shrink pretty quickly, but subscribers aren't likely to cancel. This allows Sirius XM to navigate downtrends much better than its peers.
Another aspect investors will like about Sirius XM is that some of its costs are relatively fixed. Although royalty and talent expenses are going to naturally vary from year to year, equipment and transmission costs tend to be relatively flat. Put another way, no matter how many new subscribers Sirius XM brings in, its costs to provide service to these individuals doesn't change. That's a recipe for higher operating margins over time.
