Whether you realize it or not, the stock market is a wealth-building machine. The secret to success in the market is simply having patience and allowing your investing thesis in great companies to play out over time. If you buy with a long-term mindset, the data is crystal clear that you have a really good chance to build wealth and potentially achieve financial independence.
Perhaps the best thing of all about investing in stocks is that you don't need a mountain of money to do so. With most online brokerages eliminating minimum deposit amounts and trading commissions on major exchanges, you can invest $300 and begin (or further) your trek toward financial freedom.
If you have $300 you can spare that won't be needed to pay bills or cover emergencies, the following trio of companies represents the smartest stocks you can buy right now.
One of the smartest things you could do with $300 at this very moment is put it to work in the world's leading payment-processor Visa (V 0.12%). The company may not be cheap in a traditional sense of the term, but it makes perfect sense to pay a premium for a business that excels at practically everything.
Visa, like most financial stocks, is a cyclical company. This is a fancy way of saying that it performs well when the U.S. and global economy are expanding and struggles when the opposite is true. This shouldn't come as a surprise, given that consumer and enterprise spending drives the merchant fees it collects.
But what's important to note is that Visa is playing a numbers game it's virtually assured to win. Recessions often last no longer than a couple of quarters. Meanwhile, periods of economic expansion can go on for years, if not a decade. This means Visa is in expansion mode for a considerably longer period of time than it's on the defensive.
Another interesting operating choice for Visa is that it strictly sticks to the payment-processing side of the equation. Even though some of its peers, such as American Express and Discover Financial Services, lend and process payments, Visa chooses not to. While it's giving up interest income and fee potential during these long-winded periods of expansion, it's also avoiding the credit delinquencies that inevitably arise during economic contractions and recessions. Not having to worry about credit-based losses is why Visa bounces back from recessions so quickly.
Don't overlook the global-expansion runway, either. A majority of the world's transactions are still being conducted in cash. This gives Visa the opportunity to move into underbanked emerging markets or use acquisitions as a means of strengthening its global position in the payments space (e.g., the purchase of Visa Europe in 2016).
Between its dominance of the U.S. credit card payments market (53% market share in 2018) and its emerging-market opportunity, Visa is a no-brainer buy-and-hold stock.
Prior to the pandemic, businesses were shifting online and into the cloud at a steady pace. But once the coronavirus pandemic hit and completely disrupted workplaces, demand for data protection soared, putting the onus of responsibility on third-party providers like CrowdStrike. Cybersecurity has effectively become a basic-need service, no matter the size of the company or the state of the U.S./global economy.
CrowdStrike's superstar is its cloud-native Falcon security platform. Built entirely in the cloud and reliant on artificial intelligence (AI), Falcon oversees an estimated 6 trillion events on a weekly basis. The use of AI allows Falcon to become more proficient at identifying and responding to threats. In other words, CrowdStrike's platform is better at dealing with potential threats, and it's often cheaper than on-premises solutions.
What's plainly evident from CrowdStrike's operating results is that its suite of cloud-based solutions works. In a stretch of 17 quarters (four years and three months), its subscribing customers have catapulted from 450 to 11,420! What's more, it's retaining 98% of its customers on a year-over-year basis, and in each of the past 12 quarters, we've observed existing clients spend between 23% and 47% more than they did in the previous year.
The real moneymaker for CrowdStrike is that its clients are willingly purchasing multiple cloud module subscriptions. In four years, the percentage of subscribers that bought four or more cloud module subscriptions has soared to 64% from 9%. Since the company has already hit its long-term subscription gross margin target of 77% to 82%, it's these added cloud modules per customer that'll drive its operating cash flow through the roof.
Annaly Capital Management
For value- and income-seeking investors, perhaps the smartest stock to buy right now with $300 is mortgage real estate investment trust (REIT) Annaly Capital Management (NLY 1.04%). To put things bluntly, Annaly and the mortgage REIT industry haven't been well liked by Wall Street for almost a decade. But that's about to change.
Mortgage REITs like Annaly borrow money at low short-term rates and use that capital to buy assets with higher long-term yields, such as mortgage-backed securities (MBS). The difference between this higher long-term yield and lower short-term borrowing rate is known as net interest margin (NIM). The wider the NIM, the more money Annaly makes. Since Annaly is a REIT that avoids normal corporate income tax rates, the more money it makes, the higher its dividend payout.
In the years leading up to the coronavirus pandemic, the yield curve flattened. This is to say that long-term yields declined while short-term yields rose, which isn't good news for mortgage REITs. But in virtually every economic recovery dating back decades, the yield curve steepens. This leads to higher long-term yields and a juicier NIM.
To add gasoline to the fire, Annaly almost exclusively purchases agency securities. An agency asset is one that's backed by the federal government in the event of a default. As you might imagine, agency assets have lower yields, due to this added protection. Nevertheless, this built-in safety net allows Annaly to use leverage to its advantage to pump up profits.
With Annaly, investors can expect an average annual yield of around 10%, which should blow U.S. inflation concerns out of the water.