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Got $500? Smart Investors Are Piling Into These Stocks

By Rachel Warren - Jun 24, 2021 at 6:09AM

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These are two golden eggs to add to your buy basket right now.

Investing in the stock market may seem complicated, but in reality, you can be a successful investor by following a few basic principles. For example, you should invest for the long-term rather than the short-term, and stick to high-quality companies that you're willing to keep in your portfolio for a minimum of three to five years, or longer.

If you're starting out on your long-term investing journey, you don't necessarily need to invest huge amounts of money right out of the gate to be successful. And strategically investing your cash into quality companies can reap far greater rewards than aimlessly piling money into random stocks. If you have $500 to invest, here are two unstoppable stocks you should consider snapping up right now.

Smiling grandparent and grandchild putting money in piggy bank.

Image source: Getty Images.

1. UnitedHealth Group

It's no secret that the health insurance market is a multi-billion dollar business. One of the most prominent leaders in this lucrative sector is UnitedHealth Group (UNH -0.20%).

The company divides its business into two main segments. The first is UnitedHealthcare, its healthcare benefits business through which it sells everything from individual and employer health insurance to group Medicare plans. The second is its health services business Optum, which provides a bevy of solutions for individuals, providers, and even government entities that range from health information technology to pharmacy services.

As of 2019, UnitedHealth Group controlled the leading share of the U.S. health insurance market with more than $100 billion in direct premiums written that year, according to Statista. Bear in mind, the U.S. health insurance market has a valuation of more than $1 trillion at the time of this writing, according to data from IBISWorld.

Despite the impact that the COVID-19 pandemic had on the health insurance industry as a whole, UnitedHealth Group still reported 6% revenue growth for the full-year 2020. And earnings and cash flow from operations increased by respective amounts of 14% and 20% from 2019. Broken down by business segment, UnitedHealthcare generated 4% revenue growth last year while Optum reported a healthy 21% hike in annual revenue.

UnitedHealth Group started 2021 on a high note. In the first quarter, it reported 9% total revenue growth and a 35% spike in earnings from operations compared to the year-ago period. Revenues generated by its UnitedHealthcare segment surged 8% year over year while Optum delivered 11% revenue growth.

Shares of UnitedHealth Group have skyrocketed by more than 100% over the past year alone, but analysts think that the stock has plenty of upside potential left. They project that the company could achieve a high price target of $522, giving the stock a potential upside of about 30% from where it's trading now.

Another reason for long-term investors to take a second look at this stock is its dividend. With a current yield of 1.3%, the company's dividend is right in line with that of the average stock trading on the S&P 500. UnitedHealth Group also has a solid track record of increasing its dividend over time. In fact, the company just raised its quarterly dividend by a whopping 16%.

With its robust balance sheet, solid competitive advantage, durable growth potential, and attractive dividend, UnitedHealth Group checks all the boxes of a high-caliber stock that long-term investors shouldn't hesitate to buy right now.

2. Zoom

Another hot stock to consider for your buy list right now is Zoom Video Communications (ZM -6.24%). After its impressive balance sheet and share price surges during the pandemic, some investors have been less-than-optimistic about Zoom's ability to maintain its remarkable gains now that people are returning to work and school in person again.

Despite the mixed investor consensus about Zoom's future growth prospects, shares of the company have hit double-digit gains from 12 months ago and are trading 4% higher than they were at the beginning of 2021.

2020 was a year of record growth for the company. Its top line grew 326% and its bottom line increased by nearly 3,000%. And in the first quarter of this year, Zoom delivered another stretch of exceptional growth. Not only did the company's revenue jump 191%, but its net income grew by a triple-digit percentage of more than 740% year over year.

Zoom is also growing its cash position at a rapid pace. The company closed the first quarter with a robust $4.7 billion in cash, cash equivalents, and marketable securities. Management also said that Zoom generated free cash flow of $454 million during the quarter, way up from the $251 million it reported in the year-ago period.

Zoom is ready to meet the changing needs of its users in a post-pandemic world. The company just announced on June 9 that it was launching Zoom Phones, which management called, "a new category of hardware optimized for the hybrid workforce." It's also important to consider that the work landscape has changed drastically as a result of the pandemic, both in terms of the types of jobs people look for and the environment in which they want to continue working in the new normal. Zoom is expecting to deliver approximately 100% revenue growth for the full year, which it reports as its fiscal 2022.

According to a survey conducted by FlexJobs of over 2,100 individuals, 65% reported that they want to continuing working 100% remote post-pandemic. In addition, 58% of the individuals surveyed reported that they would search for other employment if their existing employers didn't let them keep working remotely post-pandemic.

Zoom hasn't lost its luster as a top-notch growth stock buy for shrewd investors, and now looks like a prime window of opportunity to buy shares of the company. 

Rachel Warren has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zoom Video Communications. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.

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Stocks Mentioned

UnitedHealth Group Incorporated Stock Quote
UnitedHealth Group Incorporated
UNH
$545.00 (-0.20%) $-1.12
Zoom Video Communications Stock Quote
Zoom Video Communications
ZM
$102.38 (-6.24%) $-6.81

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