Last week, all three of the major U.S. indexes -- the iconic Dow Jones Industrial Average, benchmark S&P 500, and tech-heavy Nasdaq Composite -- closed at fresh all-time highs.
For some investors, it's simply not appealing to put money to work with the market at a record high. However, history has conclusively shown that if you hold on to your high-quality investments for a long time, it doesn't matter when you put your capital to work -- you'll very likely make money. For instance, there hasn't been a rolling 20-year period in history where buying an S&P 500 tracking index would have lost you money. Value exists, if you have a long-term mindset.
Best of all, you don't need to start with a fortune to build wealth on Wall Street. If you have $3,000 in cash at the ready, which won't be needed to pay bills or cover an emergency, this is more than enough to buy the following trio of no-brainer stocks, all of which have the capacity to easily double your money.
If growth stocks are what tickle your fancy, social media platform Pinterest (NYSE:PINS) is your ticket to doubling your initial investment.
To state the obvious, social media companies benefited notably from the coronavirus pandemic. Since many people chose to stay home to reduce virus transmission, folks turned online for interaction and entertainment. Pinterest's platform, which allows users to share what things, services, and places interest them, was one of these key beneficiaries. The company's monthly active user count grew by 37% in 2020, which was up from an annual average of 30% in the three years leading up to the pandemic.
Even if user growth were to slow and return to historic growth levels, Pinterest remains in fantastic shape to command better ad-pricing power. During the second quarter, the company likely neared or surpassed 500 million monthly active users, with most of this growth coming from international markets. Even though average revenue per user (ARPU) is lower outside the U.S., the ability to double international ARPU multiple times this decade is what gives Pinterest sustainable double-digit growth potential.
Another interesting thing about Pinterest is that it has one of the most transparent user bases on social media. Advertisers looking to target their messaging aren't going to find it easier than Pinterest, where users publicly display their interests.
Over time, Pinterest shouldn't have any issues connecting merchants with its clearly motivated user base. This gives the company a real shot at becoming a leading e-commerce destination this decade.
Annaly Capital Management
Dividend stock investors can easily double their $3,000 as well, albeit they may need to be a bit more patient. Mortgage real estate investment trust (REIT) Annaly Capital Management (NYSE:NLY) is the perfect income stock to double investors' money.
A REIT is a uniquely structured company that turns real estate into an income stream. For example, Annaly borrows money at low short-term lending rates and uses that capital to acquire assets, such as mortgage-backed securities, with a higher long-term yield. This difference between the higher long-term yield and its borrowing rate is known as the net interest margin. The wider Annaly can get this margin, the more income it can potentially generate. And since it's a REIT, it avoids normal corporate income tax rates by parsing out virtually all of its profits as a dividend to its shareholders.
The enemy of the mortgage REIT industry is a flattening yield curve. When the yield curve flattens, the company's net interest margin typically shrinks. Comparatively, a steepening yield curve, coupled with very clear and slow-moving monetary action from the Federal Reserve, is an ideal scenario. Historically, a recovering U.S. economy has led to a steepening of the yield curve. In other words, we're at the point in the economic growth cycle where mortgage REITs like Annaly do their best.
Making things even better for long-term investors is the fact that Annaly almost exclusively buys agency securities. Agency assets are backed by the federal government in the event of default. Although this added protection lowers the long-term yields Annaly nets from its asset purchases, it allows the company to smartly use leverage to lift its profit potential.
Annaly has consistently averaged around a 10% dividend yield for more than two decades. If you reinvest your payouts, and Annaly's share price sees modest upside as its book value expands, a doubling in your initial investment could occur in as little as five years, if not even sooner.
A third stock that has shown its ability to double investors' money time and again is conglomerate Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B). For those of you who might be less familiar with Berkshire, we're talking about the company that billionaire (and CEO) Warren Buffett has run for more than five decades.
Since taking the helm of Berkshire Hathaway in 1965, the Oracle of Omaha's company has averaged... averaged... an annual return of 20% on the nose for its shareholders. A 20% return might not sound all that nominally impressive on the surface, but after averaging a 20% annual return for more than 55 years, Berkshire Hathaway's aggregate return with Buffett as CEO is 3,393,710% (Class A share return), through the July 4 weekend. Buffett has effectively created over $500 billion in value for his company's shareholders.
The most obvious benefit I can point to in owning Berkshire Hathaway's stock is that you're getting Warren Buffett and his trusted investment team as your pseudo portfolio managers. Buffett has a knack for identifying companies with clear-cut competitive advantages, and he's not afraid to hold his investments for years or decades to allow his thesis to play out.
Furthermore, the Oracle of Omaha and his investing team have packed Berkshire Hathaway's nearly $313 billion investment portfolio with cyclical stocks in the information technology, financial, and consumer staples sectors. Buffett fully understands that the U.S. and global economy spend a disproportionately longer period of time expanding than they do contracting. The Oracle of Omaha is playing a simple numbers game that favors patient investors.
While it's unclear if Berkshire Hathaway can maintain its average annual share price appreciation of 20%, which would result in a doubling of investors' money in under four years, the company's focus on dominant cyclical businesses should allow shareholders to easily grow their wealth over time.