The stock market offers few guarantees. However, the market has historically been kind to investors who take a long-term approach.
According to data from Crestmont Research, there's never been a rolling 20-year period where the broad-based S&P 500 has delivered a negative return to investors. Put another way, it doesn't matter when you put your money to work in the stock market. As long as you allow your investment thesis to play out over time, you have a very good chance to build wealth on Wall Street.
Another great thing about putting your money to work in equities is that you don't need to be rich to make money. If you have $200 at your disposal, which won't be needed to cover emergencies or pay bills, this is more than enough to buy some of the smartest stocks right now.
First up on the buy list is pharmaceutical stock AstraZeneca (NASDAQ:AZN). Although AstraZeneca was a significant laggard for much of the past two decades due to competition and the patent cliff, it's found new life thanks to a number of blockbuster medications and inorganic opportunity.
Whereas most Big Pharma stocks are slow-growing cash cows, AstraZeneca is actually a rapidly growing cash cow with what looks to be a sustainable double-digit sales growth rate through mid-decade. Leading the charge are its blockbuster trio of oncology drugs (Tagrisso, Imfinzi, and Lynparza), as well as next-generation type 2 diabetes treatment Farxiga. The company's cancer-drug trio helped push oncology sales up 20% in the first quarter, while sales of Farxiga rose by 50%. The latter lifted cardiovascular (CV) segment sales higher by 19%, even with revenue declines from other core CV therapies.
Beyond increased demand and improved pricing power for its key brand-name drugs, AstraZeneca is making a huge acquisition to broaden its portfolio and pump up its cash flow over the next decade. Its pending deal to buy Alexion Pharmaceuticals (NASDAQ:ALXN) will bring a top-notch ultra-rare-disease drug developer into the fold. Though it's risky to develop treatments for very small patient pools, the reward is a high list price that insurers don't question and nonexistent competition.
Perhaps the best part of this deal is that AstraZeneca doesn't have to worry about losing sales once Alexion's top-selling drug, Soliris, loses exclusivity. That's because Alexion developed a next-generation replacement therapy, known as Ultomiris, which the U.S. Food and Drug Administration has approved. Since Ultomiris is administered less frequently than Soliris, it represents a clear improvement in patient quality of life and treatment efficacy. This should allow Ultomiris to eventually absorb Soliris's more than $4 billion in annual sales.
After years of underperformance, AstraZeneca is finally the growth company Wall Street always hoped it would be.
Another one of the smartest stocks you can buy with $200 right now is esports and gaming company Skillz (NYSE:SKLZ). Though it certainly sports a premium valuation, the growth and partnership potential here should play out favorably for long-term investors.
Whereas most gaming companies choose the road frequently traveled and take on the major game developers, Skillz didn't do that. Instead, it built a platform that allows gamers to compete against each other for cash prizes. In exchange for providing a platform for these competitions to take place, Skillz and the game developer in question get to a keep a cut of the cash prize. It's a lot cheaper and far more successful to develop a gaming medium than it is to develop a game and hope it finds its mark.
Although it's very early, the initial results are incredibly promising. Skillz had 467,000 paying monthly active users as of the end of March. This works out to 17% of the players on its platform. For some context here, Wappier Gaming Apps notes that pay-to-play conversion rates ranged from 1.6% to 2% in 2020. This suggests Skillz has between eight and 10 times higher conversion rates than the industry average. Plus, the company is generating a 95% gross margin on the revenue it's bringing in.
As I've alluded, there's also serious partnership potential here as a mobile gaming medium. In February, Skillz landed a multiyear agreement with the National Football League (NFL). Football is the undisputed most popular sport in the United States. With this agreement, developers will be able to debut NFL-themed games on the Skillz platform beginning no later than 2022.
For the time being, Skillz will be expanding its headcount and spending aggressively on marketing to build its brand and get gamers and mobile developers interested. That means bigger losses in the near term. But with $1 billion in annual revenue a very real target by 2025, if not sooner, Skillz looks to have all the tools needed to make investors rich.
Bank of America
A final smart stock long-term investors can confidently buy with $200 right now is banking giant Bank of America (NYSE:BAC).
There's no question that banks have enjoyed a monstrous run-up over the past eight months. But this looks like just the beginning. That's because rising inflation and a rebounding U.S. economy are opening the door for the Federal Reserve to act by 2023, if not earlier.
The nation's central bank is responsible for setting the federal funds rate, which is the interest rate at which depository institutions lend reserve balances to other depository institutions. Without getting overly technical, adjustments to the federal funds rate affect interest rates and can affect mortgage rates. When the Fed begins raising rates, bank stocks will receive an immediate boost to their net interest income via variable-rate loans. No bank is more interest-sensitive than Bank of America.
According to the company's first-quarter operating results, a 100-basis-point parallel shift in the interest rate yield curve would produce an estimated $8.3 billion in added net interest income over the next 12 months. While these hikes are more than 12 months away, bond yields have already begun rising, which is a good sign for future bank profits.
What's more, Bank of America has been cutting costs and spending aggressively in all the right places. The push toward digitization is paying off handsomely, with more than 40 million people banking digitally with BofA in the first quarter, up almost 5 million from three years ago. Most importantly, the percentage of sales completed online or via mobile skyrocketed to 49% in first-quarter 2021 from 33% in the year-ago quarter. This shift to online banking is considerably cheaper for Bank of America, and it's allowed the company to close and consolidate some of its branches.
With the Great Recession now a distant memory, it's time for investors to believe in the long-term growth potential of Bank of America.