Practice makes perfect, and patience makes millionaires. Despite losing more than a third of its value in fewer than five weeks in the first quarter of 2020, the benchmark S&P 500 has bounced a whopping 95% off of its pandemic low. Time and again, the market has demonstrated that it rewards investors who allow their investment theses to play out over time.
But arguably the best thing about investing in stocks today is that you don't need a mountain of money to begin building wealth. With most brokerages eliminating commissions and ending minimum deposit requirements, investors can put $20 to work right now to begin or further their trek toward financial independence.
If you have $20 at the ready, which you're not going to need to cover emergencies, bills, or other basic needs, now could be the perfect time to put it to work in the following trio of smart stocks.
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Exelixis
The first genius play worthy of a $20 investment is biotech stock Exelixis (EXEL -0.48%). Whereas most biotech stocks are losing money hand over fist while they search for their first-ever blockbuster drug, Exelixis is sitting on the cusp of $1 billion in annual sales from its lead cancer drug Cabometyx -- and it's profitable on a recurring basis.
For the moment, Cabometyx is approved as a treatment for first- and second-line renal cell carcinoma (RCC), as well as advanced hepatocellular carcinoma (HCC). Based on just these indications alone, Cabometyx should push past $1 billion in annual sales by no later than 2022.
One thing to understand about Exelixis' lead drug is that it's not been perfect. (But when is any cancer therapy?) It failed a late-stage trial in patients with metastatic castration-resistant prostate cancer in 2014, and late last month reported underwhelming overall survival data from a combination study with partner Ipsen for patients with previously untreated advanced HCC.
But clinical development is a literal trial-and-error process. The company has close to six dozen clinical trials underway to explore the use of Cabometyx, one of which has already resulted in a label expansion (first-line RCC in combination with Bristol Myers Squibb's Opdivo). If even a handful of these studies is successful, Exelixis' lead drug could push for multiple billions of dollars in annual sales.
Something else for investors to consider is Exelixis' growing treasure chest. Having a highly profitable cancer drug in its portfolio, as well as bringing in collaboration revenue from time to time, has helped the company build up a war chest totaling $1.6 billion in cash, cash equivalents, and restricted cash and investments. This equates to 28% of its current market cap. This mountain of capital has allowed Exelixis to reignite its internal growth engine, and it could be the catalyst that encourages it to acquire other therapies or companies.
Paying 21 times Wall Street's forward-year earnings forecast for a company consistently growing sales at or above 20% is a no-brainer opportunity for patient investors.
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Jushi Holdings
The cannabis industry has no shortage of high-growth, low-share-price companies that could ultimately thrive. But perhaps the best bang for your $20 is U.S. multistate operator Jushi Holdings (JUSHF 9.77%).
To begin with, the U.S., not Canada, is where you want to put your money to work in the pot industry. According to New Frontier Data, the U.S. cannabis industry could be generating as much as $41.5 billion in sales by 2025, with average annual sales growth totaling 21% until mid-decade. Regardless of whether the federal government passes cannabis reform measures or not, the simple fact that 36 states have legalized weed in some capacity will allow marijuana stocks to succeed.
The Jushi growth story is interesting given its relatively narrow focus. Even though it has a presence in around a half-dozen states, the company anticipates generating more than 80% of its revenue this year from the combination of Pennsylvania, Illinois, and Virginia. Of its 20 currently operational dispensaries, 13 are located in Pennsylvania.
Both Pennsylvania and Illinois are limited-license states, meaning they place a cap on the number of retail licenses that can be issued in aggregate, as well as to a single company. This suggests Jushi is going to be able to build up a following in these two states without being overrun by a larger multistate operator. Meanwhile, Virginia assigns dispensary licenses based on jurisdiction, meaning competition is practically nonexistent.
Though this trio of states represents Jushi's future, the company hasn't been afraid to use its cash to expand into new markets. For example, it recently closed on two dispensaries in California, which is the largest pot market in the world by annual sales.
Among U.S. multistate operators, Jushi may well be the fastest-growing pot stock through 2025. With recurring profitability expected by no later than 2022, it looks to be well on its way to bringing in the green for its shareholders.
The 2021 Ford F-350 Super Duty. Image source: Ford.
Ford Motor Company
A third really smart stock investors can buy with just $20 in July is auto-giant Ford Motor Company (F -3.01%).
Historically, auto stocks like Ford have been predominantly profitable but relatively slow growing. Constrained by the ebbs and flows of the economy and large debt loads, Ford and its peers are typically valued at price-to-earnings ratios well below the average for the S&P 500. However, this long-standing tradition may be about to change.
After more than a century of combustion-engine sales, the auto landscape is shifting rapidly. Ford's focus on electric vehicles (EV) and autonomous-driving capabilities has the potential to seriously kick-start its growth rate and (pardon the pun) fuel a multi-decade replacement cycle at the consumer and enterprise level.
Recently, Ford announced that it was upping its spending on EVs to $30 billion through 2025, with the intent of launching 30 new EVs worldwide by mid-decade. By 2030, the company anticipates 40% of its global sales will come from EVs.
Building on this point, Ford has an incredible opportunity to become a major player in China's alternative-energy market. According to estimates from the Society of Automotive Engineers of China, half of auto sales by 2035 are expected to be powered by alternative energy. With China selling 20.7 million passenger vehicles in 2019, the year before the pandemic, you can get some idea of just how many vehicles could be in demand in the largest auto market in the world. The runway is wide open for Ford to gobble up share in China.
And of course, no discussion of Ford would be complete without mentioning its rock-solid profit producer, the F-Series pickup. The F-Series has been the best-selling vehicle in the U.S. for 39 consecutive years. With trucks providing better margins than smaller vehicles and sedans, the F-Series is critical to Ford's continued growth.
A forward price-to-earnings ratio of eight isn't historically cheap for Ford. But considering the multi-decade vehicle-replacement cycle that awaits, Ford has an incredibly attractive valuation for what should be a highly profitable auto stock.
