Despite there being numerous ways to build wealth, few pathways can offer the financial independence that can be achieved by putting your money to work in the stock market. Since 1980, the broad-based S&P 500 has navigated its way through four significant bear markets, yet has delivered an average annual total return, including dividends paid, of 11% per year.
Perhaps the best thing about investing in stocks is that you don't need a mountain of cash to get started. If you have $500 at the ready, which won't be needed to cover bills or emergencies, this is more than enough to put to work in the following five stocks, which look to be no-brainer buys.
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Exelixis
If bargain-hunting growth stocks is your thing, you're going to love biotech stock Exelixis (EXEL 5.13%). Although Exelixis was recently weighed down by less-than-stellar overall survival data for lead drug Cabometyx in a phase 3 study for previously untreated liver cancer patients, Cabometyx has demonstrated that it can deliver sustainable double-digit sales growth for the company.
Cabometyx is currently approved to treat first-and-second-line renal cell carcinoma (RCC), as well as advanced hepatocellular carcinoma (liver cancer). These indications alone should allow Exelixis' lead drug to generate $1 billion or more in recurring sales by no later than 2022.
But the company isn't stopping at these indications. Cabometyx is being examined in roughly six dozen additional clinical trials as a monotherapy or combination treatment. One of these studies, CheckMate-9ER, which examined Cabometyx in combination with Bristol Myers Squibb's cancer immunotherapy Opdivo, was already approved as a first-line RCC treatment. If even only a handful of these six dozen trials bears fruit, Cabometyx could become a multibillion dollar drug.
Don't overlook Exelixis' war chest, either. Management expects the company to have between $1.6 billion and $1.7 billion in cash, cash equivalents, and restricted cash equivalents and investments by years' end. That's more than enough money to cover its internal research and development, as well as make acquisitions.
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Visa
If you have a long-term investing horizon, there's probably no such thing as a bad time to invest in payment processing company Visa (V +0.86%).
The beauty of the Visa operating model is that the company is cyclical. This is to say that an expanding economy tends to encourage consumers and businesses to spend more, which helps Visa generate higher merchant fees on transactions. Since periods of economic expansion last substantially longer than contractions or recessions, long-term investors are making a play on a numbers game that's weighted heavily in their favor.
Visa has an extremely long runway with which to expand its presence, too. With most of the world's transactions being conducted in cash, Visa has an opportunity to organically push into emerging markets, as well as make acquisitions (e.g., Visa Europe in 2016), to reach new merchants.
You'll also want to take note that Visa strictly sticks to payment processing. You might think the company's lack of lending (i.e., issuing credit cards) is costing it valuable interest income and fee revenue. However, with recessions and economic contractions an inevitability, it also means Visa isn't exposed to credit delinquencies when they arise. Not having to set aside cash to cover bad credit loans is one of Visa's keys to a 50%-plus profit margin.
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The Original BARK Company
It may not be the fastest-growing industry in the U.S., but the pet industry has proved virtually unstoppable. That's why a $500 investment in The Original BARK Company (BARK +4.35%), which you might know better as BarkBox, can go a long way.
Between 1988 and 2019-2020, the American Pet Products Association's surveys found that pet ownership increased from 56% of all households to 67%. Today, this translates to nearly 85 million homes with a pet, including over 63 million with a dog, which is the specific companion animal that BARK caters to.
Though BARK does have its products in approximately 23,000 retail locations throughout the U.S., it's primarily an online company with a monthly subscription-based foundation. This lack of overhead is a big reason it's been consistently producing a gross margin around 60%. When you tack on the 91% increase in subscriber count to 1.2 million in the previous fiscal year, you can see why it's easy to get excited about this company.
However, what'll really drive long-term gains for BarkBox is the company's innovation. It introduced a number of new services in 2020, including Bark Home, which sells basic-need accessories like collars, leashes, and beds, as well as Bark Eats, which is a personalized service that works with dog owners to develop a dry food diet for their pup. BARK has long-term multi-bagger written all over it.
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EverQuote
Traditionally, insurance stocks are slow-growing, boring businesses. However, don't tell that to the folks at online insurance marketplace platform EverQuote (EVER +0.15%).
According to EverQuote, the entire insurance market will outlay $154 billion on distribution and ad spend, with this figure growing by an estimated 4% annually through 2024. Of this total spend, $6.5 billion will be focused on digital advertising, which is EverQuote's domain. This digital ad spend is expected to grow at four times the rate (16%/annually) of total insurance market spending through 2024.
As a middleman, EverQuote is angling to make life easier for insurers and consumers. With nearly all major auto insurers on board, consumers can quickly price out and compare policies. As for insurers, they're getting more bang for their buck given that EverQuote's platform is drawing in motivated shoppers. Approximately 1 in 5 consumers who use EverQuote's marketplace will purchase a policy.
What's more, EverQuote has been moving into new insurance verticals. In addition to auto policies, it also has a marketplace for rental, home, life, and health insurance. Even though auto policies still comprise the bulk of EverQuote's sales, growth in these new verticals has been handily topping auto channel sales growth.
Image source: Facebook.
Social media giant Facebook (FB +0.58%) won't win investors any points for originality, but it's a proven moneymaker with clear-cut competitive advantages that makes it a no-brainer buy.
If you want to know how dominant Facebook is, just take a quick peek at its first-quarter operating results. It finished the quarter with 3.45 billion monthly active users (MAU) visiting one of its owned sites on a monthly basis (2.85 billion MAUs for Facebook and 600 million unique MAUs for Instagram and/or WhatsApp). There isn't a single platform on this planet that offers advertisers access to 44% of the world's population. Not surprisingly, Facebook's ad revenue continued to grow by a double-digit percentage even during the worst of the coronavirus pandemic.
What's truly amazing about Facebook is that the more than $101 billion in ad revenue it's pacing for 2021, based on its Q1 operating results, derives almost entirely from its namesake site and Instagram. Even though WhatsApp and Facebook Messenger are two of the most popular social apps in existence, neither has been meaningfully monetized as of yet. When they are monetized, Facebook can expect another surge in sales, cash flow, and growth.
If this weren't enough to convince you, consider that Facebook is making a play to become a leading virtual reality/augmented reality company with its Oculus devices. The company doesn't specifically break out sales of its Oculus devices in its quarterly reports, but the "Other" category where Oculus sales are reported saw sales rocket higher by 146% in the first quarter.
