Since the stock market hit its coronavirus pandemic low on March 23, 2020, investors have reveled in a historic bounce back rally. It took less than 17 months for the widely followed S&P 500 to double in value from its bear-market bottom, and proved, once again, how invaluable it is for investors to hold onto great companies for the long run.
Best of all, with most online brokerages eliminating minimum deposit requirements and commissions to buy and sell stock on major exchanges, any amount of money can be used to begin or further your trek toward financial independence.
If you've got $400 at the ready, which won't be needed to pay bills or handle an emergency, this is more than enough to invest in the following trio of no-brainer stocks right now.
For investors who like putting their money to work in time-tested companies, conglomerate Berkshire Hathaway (BRK.A 0.35%) (BRK.B 0.40%) is about as no-brainer as they come. I'm specifically referring to the Class B shares (BRK.B) in this discussion, since you'd need over $411,000 just to purchase a single Class A share.
While Berkshire Hathaway isn't exactly a household name, its CEO, billionaire Warren Buffett, is well-known. Since taking over as CEO in 1965, Buffett has led his company to an annual average return of 20%. Over 56 years, we're talking about an aggregate return of more than 3,300,000% for the Class A shares, including year-to-date gains, and the creation of around $600 billion in shareholder value. Historically, riding the Oracle of Omaha's coattails has been very profitable.
There are a lot of reasons Berkshire Hathaway is such a successful company, and Buffett certainly plays a key role. For instance, Buffett and his investing team have absolutely packed the company's investment portfolio with cyclical businesses. Even though swoons and recessions are a normal part of the economic cycle, periods of economic expansion last substantially longer than recessions. Buffett's portfolio is simply leveraging time and taking advantage of disproportionately long periods of economic expansion.
To build on this point, the Oracle of Omaha and his investing team stick to what they know well. For example, Warren Buffett knows the banking industry inside and out. He's also quite familiar with brand-name consumer staples companies. Although tech stocks have been the talk of Wall Street for more than a decade, high-tech companies simply aren't Buffett's forte. By sticking with industries and sectors he knows, Buffett is giving Berkshire Hathaway the best possible chance to succeed over the long run.
The role that dividend stocks play for Buffett's company can't be overlooked, either. Although Berkshire Hathaway doesn't pay a dividend, it's on pace to collect over $5 billion in dividend income this year, including preferred stock payouts. Berkshire Hathaway's cost basis on some of its holdings is so low that it's generating insane yields relative to cost. For instance, Berkshire's annual yield on cost for Coca-Cola is nearly 52%, thanks to a cost basis of about $3.25 a share. This dividend income is a big, yet under-the-radar, reason why Berkshire Hathaway should continue to outperform.
To not beat around the bush, Skillz has been absolutely clobbered since the beginning of February. After hitting an all-time high of $46, its shares have crashed all the way back below $10. Higher marketing costs and increased headcount have widened the company's quarterly losses and at least temporarily taken the wind out of its sails. Nevertheless, the long-term growth story remains well intact, and patient investors have an opportunity to land a multi-bagger at or near its all-time low.
With the understanding that developing mobile games is costly, time-consuming, and far from a guarantee to succeed, Skillz set itself up as a middleman in the gaming arena. Its platform allows gamers to compete against each other for cash prizes. In turn, Skillz and the game developer in question get to keep a percentage of the cash prize. Since operating a gaming platform is a less costly than developing mobile games, Skillz has consistently produced a gross margin of 95%.
But the metric that really stands out for this company is its pay-to-play conversion ratio. At the end of March, Skillz noted that 467,000 gamers were paying to play on its platform. This worked out to 17% of its monthly active gamers. For some context, only around 2% of mobile gamers industrywide are being converted into paying customers. If the company can maintain a pay-to-play conversion ratio that's eight or more times the industry average, it's only a matter of time before recurring profits follow.
The ability to make deals is also tantalizing. In early February, Skillz signed a multiyear agreement with the National Football League (NFL) that allows developers to create NFL-themed games. Football is the most-popular sport in the United States by a longshot. These NFL-themed games should make their debut next year, and could be a significant sales growth driver for Skillz.
Patience will be necessary on the part of investors as the company navigates steeper near-term losses, but the long-term catalysts here remain rock-solid.
A final no-brainer buy with $400 right now is stay-and-hosting platform Airbnb (ABNB 1.08%), which went public in December 2020.
As you can likely surmise, Airbnb had a rough go of things in 2020 due to the pandemic. With domestic and international travel limited by the pandemic, and travelers leery of coronavirus mutations, bookings fell significantly on a year-over-year basis. Yet, in spite of these short-term shocks, virtually all signs continue to point to Airbnb being a true hotel and travel industry disruptor.
According to the company, more than 4 million people are now hosts on its platform. This might sound like a lot, but it's probably just the tip of the iceberg. There are 130 million homes in the U.S. and around 1 billion worldwide. With the potential to generate sustainable income, I'd expect more homeowners to jump at the chance to be hosts.
Likewise, the vast majority of listings on Airbnb's marketplace are going to undercut the price charged by traditional hotels and offer more conveniences. It's no surprise that Airbnb's total bookings quintupled in the three-year period between the end 2016 and the end of 2019.
What's particularly interesting about the Airbnb operating model is that its fastest-growing segment is long-term stays (defined as stays of at least 28 days). This suggests its hosting platform isn't just a fad, and that mobile workers/travelers could become a more common occurrence over time.
Equally exciting for Airbnb is the company's push into travel activities. The company's Experiences segment works with local experts to lead travelers on adventures. It wouldn't be surprising to see Airbnb partner up with transportation companies, restaurants, or other popular industries/companies in tourist-heavy markets as it aims to engrain itself as the go-to booking platform for travel.
With sustainable double-digit growth expected for a long time to come, Airbnb has "disruptor" written all over it.