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3 of the Best Stocks to Buy Now With $1,000

By Neil Patel – Updated Oct 4, 2021 at 5:07PM

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Owning shares in any of these excellent businesses offers a surefire way to build your wealth.

You've paid off your monthly bills, you got rid of any high-interest debt you might have, and you've stashed away an emergency fund. If you find you still have some extra cash left over, say $1,000 for instance, you may want to put that money to work for you and grow it a bit.

Putting it to work successfully generally means putting it where it can earn a decent return. The stock market has averaged annual returns of roughly 10% over time. So buying stocks can be a good way to get that decent return. But what stocks do you choose?

The good news for investors is that there are some lucrative opportunities out there today.  Here are three top stocks to consider buying with $1,000. 

Person looking at stock chart on tablet.

Image source: Getty Images.

1. Home Depot

One of the best companies around is retailer Home Depot (HD -1.11%). Its stock has shown itself to be an excellent long-term investment, rising 157% in value over the past five years. It's the largest home-improvement chain in the world and it generated $41.1 billion in sales in its most recent fiscal quarter, a record for the company. Do-it-yourself (DIY) customers, flush with stimulus cash and spending more time than ever at home during the pandemic, drove some outsized growth in 2020 that continues into 2021. 

Lately, its been Home Depot's professional customers that are helping it grow. "We also see customers more comfortable taking on larger projects as evidenced by the continued strength with our Pro customer, which outpaced the DIY customer for the second quarter in a row," CEO Craig Menear noted on the Q2 earnings call. Pros spend much more than DIY customers, a boon for the company. Home Depot is getting better at catering to these contractors by bolstering its supply chain and omnichannel capabilities. 

As a result, Home Depot sports a remarkable return on invested capital of 44.7%, a figure any business would be envious of. Additionally, Q2 same-store sales increased 4.5% year over year after jumping 23.4% in Q2 2020. Expect much of the same in the years ahead, as historically low interest rates and short housing supply, coupled with Americans reevaluating their living situations in a post-pandemic world, provide a nice tailwind for Home Depot.

2. Lululemon Athletica

The global athletic apparel market is extremely competitive, but Lululemon Athletica (LULU -12.85%) stands out because of its strong brand presence and fast growth. The trailblazer of the athleisure trend has seen its stock price performance exceed that of even Nike over the trailing one-, three-, and five-year periods. Revenue in the most recent quarter soared 61% compared to Q2 2020, while profit skyrocketed 140%. This stellar outing led management to raise financial guidance for the rest of fiscal 2021. 

Lululemon has been so successful and will continue to be in large part because of one very important factor. The maker of insanely popular yoga pants and joggers offers merchandise mainly through its own website and company stores. Although not selling products through third-party retailers like Dick's Sporting Goods or Foot Locker might seem trivial at first, it allows the business to avoid brand-damaging markdowns by controlling inventory and keeping products at full price longer. Direct-to-consumer revenue accounted for 41.2% of total business in the quarter, and Lululemon's gross margin of 58.1% beats Nike's 46.5%. 

Person smiling and stretching on a yoga mat.

Image source: Getty Images.

And with the recent acquisition of interactive workout device maker Mirror, Lululemon gains access to the burgeoning at-home fitness market to help drive even more expansion in the future. Wall Street analysts are forecasting earnings per share to surge 66% this fiscal year, 21% in fiscal 2022, and 20% in fiscal 2023, which easily justifies what initially seems like a high forward price-to-earnings multiple of 54. 

3. PayPal Holdings

Digital payments have become more widespread thanks to the growth in online shopping, and PayPal Holdings (PYPL -0.88%) has been a huge beneficiary of this trend. The leading fintech business, with more than 400 million active accounts today, processed a whopping $311 billion in total payment volume (TPV) during its most recent quarter. That's a colossal amount, and it underscores just how important PayPal has truly become in today's economy. 

While the stock's been a huge winner since returning to the public markets in 2015, there is still plenty for investors to cheer about. PayPal's peer-to-peer payments service, Venmo, grew TPV 58% year over year and now counts a remarkable 75 million customers. Users also have the ability to buy and sell cryptocurrencies on the mobile app. And PayPal just announced major upgrades to its flagship consumer app, introducing access to a high-yield savings account, shopping deals and rewards, early direct deposit, and bill pay. 

The recent $2.7 billion purchase of leading Japanese buy now, pay later (BNPL) provider Paidy helps PayPal penetrate the world's third-largest e-commerce market. While PayPal already launched its own BNPL offering in October 2020, integrating Paidy onto its existing platform makes complete sense, especially in a country like Japan that still very much loves to transact in cash. PayPal is already available in more than 200 countries, so it knows a thing or two about international expansion. 

Invest it now for great returns down the road

Having $1,000 ready to invest is a great position to be in. Buying shares in these three industry leaders will likely turn that money into a much larger sum over the next five to 10 years. 

Neil Patel owns shares of PayPal Holdings. The Motley Fool owns shares of and recommends Home Depot, Lululemon Athletica, Nike, and PayPal Holdings. The Motley Fool recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.

Stocks Mentioned

Home Depot Stock Quote
Home Depot
HD
$320.48 (-1.11%) $-3.61
Lululemon Athletica Stock Quote
Lululemon Athletica
LULU
$326.39 (-12.85%) $-48.12
PayPal Stock Quote
PayPal
PYPL
$73.57 (-0.88%) $0.65

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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