Time and again, Wall Street has shown investors the power of patience.
Over the past 71 years, the broad-based S&P 500 has undergone 38 double-digit percentage corrections. Despite the regularity of these moves lower, every crash and correction throughout this period was eventually erased by a bull market rally. To put things succinctly, if investors buy great companies and allow their investment theses to play out over long periods of time, their chances of building wealth is very high.
Best of all, with most online brokerages discarding minimum deposit requirements and commission fees, investors can begin or further their trek to financial independence with any amount of cash -- even $20. If you have $20 ready to put to work in the market, and it won't be needed to cover bills or other essential costs, the following trio of companies are the smartest stocks to buy right now.
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Exelixis
One of the savviest stocks patient investors can buy right now with $20 is cancer-drug developer Exelixis (EXEL 0.57%).
Last week, Exelixis announced its third-quarter operating results, which failed to hit the mark and sent its shares down by more than 10%. Sales of lead-drug Cabometyx were shy of Wall Street's expectations, which caused Exelixis to lower the upper end of its full-year sales outlook. Generally, lowering sales expectations will be met with frowns on Wall Street.
However, this short-term weakness should be viewed as an opportunity, especially with the company's price-to-earnings-growth ratio (PEG ratio) below 0.4. A PEG ratio below 1 is typically considered "undervalued."
Although the landscape for first-line advanced renal cell carcinoma (RCC) is competitive, Cabometyx has demonstrated the ability to grow sales by a sustained double-digit percentage in RCC and advanced hepatocellular carcinoma. On an annual run-rate basis, Cabometyx is pacing more than $1 billion in sales -- and it's not done growing.
More importantly, Exelixis' lead drug is being examined in close to six dozen clinical trials as a monotherapy or combination treatment. If even a handful of these trials yield a positive result, label-expansion opportunities and organic growth could send Cabometyx to north of $2 billion in peak annual sales.
Additionally, Exelixis' robust cash position ($1.8 billion in cash, cash equivalents, and restricted cash) and healthy operating cash flow have allowed it to reignite its internal research engine. This includes advancing internally developed compounds into phase 1 studies, as well as signing collaboration agreements to potentially expand its cancer-drug pipeline.
It's not often you can marry growth and value with the same company, but that's exactly what investors can do with biotech stock Exelixis.
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Jushi Holdings
Some of the most deeply discounted growth stocks can be found in the marijuana industry, which is why U.S. multi-state operator (MSO) Jushi Holdings (JUSHF 1.73%) makes for a smart buy with $20.
To start with, don't be concerned about a lack of cannabis reform in Washington. While life would undoubtedly be easier for pot stocks if lawmakers would simply follow the overwhelming will of the public and legalize cannabis, allowing individual states to legalize and regulate their pot industries is working fine. Thus far, 36 states have given the green light to weed in some capacity, which is providing growth opportunities for MSOs like Jushi.
In relative terms, Jushi is a small fry, with only 26 operating dispensaries at the moment. Comparatively, a handful of MSOs have in the neighborhood of (or more than) 100 open locations. But Jushi isn't about reckless expansion. Its management team favors methodical expansion in core markets. For Jushi, these core states are Pennsylvania, Illinois, and Virginia.
The reason management has chosen these states is due to their billion-dollar sales potential (Illinois hit $1 billion in legal pot revenue in 2020) and their limited-license status. In limited-license cannabis markets, regulators purposely limit how many dispensary licenses are issued in total, as well as to a single business. For a smaller player like Jushi, this competitive protection ensures it'll have a fair shot to build up its brand(s) and garner a loyal following in these core markets.
Something else impressive about Jushi, and one of the reasons I plan to be a long-term shareholder, is the participation of management and insiders. Of the first $250 million raised by the company, $45 million came from insiders and execs. When leadership has skin in the game right alongside their investors, good things tend to happen.
Jushi is expected to turn the corner to recurring profitability in 2022 and the company's growing sales faster than virtually all other MSOs. The company checks all the appropriate boxes for growth investors.
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Viatris
On the other hand, if value runs through your blood, generic-drug giant Viatris (VTRS 0.09%) is one of the smartest stocks you can buy right now with $20.
Roughly a year ago, Viatris was born from the combination of Pfizer's established drug unit Upjohn with generic-drug developer Mylan. Due to generic-drug price weakness throughout the industry, the company's first year as a public company has been one to forget. However, this near-term underperformance represents the perfect opportunity for patient investors to nab an exceptionally inexpensive and profitable drug stock.
There were a number of reasons Upjohn and Mylan tied the knot. First off, there were clear-cut cost synergies. The company expects to recognize more than $500 million in cost synergies this year, with well over $1 billion in annual cost reductions by 2023.
As a combined company, Viatris is also in a better position to tackle its outstanding debt. Through the first six months of 2021, $1.15 billion in debt was repaid. By the end of 2023, $6.5 billion in debt should be repaid, which represents a quarter of the company's combined debt ($26 billion), as of November 2020.
Beyond just trimming the fat, Viatris should be able to kick-start its internal drug research in 2024 once debt levels are reduced to more favorable levels. Keep in mind that new drug research would come atop existing biosimilar clinical trials, which are expected to generate billions of dollars in future sales.
Viatris won't deliver jaw-dropping growth like Jushi, or even double-digit annual sales upside like Exelixis. But with a steadiness to generic-drug demand and an improving balance sheet, Viatris' forward price-to-earnings ratio below 4 simply doesn't do its stock justice.
