In less than three weeks, 2021 will come to a close and Wall Street will likely have reason to break out the champagne. That's because the benchmark S&P 500 has more than doubled up its annual average total return of 11% since 1980. Through Dec. 9, the widely followed index was higher by 24%.
But even with the broader market near an all-time high, incredible bargains can still be found.
Best of all, you don't need a mountain of cash to make a boatload of money on Wall Street. With most online brokerages eliminating minimum deposit requirements and commission fees, any amount of money -- even $500 -- is the perfect amount of money to put to work on Wall Street.
If you've got $500 ready to invest, which won't be needed to pay bills or cover an emergency, the following three stocks check all the necessary boxes to make you a boatload of money.
Image source: Getty Images.
Work-from-home stocks were unstoppable last year. In 2021, it's been quite the opposite. An uptick in U.S. and global COVID-19 vaccination rates has hurt monthly active user (MAU) growth for social media platform Pinterest (PINS -0.55%), and Wall Street has been unrelenting in its punishment for sequentially declining MAUs.
But this very shortsighted view of Pinterest overlooks a number of key growth initiatives or metrics. For example, even though we've witnessed two sequential quarterly declines in the company's MAUs, the longer-term MAU growth trajectory is still within historic norms. All that's happened is a reversion from the temporary growth spike following the lockdowns associated with the COVID-19 pandemic.
What's far more important is that Pinterest is raking in the cash by monetizing its MAUs. Even with year-over-year user growth of less than 1% in the September-ended quarter, Pinterest managed to boost its average revenue per user (ARPU) globally and internationally by 37% and 81%, respectively. What this demonstrates is that advertisers are willing to pay increasingly higher prices for an opportunity to get their message in front of Pinterest's MAUs.
That brings me to the next point: Pinterest's motivated shoppers. Since the entire premise of Pinterest is for users to share what things, places, and services interest them, it's easy for the company to act as a middleman that connects users with merchants that can meet their interests. Arguably no social media platform gives advertisers more tools to effectively target prospective shoppers.
Pinterest is profitable and growing ARPU at a rapid rate. It's the perfect buy-low candidate that can make patient investors a boatload of money.
Image source: Getty Images.
Trulieve Cannabis
Not only does the U.S. cannabis industry have a chance to be one of the fastest-growing industries this decade, but quite a few U.S. multistate operators (MSOs) now fall into value territory. One such marijuana stock with the potential to show investors plenty of green is Trulieve Cannabis (TCNNF -7.46%).
Trulieve has taken a unique approach to growing its business. Instead of piling into as many legalized states as possible like some of its peers, it's focused a lot of its efforts on growing its presence in the Sunshine State (Florida). This past week, Trulieve opened its (drumroll) 111th store in medical marijuana-legal Florida, which means it accounts for more than 1 in 4 open dispensaries in the Sunshine State.
Why Florida? Behind California and Colorado, it's on track to be the third biggest weed market by 2024, in terms of annual sales. What's more, by saturating the state with its dispensaries, the company hasn't had to spend big on marketing. As a result, Trulieve Cannabis has been profitable on a recurring basis for three years. Meanwhile, some if its peers are still working their way toward recurring profits.
The company also made waves by closing the largest acquisition in the U.S. cannabis industry's history. Purchasing MSO Harvest Health & Recreation broadened Trulieve's reach within the U.S., as well as made it the No. 1 player in Harvest's home market, Arizona. The Grand Canyon State legalized recreational marijuana in Nov. 2020 and commenced sales two months later. It could soon become a billion-dollar market, based on annual weed sales.
With double-digit sales growth and a forward price-to-earnings ratio below 23, Trulieve looks like a steal.
A jubilant Berkshire Hathaway CEO, Warren Buffett. Image source: The Motley Fool.
Berkshire Hathaway
A third stock with all the tools necessary to make investors a boatload of money with $500 is conglomerate Berkshire Hathaway (BRK.A -0.21%) (BRK.B -0.21%).
Although Berkshire Hathaway isn't a household name, its CEO certainly is: Warren Buffett. Since taking the helm as CEO in 1965, the Oracle of Omaha has led Berkshire Hathaway's stock to an annualized return of 20%. Taking into account a 23% year-to-date gain for the company's Class A shares (BRK.A), Buffett has overseen more than $600 billion in value creation for shareholders, as well as an aggregate gain of around 3,500,000% since becoming CEO.
One of the reasons Berkshire Hathaway has been such an outstanding investment for so long is Buffett's focus on buying cyclical business. Most of Berkshire's investment portfolio is tied up in information technology, financials, and consumer staples. These are sectors that benefit during periods of economic expansion and struggle during downturns. Although recessions are inevitable, they typically last a few months to a couple of quarters. Comparatively, periods of expansion last years. Buffett is playing a simple numbers game that favors patient investors.
Speaking of patience, Buffett allows his best investing ideas to stew over many years, if not decades. Holdings like Coca-Cola, American Express, and Moody's have been held for 33 years, 28 years, and 21 years, respectively. This patience has translated into a dividend yield relative to the company's cost basis for this trio of between 20% and 52%.
This brings me to the final point: Buffett's love of dividend stocks. Historically, income stocks have run circles around their non-dividend-paying peers. This shouldn't be a surprise considering that dividend stocks are often profitable and time-tested. Loading Berkshire Hathaway's portfolio with dividend stocks should result in the company collecting over $5 billion in dividend income this year.
While asking for a 20% annualized return in the future might be a bit much, Berkshire's track record of outperformance suggests it can make long-term investors a lot richer.
