While all three major U.S. exchanges have bounced off their year-to-date lows, the S&P 500, Dow Jones Industrial Average, and the Nasdaq Composite are still in negative territory in 2022.
Rampant inflation, rising interest rates, and persistent supply-chain snags have the word "stagflation" on a lot of people's lips again. Stagnant economic conditions, coupled with fast-rising prices, are creating a sour mood for investors. They've already abandoned many previously high-flying technology stocks, along with just about any company that benefited from the unique conditions of the pandemic. Even on the consumer goods front, traders worry about how businesses will confront shipping delays and higher input costs.
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While just the tech-heavy Nasdaq remains in correction territory, or down more than 10%, it's quite possible all the exchanges could at some point be in an official bear market, meaning they would lose 20% or more of their value. It might be tempting for investors to just take their marbles and go home until it all blows over, but that would be a mistake, because it's when stocks have been hit hardest that you want to buy.
Still, you need to pick your stocks carefully, especially if you only have $500 to invest. That's why this trio of stocks are smart businesses to buy now.
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1. Shopify
E-commerce platform provider Shopify (SHOP 0.23%) is one of those stocks that's really taken it on the chin, as it's both a tech stock and one that performed strongly because people started up online businesses in droves during the lockdown period of the pandemic.
The stock is down 50% this year and off by over 62% from its 52-week high, which represents a unique opportunity for investors, who can now buy it at prices that haven't been seen since the start of the COVID outbreak. It's like buying in after Shopify has established itself as a premier provider of tools for entrepreneurs and larger, more established businesses alike -- but before the market realized its potential.
The platform is now taking control of every facet of its operations by becoming a vertically integrated, one-stop shop that is attracting many medium- and even large-sized businesses.
For instance, it's launched merchant money management accounts through Shopify Balance; it's offering small business loans through Shopify Capital; it's created Shopify Plus, a fully hosted, enterprise e-commerce platform for fast-growing brands; and soon it will sell non-fungible tokens, or NFTs, to help businesses and brands better connect with customers.
While the market has knocked Shopify down more than a peg or two, Wall Street still expects revenue to soar 500% over the next five years and the stock to as much as triple in value, making the shares an easy pick for investors today.
Image source: Nio.
2. Nio
I've made no bones about my wariness over investing in Chinese stocks these days, but electric carmaker Nio (NIO -5.00%) is one I've said looks like it carries much lower risk than many of its brethren. And now that Beijing has promised it will end its targeted attacks on U.S.-listed shares, the concern that Nio could be next in finding itself in regulators' crosshairs has all but dissipated.
Nio has proved adept at driving deliveries in a challenging market. Its existing manufacturing plant has been upgraded, a second plant is coming online later this year, and the EV maker will be introducing its popular SUVs in five additional countries.
Supply-chain woes and national holidays have stalled sequential growth this year, but deliveries remain above last year's level, and it is now ramping up production. The computer chip shortage is still a concern, but that's across the entire automotive industry -- virtually all industries, in fact -- so it could serve as a drag on Nio's stock.
Yet that is what helps make Nio an attractive buy for an investor's $500. Its stock is also down 36% year to date (and 61% from its highs), but analysts have assigned it a consensus one-year target of $54 per share, some 160% above where it currently trades.
As one of the biggest EV makers in the world's biggest EV market, Nio should be seen as a buy.
Image source: Getty Images.
3. Realty Income
What I like about Realty Income (O 1.94%) is it's a commercial real estate investment trust (REIT) focusing on triple net leases, or leases where its tenants are responsible for the sites' taxes, maintenance, and insurance. It's a relatively low-risk way to manage property, and because those leases are long-term in nature (about 10 years, on average), the normal ups and downs of the commercial real estate market are smoothed out to a great extent.
It recently spun off its office real estate assets into Orion Office, which will allow it to focus more on retail-type properties, such as grocery stores and pharmacies, which are fairly generic in nature and for which replacement tenants are readily found.
Realty Income has establish a long record of returning value to shareholders through the payment of a dividend, as all REITs are required to, but which it pays on a monthly basis. It even bills itself as "The Monthly Dividend Company." The payout currently yields 4.5% on an annual basis, and it has grown the dividend at a compound annual rate of 4.4% since 1994.
That track record firmly ensconces Realty Income as a Dividend Aristocrat, a stock that has raised its payout for 25 years or more, making it almost a no-brainer stock to plunk down $500 into and reap the rewards for years to come.
