When it comes to investing, even small amounts of cash can draw major returns. If you're eager to put your money to work, as little as $100 can be a solid starting foundation. But how to get the most bang for your buck? ASE Technology (ASX -1.26%) and GlaxoSmithKline (GSK 1.07%) offer two potential paths. Both are riding business trends that make them solid bets: ASE Technology makes packaging for the in-demand semiconductor industry, and GlaxoSmithKline is an established pharmaceutical company that promises stability amid broader economic downturns.
Both companies are substantially undervalued compared to others in the tech and healthcare sectors. Let's dive into each and see which makes a better investment with your $100.
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The growth route: Buy 13 shares of ASE Technology
ASE Technology isn't a semiconductor maker, but it's still crucial to the industry, providing front-end outsourced packaging, testing, and electronic services to manufacturers. The Taiwanese company should benefit as demand surges amid 5G expansion, WiFi development, and electric vehicle deployment. The global semiconductor materials market was worth $52.1 billion in 2021 and IMARC Group analysts expect a compound annual growth rate (CAGR) of 4.07% over the next five years, reaching a $61.3 billion market by 2027.
The stock is trading at around $7.50 a share, meaning you could buy 13 shares with your $100 and still have a little change left over. Because of a 2% decrease in stock price over the course of March, ASE Technology looks to be a better buy with a price-to-earnings ratio (P/E) of about 7.4 . The average trailing P/E in the semiconductor equipment industry is 44.44, suggesting that ASE Technology is seriously undervalued.
ASE Technology's financials are in good shape. The semiconductor company has increased its annual revenue for the past five years and more than doubled its annual earnings per share (EPS) last year, going from $0.44 per share to $1.06 per share. In 2021, the company reported annual revenue of $20.4 billion, up 19.5% over 2020, with the biggest growth coming from the company's automotive sector, up 60% year over year. The company said it expects that momentum to continue this year, with automotive revenue reaching $1 billion. ASE also reported an increased operating margin of 10.9% in 2021, compared to 7.3% in 2020.
Unusual for a tech company, ASE Technology also offers a dividend, albeit a yearly one. Last year it raised its dividend by 121% to $0.30 per share, giving it a yield of 2.94%, well above the average 0.57 yield of the semiconductor equipment sector.
The stability route: Buy two shares of GlaxoSmithKline stock
GlaxoSmithKline's stock is down less than 1% this year, and a purchase of two shares, as of Monday's prices, would again leave a little bit left over from your $100. This pick is a stable one from which investors can reap rewards far into the future: the pharmaceutical company has seen its revenue rise for six consecutive years. In 2021, revenue grew to $46.9 billion, up 7% year over year, while EPS trailed to $0.87, down from $1.14 in 2020.
To improve margins, the company plans to spin off its consumer healthcare division into a new company called Haleon sometime this summer. The division is known for brands such as Sensodyne toothpaste, ChapStick, Advil, and Robitussin. This spinoff will allow GSK to focus on the 21 vaccines and 43 medicines in its pipeline, along with the rest of its more profitable pharmaceutical side, which saw a 10% year over year revenue increase of 10% in 2021. The company estimated that the split would increase adjusted operating profit by more than 10% CAGR over the next five years.
GSK's pharmaceutical side has a strong stable of oncology, respiratory, and immunology therapies. Last year, it had three big approvals: long-term HIV preventative Apretude; Xevudy, a neutralizing monoclonal antibody to treat COVID-19; and endometrial cancer treatment Jemperli.
The stock has a P/E of 18.37, putting it in the bargain bin compared to the 45.69 average P/E of a typical pharmaceutical stock. Another thing that makes GlaxoSmithKline stock enticing is its above-average dividend, which is good enough for a yield of 4.66%. One caveat, though. The company increased its dividend by 17.8% this year to 27 pence ($0.36) per share, but after the spinoff, the dividend for just the GSK stock will fall to 22 pence ($0.29) per share.
ASX Revenue (Quarterly) data by YCharts.
Choosing the best path for your $100
Both of these stocks would be a great place to park $100 right now. It depends on whether you prefer a growth stock with slightly more risk or a value stock with more dependable returns, including a larger dividend.
ASE Technology is slightly riskier, but it has outpaced the S&P 500 in total return over the past three years.
Even after its upcoming split, GlaxoSmithKline will have a better dividend and a little more safety because of its huge pipeline of therapies. If its split leads to better margins, as the company suggests, now may be a good time to buy the stock.