It's been a long time since Wall Street and everyday investors contended with such a challenging year. The growth-centric Nasdaq Composite, which was largely responsible for pushing the broader market to new heights, has lost around a third of its value. Meanwhile, the widely followed S&P 500 produced its worst first-half return in over a half-century.
While it's never any fun watching short-term, unrealized losses pile up, history has also shown that bear-market declines are the ideal opportunity for long-term investors to put their money to work.
Image source: Getty Images.
Thanks to most online brokerages doing away with commission fees and minimum deposit requirements, you don't need a mountain of cash to take advantage of significant market downturns. If you have $100 in cash that's ready to invest right now, which won't be needed to cover bills or emergencies, then putting that money to work in the following seven stocks would be a genius move.
1. Walt Disney
The first exceptionally smart buy as the stock market plunges is the "House of Mouse" -- Walt Disney (DIS +1.86%). Despite bringing joy to families, shares of Disney have brought pain to its shareholders, with a decline of roughly 45% since hitting its all-time high.
While things might seem a bit "Goofy" at the moment, Walt Disney brings a competitive edge to the table that can't be matched by other content providers. Namely, it can traverse generational gaps with ease to connect with users. Whether it's Disney's massive content library that allows grandparents and grandchildren to find common ground, or the company's theme parks, which bring friends and families together on a daily basis, the Walt Disney brand is a beast that continues to grow in value and command incredible pricing power.
Walt Disney's streaming platform, Disney+, is also on track to be a serious, long-term growth driver. As of July 2, 2022, Disney+ had 152.1 million subscribers. It's taken less than three years for Disney to reach subscriber totals that took Netflix more than a decade to amass.
NASDAQ: AZN
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2. AstraZeneca
The beauty of healthcare stocks is that they're highly defensive. Since we don't get to choose when we get sick or what ailment(s) we develop, there's always demand for prescription drugs, medical devices, and healthcare services. That's what makes pharmaceutical stock AstraZeneca (AZN +0.00%) such a genius buy right now.
After more than a decade of seemingly running in place, AstraZeneca has numerous areas of focus that are firing on all cylinders. For instance, oncology sales rose 18% on a constant-currency basis during the first half of 2022, thanks in large part to sustained, double-digit sales growth from blockbuster drugs Tagrisso, Imfinzi, and Lynparza. Cardiovascular (CV) therapies have excelled, too, with next-generation type 2 diabetes drug Farxiga growing its year-over-year sales by 63% on a constant-currency basis.
AstraZeneca has also benefited immensely from its acquisition of rare-disease drugmaker Alexion Pharmaceuticals. Although developing drugs for a small pool of patients can be risky, the reward for success tends to be a high list price with little or no pushback from insurers, as well as minimal or nonexistent competition.
A sustainably higher oil price could encourage more drilling. WTI Crude Oil Spot Price data by YCharts.
3. Enterprise Products Partners
Although the memory of oil and natural gas demand falling off a cliff during the initial stages of the COVID-19 pandemic is still fresh in the minds of investors, midstream oil and gas company Enterprise Products Partners (EPD 1.57%) can put these concerns to bed.
Midstream companies like Enterprise Products Partners are effectively energy middlemen. They move, store, and occasionally process crude oil and natural gas. What's important is that midstream providers lean on fixed-fee and volume-based contracts with drilling companies. This leads to highly predictable operating cash flow, and makes oil and natural gas spot-price volatility a moot point. Being able to accurately forecast its cash flow is what allows Enterprise Products Partners to pay a juicy 8% yield.
What's more, global energy supply chain disruptions are liable to keep oil and gas prices elevated for some time. Russia's invasion of Ukraine, coupled with reduced capital investment by energy majors during the pandemic, will make it difficult to ramp up supply anytime soon. Higher energy commodity prices should encourage drillers to eventually increase their long-term spending plans.
Image source: Getty Images.
4. Fiverr International
Another genius way to put $100 to work right now would be to buy shares of online-services marketplace Fiverr International (FVRR 1.19%). Even though the labor market is likely to weaken as the Federal Reserve raises interest rates and makes borrowing costlier, Fiverr's two competitive advantages make it a no-brainer buy.
First of all, Fiverr's freelancer-driven platform presents tasks as packaged deals. Comparatively, most freelancers on competing marketplaces price their services on an hourly basis. Fiverr's method provides superior price transparency for buyers, which has encouraged increasingly higher spending per buyer on Fiverr's marketplace even as the U.S. economy has weakened.
The second (and arguably more impressive) competitive edge can be seen in Fiverr's take rate. The "take rate" describes what percentage of each deal negotiated on its marketplace it gets to keep. Whereas most of Fiverr's competitors are netting a low-to-mid-teens take rate, Fiverr's take rate has consistently grown to almost 30% as of the end of June.
Aggressive Fed rate hikes mean more net interest income for banks with outstanding variable-rate loans. Effective Federal Funds Rate data by YCharts.
5. U.S. Bancorp
Regional banking giant U.S. Bancorp (USB +2.45%) represents another smart way to put $100 to work with the stock market plunging. Though bank stocks would usually be well off buyers' radars in a bear market, things are different this time around.
For the first time in history, the nation's central bank is raising interest rates into a tumbling stock market. While this will likely increase loan delinquencies for banks, higher rates also boost what banks generate in net interest income on outstanding variable-rate loans. U.S. Bancorp's generally conservative operating approach, coupled with higher net-interest income, should allow it to generate higher earnings per share even as loan delinquencies rise.
The other big differentiator for U.S. Bancorp is its incredible digital engagement. Through the end of May, 82% of the company's customers were banking online or via a mobile app. Furthermore, 64% of total loan sales were completed digitally, which is up from 45% at the beginning of 2020. Digital transactions cost just a fraction of in-person or phone-based interactions, which helps U.S. Bancorp deliver a higher return on assets than virtually all big banks.
NYSE: NEE
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6. NextEra Energy
Sometimes, playing it safe can be a genius move during periods of heightened volatility. That's why buying $100 in shares of electric utility stock NextEra Energy (NEE 0.07%) could be a good idea. Including dividends paid, NextEra has generated a positive total return for its shareholders in 19 of the past 20 years!
The obvious benefit of owning electric utility stocks is the predictability of their cash flow. No matter how poorly the stock market performs, homeowners and renters still need electricity and gas service. Demand for these basic-need services doesn't change much from one year to the next, which allows NextEra to accurately forecast its operating cash flow and invest in new infrastructure projects without compromising its steadily growing dividend or profitability.
Another major selling point with NextEra Energy is its focus on renewable energy. No utility in the country is generating more capacity from solar or wind power. Although green energy projects can be costly, they've helped NextEra reduce its electricity-generation costs and grow profits annually by a high single-digit percentage for more than a decade. For context, most electric utilities grow by a low single-digit percentage.
NYSE: PINS
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7. Pinterest
Lastly, adding $100 to social media stock Pinterest (PINS +0.27%) would be a genius move right now. Even though ad-driven businesses have been hit hard by short-term economic uncertainty, clear-cut competitive advantages -- a theme of this list -- can easily power Pinterest higher over the long term.
For instance, despite monthly active users (MAU) declining by 21 million in the June-ended quarter to 433 million, Pinterest reported average revenue per user (ARPU) climbed 17% globally. Not only have Pinterest's MAUs been increasing when examined over multiyear time frames, but it's evident that advertisers have been willing to pay a premium to get their message in front of Pinterest's user base.
What's even more noteworthy is that Pinterest's operating model largely avoids the headaches associated with data-tracking software changes. Because Pinterest's MAUs freely post the things, places, and services they like, merchants are able to target their messages/products at these potential shoppers. This sets Pinterest up to become a sizable e-commerce player throughout the decade.
