This has not been a pretty year for Wall Street. Since hitting their respective all-time highs within the past year, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have plunged by as much as 22%, 28%, and 38%. This means all three major U.S. stock indexes are now in a bear market.
There's little question that bear markets can be scary. The big down days that often accompany periods of heightened volatility can be enough to make anyone question their resolve to stay invested. But bear markets also represent opportunity. Since every double-digit percentage decline in the broader market has eventually been cleared away by a bull market rally, it's the ideal time for long-term investors to go to work.
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The best thing about investing in today's bear market is you don't need a boatload of cash to begin building wealth. Most brokerages have done away with commission fees and minimum deposit requirements, which means any amount of money -- even $300 -- can be the perfect amount to invest.
If you've got $300 at the ready, which won't be needed to cover bills or emergencies, the following three stocks would make for genius buys on the dip.
NextEra Energy
One of the smartest stocks investors can buy right now with $300 as the broader market dips is America's largest electric utility by market cap, NextEra Energy (NEE 1.36%).
The biggest headwind for electric utilities is rapidly rising interest rates. Not only are utilities known for leaning on debt to finance new infrastructure projects, but utility stocks are often purchased for their market-topping dividend yields. As interest rates rocket higher, bond yields begin to look like a more attractive option for investors than utility stocks.
However, NextEra Energy isn't like a traditional utility stock. That's because it's directed its focus on renewable energy sources. No utility in the country generates more capacity from solar or wind power. As a result, NextEra's electricity generation costs have shrunk, and the company has delivered a compound annual growth rate in the high single-digits for more than a decade. Comparably, electric utilities typically grow by a low-single-digit percentage. If there is such a thing as a utility growth stock, NextEra would fit the definition.
NextEra can also lean on the predictability of its regulated operations (i.e., those not powered by renewable energy sources). Regulated utilities need the approval of state public utility commissions before they can pass along rate hikes. While this might sound less-than-ideal, it's actually good news. Regulated utilities aren't exposed to potentially volatile wholesale electricity pricing, which means NextEra's cash flow is highly predictable from one year to the next.
With NextEra capable of high-single-digit earnings growth and expected to increase its dividend by a double-digit percentage through 2024, it looks like a no-brainer buy.
Novavax
A second genius stock that investors can confidently buy with $300 on the dip is biotech stock Novavax (NVAX 2.95%).
Novavax gained fame during the COVID-19 pandemic due to its development of NVX-CoV2373 (known as Nuvaxovid in Europe). Only three COVID-19 vaccines makers have managed to hit the elusive 90% vaccine efficacy (VE) mark in late-stage clinical trials. Novavax was one of those three with NVX-CoV2373 in its U.S./Mexico trial (90.4% VE). The company's vaccine was given emergency-use authorization in the U.S. for persons 12 and older as a primary two-dose treatment.
The issue for Novavax and other COVID-19 vaccine developers is that the worst of the pandemic appears to be in the rearview mirror. Therefore, skepticism is building with regard to how much revenue vaccine makers like Novavax will bring in on a recurring basis. But there are still abundant catalysts in Novavax's sails.
Perhaps even more important than generating global recurring sales is the fact that Novavax's drug-development platform has demonstrated it works. The pandemic should serve as a jumping-off point for the company to develop combination vaccines (COVID-19 and influenza) and further its norovirus vaccine program. Within a few years, the company could be generating recurring sales from a number of channels.
Another reason for investors to be confident about Novavax is the company's healthy balance sheet. When the June quarter came to a close, Novavax had $1.38 billion in cash and cash equivalents. This is more than enough capital for the company to continue its research. Further, with Novavax's market cap at only $1.54 billion, its cash should act as a downside buffer.
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Etsy
The third genius stock to buy with $300 on the dip is specialty e-commerce company Etsy (ETSY 2.86%).
Consistent with the companies on this list, Etsy is contending with a mountain of headwinds. Historically high inflation threatens to reduce the purchasing power of low-earning consumers. Also, a weakening U.S. economy could weigh on people's desire to make purchases in the first place. The cherry on the sundae is that stocks with premium valuations, such as Etsy, have been taken to the woodshed during the bear market decline.
But Etsy brings something to the table that differentiates it from other companies in the online retail space. Whereas most direct-to-consumer models are built solely on volume, Etsy's platform really pushes the idea of personalization and/or customization. That's because its merchants are self-proprietors or small businesses that are willing to work with potential buyers on a personal level to meet their needs. No other online platform comes close to providing the scale of personalization seen with Etsy's marketplace.
Something else to consider about Etsy is the company's overwhelming success in growing its habitual buyer category. According to the company, a "habitual buyer" is someone who makes at least six purchases over the trailing-12-month period that total $200 or more, in aggregate. In the three years between June 30, 2019 and June 30, 2022, the number of habitual buyers on the platform grew by 248%. Growing this figure is what allows Etsy to command higher fees from merchants on its platform.
Etsy isn't afraid to reinvest for its future, either. The company has aggressively deployed its cash to improve search and purchase functionality, as well as roll out video ads to improve user engagement.
Although it might not look like it at the moment, Etsy has the opportunity to easily sustain a double-digit average growth rate throughout the decade. With competitive advantages on its side, it looks like a smart buy for growth-oriented investors.
