From time to time, Wall Street presents investors with a "buckle up and hold on" type of year. Last year, all three major U.S. stock indexes plunged into a bear market, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite registering their worst performance in 14 years.
But when there's pain on Wall Street, there's almost always opportunity. Despite 2022 being an abysmal year for most investors, bear markets have a knack for producing once-in-a-decade discounts on many high-quality, innovative businesses.
Since every bear market throughout history has eventually been wiped clean by a bull market rally, big declines should always be viewed by long-term investors as a surefire buying opportunity.
Image source: Getty Images.
Maybe the best thing about bear markets is that most online brokerages have done away with trading commissions and minimum deposit requirements. This means any amount of money -- even $100 -- is the perfect amount to put to work right now.
If you have $100 ready to invest that won't be needed for bills or to cover emergencies, here are some of the smartest stocks you can buy in 2023.
Walt Disney
The first genius buy with $100 in the new year is media giant and theme-park operator Walt Disney (DIS 0.59%). Despite being persistently clobbered by the COVID-19 pandemic for three years, patient investors need to recognize the unwavering competitive advantages and catalysts this company offers.
As I've extolled previously, the single biggest competitive edge Walt Disney brings to the table is that it's irreplaceable. Sure, there are other theme parks to visit and movies to watch. But when it comes to the library of content Disney possesses, its dozens upon dozens of recognizable characters, and the emotional attachments those characters evoke with people of all ages, there's simply no other company that can compete with Disney.
If you need more evidence of this emotional attachment, just look at the rapid subscription uptake for streaming service Disney+. This service was launched in November 2019, and it took less than three years to sign up more than 164 million people.
While it's a money-losing segment for the time being, Disney is increasing the monthly price for this subscription service, as well as introducing an ad-supported version at a modestly lower price point. Walt Disney is one of a few companies that faces little or no pushback when increasing prices on its loyal customer base.
With shares of Disney closing in on a nine-year low and valued at less than 18 times Wall Street's consensus earnings for fiscal 2024, now looks like the ideal time to add the so-called House of Mouse to your portfolio.
NASDAQ: WDC
Key Data Points
Western Digital
Another exceptionally smart stock to buy in 2023 with $100 is storage solutions specialist Western Digital (WDC +3.50%).
The growing prospect of a U.S. recession, coupled with weaker flash memory prices and a slowdown in orders from both consumers and businesses, had led to a double-digit decline in revenue. However, this cyclical stock looks poised to rebound in a big way in the coming years.
Although the possibility of a recession is weighing on the company now, supply chain disruptions tied to the pandemic have generally been a positive. Western Digital and its peers have a tendency to overproduce storage solutions when pricing improves. With no clear answer as to when supply chains will normalize, investors can expect most of Western Digital's solutions to support favorable pricing.
More importantly, Western Digital has a well-defined opportunity to generate significant growth from data centers. Businesses were already moving their data into the cloud prior to 2020. The pandemic has accelerated this shift and increased data center storage needs. While Western Digital's hard-disk drives are a data-center staple, it's the company's NAND flash-memory solutions within data centers that offer the most exciting growth runway.
Though cyclical stocks don't turn around at the snap of a finger, they do have a tendency to benefit from disproportionately long periods of economic expansion. This makes any bear market the perfect time to buy into a storage leader like Western Digital.
NYSE: FVRR
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Fiverr International
The smartest stocks to buy right now isn't limited to brand-name companies with decades of history on their side. Online-services marketplace Fiverr International (FVRR 2.51%), which was founded in 2010, stands out as a smart way to invest $100 right now.
If you're looking for a knock against an online marketplace for freelancers, it would be the potential for a recession. The Federal Reserve's hawkish monetary policy is effectively aimed at reducing the wage-pricing power of workers and will, in all likelihood, increase the U.S. unemployment rate.
That's not exactly the best news for a job-driven online business. And yet, Fiverr presents with undeniable advantages in a dynamic labor landscape.
For instance, even though some workers have returned to the office in the wake of the pandemic, more people are working remotely than ever before. Fiverr's online-services marketplace is one of only a few that's perfectly positioned to take advantage of this shift. The transparent pricing offered by freelancers on its platform -- Fiverr freelancers present their jobs as a single price instead of pricing their work at an hourly rate -- has led to an increase in both spend per buyer and the aggregate number of buyers.
But what really separates Fiverr from other freelancer marketplaces is its take-rate, which is the percentage of each negotiated deal it gets to keep. Ideally, online-service marketplaces want to keep as much as possible without hurting growth or chasing freelancers away. Fiverr has consistently grown its take-rate, which hit 30% in the latest quarter. That's nearly double that of some of its top competitors.
Image source: Getty Images.
Bank of America
A final smart stock to buy with $100 in 2023 is Bank of America (BAC 2.73%). Normally, bank stocks would be one of the last places to consider investing when a potential recession is brewing. But these aren't normal circumstances, which is what makes BofA such an ideal stock to buy.
Historically, a recession or steep decline in the stock market would be met with interest rate cuts by the nation's central bank. However, with the U.S. inflation rate rising to a four-decade high of 9.1% this past June, the Fed has had no choice but to tackle inflation head-on with aggressive interest rate hikes. As rates rise, so does the net interest income-earning potential of money-center banks with outstanding variable-rate loans.
Among big banks in the U.S., none is more interest sensitive than Bank of America. It recognized an extra $2.7 billion in net interest income during the September-ended quarter, as well as estimated that a 100-basis-point parallel shift in the interest rate yield curve would net it an additional $4.2 billion in net interest income over 12 months. Even if loan losses were to increase, the positive impact of higher interest rates would more than offset BofA's loan losses.
In addition, today's Bank of America is nothing like the company you might remember from the financial crisis (2007-2009). Bank of America has put legal settlements and litigation in the rearview mirror and has invested heavily in a variety of digitization initiatives designed to encourage its customers to bank online or via mobile app. This steady shift to digital banking is helping to improve its operating efficiency.
