It's a lesson new investors may not have learned and tenured investors need to be reminded of: Stocks are fickle. Although the broad-market indexes rise in value over time, stocks can be highly unpredictable in the short term, as we saw in 2022. Last year, all three major stock indexes plunged into a bear market.
However, peril brings promise on Wall Street. Even though stock market corrections are inevitable, they typically don't last very long. This makes every sizable downturn in equities a buying opportunity for patient investors.
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What's more, most online brokerages have completely done away with commission fees and minimum deposit requirements, which makes it easier than ever for everyday investors to put their money to work on Wall Street. Any amount of money -- even $1,000 -- can be the perfect amount to invest right now.
If you have $1,000 that's ready to invest and you're certain you won't need this money to cover emergency expenses or pay bills, the following three stocks stand out as no-brainer buys right now.
Alphabet
The first stock that makes for a smart buy with the major stock indexes well off their all-time highs is Alphabet (GOOGL -2.33%) (GOOG -2.50%), the parent company of internet search engine Google, streaming platform YouTube, and autonomous vehicle company Waymo, among other subsidiaries.
The primary reason shares of Alphabet have fallen more than 20% from their record high is the growing expectation that the U.S. economy will enter a recession. Even the Federal Reserve has built a mild recession into its outlook for later this year. Since advertising is one of the first industries to be hampered by a recession and Alphabet generates the bulk of its revenue from selling ads, it's easy to put two and two together to figure out why the company's stock is under pressure.
However, this decline is a surefire opportunity for patient investors. Though economic downturns are inevitable, every recession after World War II has lasted between two and 18 months. Comparatively, economic expansions are almost always measured in years. It means the advertising industry should enjoy disproportionately long periods of success.
Alphabet is sitting pretty thanks to its world-leading internet search engine, Google. At no point in the last eight years has Google accounted for less than 90% global internet search share in a given month. As the clear go-to for advertisers, Google should be able to command strong ad-pricing power and generate abundant cash flow.
As I recently pointed out, cloud infrastructure service Google Cloud is another bright spot that helps to diversify the company's revenue stream. Google Cloud's share of global cloud infrastructure service spending stood at 9% during the first quarter (Q1), according to an estimate from tech analysis company Canalys. More importantly, Google Cloud generated a quarterly profit in Q1, which bodes well for its cash flow-generating potential in the second half of this decade.
Relative to its future earnings and cash-flow potential, Alphabet stock is inexpensive.
Johnson & Johnson
A second no-brainer stock that makes for a phenomenal buy with $1,000 right now is healthcare conglomerate Johnson & Johnson (JNJ -1.25%), commonly known as J&J.
Perhaps the biggest concern for J&J is the litigation regarding its talcum-based baby powder products. Litigation and the uncertainty of financial penalties have a way of weighing on valuations. But as you're about to see, this overhang isn't anything for current and prospective shareholders to worry about.
One of the reasons J&J has been such a rock-solid investment for decades is because it's a healthcare stock. As much as we'd like the ability to pick and choose when we become ill and what ailment(s) we develop, we don't have that control. Demand for prescription drugs and medical technologies tends to be consistent in any economic environment. This consistency of demand is what helped Johnson & Johnson grow its adjusted operating earnings for 35 consecutive years prior to the COVID-19 pandemic.
Another factor that's made J&J the powerhouse it is today is its operating model. For more than a decade, the company has shifted more of its net sales toward brand-name pharmaceuticals, which provide a juicy operating margin and healthy organic growth rate. However, J&J also has its industry-leading medical technologies segment it can rely on. As access to medical care improves worldwide, demand for medical devices should only grow over time.
Investors can also look to Johnson & Johnson's leadership if they want to be reassured. In the 137 years since its founding, J&J has had only eight CEOs. Continuity in key leadership positions ensures that initiatives are being seen through from start to finish.
Lastly, Johnson & Johnson is one of only two publicly traded companies that credit-rating agency Standard & Poor's (S&P), a division of S&P Global, has anointed with its highest possible rating (AAA). J&J is a cash-generating machine that S&P has the utmost confidence can service and repay its outstanding debt.
Johnson & Johnson has increased its base annual payout for 61 consecutive years, and its shares can be bought right now for less than 15 times consensus earnings for 2024. That's an all-around bargain.
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Broadcom
The third no-brainer stock you can confidently buy with $1,000 right now is semiconductor solutions specialist Broadcom (AVGO 2.21%).
Not to sound like a broken record, but the belief that a recession is coming is the biggest hurdle facing Broadcom at the moment. Chip stocks are cyclical, which means they tend to move in tandem with the U.S. economy. If economic activity drops off, the expectation would be that chip demand and pricing power would taper as well.
The good news for Broadcom and its prospective shareholders is that it has a number of "protections" built into its operating model that should allow it to outperform its peers in any economic environment.
As an example, most of Broadcom's revenue derives from the wireless chips and solutions it manufactures for next-generation smartphones. While consumer spending does tend to fall during recessions, there are certain things consumers aren't willing to give up. Smartphones and access to wireless services fit that definition, at least based on the wireless churn rates of major telecom companies.
To add to the above, it took telecom companies about a decade to upgrade wireless download speeds from 4G LTE to 5G. There's a lot of pent-up demand from consumers and businesses to upgrade their wireless devices, including smartphones. This is a multiyear catalyst for Broadcom.
The company's backlog is yet another reason not to be overly concerned about near-term turbulence in the stock market or U.S. economy. As of the end of July 2022, Broadcom was sitting on $31 billion in product backlog and was booking orders well into 2023. With nearly a full years' worth of revenue in backlog, Broadcom is better positioned to deal with a cyclical downturn than virtually any other chipmaker.
Don't overlook Broadcom's growth opportunities beyond smartphones, either. Broadcom is a leader in automotive electronics, covering vehicle connectivity. Additionally, it's a potential powerhouse in data centers. As businesses move more data online and into the cloud than ever before, demand for connectivity and access chips should steadily increase.
Broadcom has increased its quarterly dividend by nearly 6,500% since 2010, and it's currently trading at less than 16 times Wall Street's consensus earnings for 2024. It's a fairly priced income stock that can deliver sustained high-single-digit earnings growth.
