Unpredictability is about the only thing investors can count on over the short term when it comes to Wall Street. During the trailing-two-year period, we've watched the major U.S. stock indexes climb to multiple all-time highs, plunge into a bear market, and now come rip-roaring out of the gate in 2023.
But in spite of the big gains for the benchmark S&P 500 and growth-focused Nasdaq Composite in 2023, both indexes, along with the iconic Dow Jones Industrial Average, sit well below their record-closing highs. For patient investors with long-term mindsets, it means deals can still be had.
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One of the best things about putting your money to work on Wall Street today, compared to, say, 10 years ago, is that most online brokerages have done away with commission fees and minimum-deposit requirements. This means that any amount of money -- even $1,000 -- can be the ideal amount to build wealth on Wall Street.
If you have $1,000 that's ready to be invested, and this cash won't be needed to cover emergencies or pay bills, the following three stocks stand out as no-brainer buys right now.
Etsy
The first surefire stock that's begging to be bought with $1,000 right now is e-commerce company Etsy (ETSY 0.34%).
Like the broader market, Etsy has been taken on a wild ride over the past four years. The initial lockdowns associated with the COVID-19 pandemic led to an influx of consumers purchasing the company's goods online. Etsy was also a popular destination for mask purchases.
But as life has returned to some semblance of normal, we've seen year-over-year sales comparisons at Etsy slow. With the probability of a U.S. recession higher than it's been in decades by at least one widely monitored measure, there's clear concern about the near-term growth potential of retailers.
However, retreating from top-tier retailers has never been a particularly smart move for long-term-minded investors, considering that every recession after World War II has been short-lived (two to 18 months).
What really sets Etsy apart from its competition is its merchants. The company's online marketplace is kept afloat by 5.9 million sellers, 97% of whom run their Etsy shops from their homes.
Whereas e-commerce giants like Amazon are all about servicing customers in bulk, Etsy can provide a level of transactional personalization that no other company can match at scale. In other words, the uniqueness of what Etsy's merchants offer provides a moat that even Amazon won't be able to cross.
Virtually all of Etsy's key performance indicators have improved over the past four years (i.e., since prior to the pandemic). The numbers for both new-buyer acquisition and reactivated buyers are considerably higher now than they were in 2019.
More importantly, there were 7.2 million habitual buyers as of the end of March 2023. "Habitual buyers" are consumers who made at least six separate purchases over a 12-month period, with aggregate buys totaling $200 (or more).
Even though the number of habitual buyers is down 10% from where things stood a year earlier (8 million in Q1 2022), it still represents a 238% increase from the end of March 2019. A more engaged active-user base, coupled with the ability to bring back previous buyers, is a recipe for transactional growth and pricing power on Etsy's part.
Don't overlook the company's investments back into its business, either. Etsy is incorporating generative artificial intelligence (AI) to help with search results to ensure that customers are finding the products they're looking for, even if they can't perfectly describe them. These investments, including in supportive video ads, are a positive for merchants and the entire company.
Okta
A second no-brainer stock that can confidently be bought with $1,000 right now is cybersecurity company Okta (OKTA -0.69%).
The biggest knock against a high-growth stock like Okta is its valuation. If the U.S. economy does weaken, which a number of economic indicators suggest could happen, Wall Street and investors are probably not going to be as willing to pay 55 times forward-year earnings for Okta. The expectation would be for new orders to slow and earnings-multiple compression to take place.
But once again, such short-term thinking overlooks both macro and company-specific catalysts working in Okta's favor over the long run. Though it's possible Okta could be weighed down by a mild recession, the benefits appear to substantially outweigh the risks.
Before digging into company specifics, I'll point out that cybersecurity solutions have evolved into something of a necessity service. With businesses shifting their data into the cloud and online at an accelerated rate following the pandemic, demand for solutions that protect this information will be steady in any economic environment.
Okta has made a name for itself as an identity-verification specialist. The company's software-as-a-service (SaaS) platform is cloud-native and relies on AI and machine learning to grow more efficient over time. In short, the more events Okta's SaaS solutions oversee, the better trained it becomes at recognizing and responding to potential threats. Compared to on-premises solutions, cloud-based SaaS is usually a nimbler and more effective option.
SaaS is the wave of the future in identity verification. Okta estimates its total addressable market at $80 billion, with $30 billion tied to customer identity and $50 billion for workforce identity. For context, Okta generated $1.86 billion in full-year sales in fiscal 2023 (the company's fiscal year ends Jan. 31), implying there's plenty of runway for sustained double-digit sales growth.
Equally intriguing is the company's acquisition of Auth0, which closed in May 2021. Although the integration of Auth0 into the fold hasn't been as smooth as desired, the solutions that Auth0 brings to the table should vastly expand Okta's international reach.
Image source: Getty Images.
NextEra Energy
The third no-brainer stock to buy with $1,000 right now is America's largest electric utility by market cap, NextEra Energy (NEE -1.36%).
Arguably the greatest headwind for NextEra Energy is simply being noticed amid a mostly uninterrupted rally in high-growth tech stocks. But with value and stock-picking somewhat back in focus, NextEra can, once again, add a bit of electricity to your portfolio.
NextEra Energy may not have the ability to jaw-drop investors with its growth rate, like Okta or Etsy -- but what it does bring to the table is unparalleled cash-flow predictability. If you own or rent a home, there's a very good likelihood that you need electricity to power your appliances and heating or cooling systems.
Demand for electricity doesn't change much from one year to the next. This is what gives NextEra the confidence to outlay capital for new projects, acquisitions, and its dividend, without the fear of weighing on its adjusted earnings growth.
The reason NextEra is America's largest publicly traded utility by market cap is its renewable-energy focus. As of March 31, 2023, it had 31 gigawatts (GW) of clean energy in operation, including 23 GW of wind power and 5 GW of solar. Both figures are the highest of any utility worldwide. An energy portfolio focused on renewables means significantly lower electricity-generation costs and an adjusted earnings growth rate that's well above the industry average.
Take note that this renewable-energy portfolio is still rapidly expanding. Based on company expectations as of April 25, 2023, anywhere from 32.7 GW to 41.8 GW of renewable capacity should be added between the start of this year and the end of 2026. If Washington, D.C. were ever to pass clean-energy legislation governing the U.S. utility sector, NextEra would be light years ahead of its competition.
Meanwhile, NextEra's utility operations that aren't powered by renewable energy are regulated by the Florida Public Service Commission (PSC). While the Florida PSC won't allow NextEra to raise its rates without cause, regulation ensures the company won't face potentially volatile and unpredictable wholesale electricity pricing.
The cherry on top for long-term investors is that NextEra has increased its base annual dividend for 29 consecutive years. A market-topping yield (2.5%) from an outperforming utility looks like a recipe for wealth creation.
