Over the long run, Wall Street is a wealth-building machine. But when looked at over shorter time lines, the broader market is quite unpredictable as the 2022 bear market showed.
Though stock market corrections and bear markets are an inevitable part of the long-term investing cycle, they also represent surefire opportunities for patient investors. Despite never knowing (with any certainty) when corrections will begin, how long they'll last, or how steep the ultimate decline will be in the major U.S. stock indexes, history has shown that every sizable drop was eventually put in the rearview mirror by a bull market rally. With the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite still well below their all-time highs, bargains can still be had.
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The best aspect of putting your money to work on Wall Street is you no longer need a large pile of cash to build wealth. Most online brokerages have done away with minimum deposit requirements and commission fees. Any amount of money -- even $400 -- can be the ideal amount to put to work right now.
If you have $400 that's ready to invest, which you're certain you won't need to pay bills or handle emergencies, the following three stocks stand out as no-brainer buys right now.
Johnson & Johnson
The first phenomenal stock that makes for a surefire buy with $400 right now is healthcare conglomerate Johnson & Johnson (JNJ -0.46%), which is perhaps better known as J&J.
The reason prospective buyers are receiving a discount on shares of J&J is due to the litigation overhang tied to its now-discontinued talcum-based baby powder. Allegations that its baby powder caused cancer, which the company has denied, led J&J to propose an $8.9 billion settlement in April. Until there's a definitive figure that's agreed upon, this gray cloud could weigh on Johnson & Johnson's shares.
But at the same time, this litigation isn't as big of a problem as it's made out to be. Johnson & Johnson is one of only two publicly traded companies sporting the highest credit rating possible (AAA) from Standard & Poor's, a division of S&P Global. Johnson & Johnson generates more than enough annual cash flow and has plenty of cash already on its balance sheet to absorb a settlement.
What investors should be focused on is J&J's consistency and predictability. For more than a decade, it's been shifting a larger percentage of net sales to its faster-growing and higher-margin pharmaceutical segment. The company is also investing aggressively in its pipeline and has forged a number of collaborations to ensure that it won't be a victim of a patent cliff. Following the spinoff of consumer health segment Kenvue in early May 2023, J&J should enjoy sustained earnings growth in the mid-single digits.
It's also a company with little turnover in key leadership positions. Despite being founded 137 years ago, J&J has had only eight CEOs. Maintaining strong leadership has been key to ensuring that strategic initiatives are properly implemented.
The cherry on the sundae for investors is that Johnson & Johnson's forward price-to-earnings (P/E) ratio is lower now than at the end of any year over the past decade. Investors are getting a truly generational business that's riding a 61-year streak of increasing its annual dividend for a bargain price.
Green Thumb Industries
A second no-brainer stock you can confidently buy with $400 right now is cannabis multistate operator (MSO) Green Thumb Industries (GTBIF 3.56%).
There's no dancing around just how poorly marijuana stocks have performed over the past two years. The expectation that President Joe Biden and a Democrat-led Congress would swiftly reform cannabis banking policies, if not outright legalize weed at the federal level, were quickly whisked away. As the industry has matured, smaller players have faltered. But Green Thumb is not among the MSOs that have struggled.
On the contrary, Green Thumb has delivered a generally accepted accounting principles (GAAP) profit in all but one of the last 11 quarters, through March 2023. Whereas most MSOs are struggling to reach their first profitable quarter, Green Thumb has nearly three consecutive years of recurring GAAP profits under its belt.
The secret to Green Thumb's success can be found in its revenue mix. Well over half of the company's revenue comes from derivative pot products, such as infused beverages, vapes, pre-rolls, and edibles. In particular, edibles, vapes, and pre-rolls grew by 20% or more on a year-over-year basis during the first quarter. Derivative pot products, which are what's fueling GAAP profits for Green Thumb, offer substantially higher margins than dried cannabis flower.
There's also plenty of opportunity for patient investors to benefit from state-level legalizations of cannabis. Every year, a handful of new states approve adult-use consumption and possession. According to estimates from BDSA, legal marijuana sales in the U.S. are forecast to grow from an estimated $29.6 billion in 2023 to $45 billion in 2027.
With Green Thumb consistently profitable and moving into new markets, it finds itself perfectly positioned to benefit from the "green wave."
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Vertex Pharmaceuticals
The third no-brainer stock to buy with $400 right now is biotech company Vertex Pharmaceuticals (VRTX -0.06%).
The biggest "issue" for Vertex is the company's lack of revenue diversification. According to guidance issued by the company, it's expected to generate $9.55 billion to $9.7 billion in net-product sales, all of which will come from drugs targeted at cystic fibrosis (CF). CF is a genetic disease characterized by thickened mucus that obstructs a patient's lungs and pancreas.
Although CF has no cure, Vertex has had an abundance of success developing treatments aimed at improving the lung function of CF patients. Specifically, Vertex has seen four generations of its treatments approved by the U.S. Food and Drug Administration, with the latest, Trikafta (approved in 2019), targeting the F508del mutation. This is the most common mutation, which occurs in approximately 90% of all patients.
Vertex is currently working on its fifth-generation treatment for CF and saw the label for Trikafta expand to ages 2 through 5 years (previously age 6 and above) in late April 2023. The key point here is that Vertex's CF cash flow is well protected.
There's also plenty of optimism that Vertex will expand its revenue stream beyond CF in the coming years. The most exciting of these new potential treatments is exagamglogene autotemcel, which is mercifully better known as exa-cel. This gene-editing drug, which was developed in cooperation with CRISPR Therapeutics, is focused on treating severe sickle cell disease and transfusion-dependent beta thalassemia, and has the potential to surpass $1 billion in annual sales by 2028.
Something else for investors to love about Vertex Pharmaceuticals is its cash hoard. The company is generating so much cash flow that it closed out March with $10.4 billion in cash, cash equivalents, and marketable securities. There's plenty of capital for ongoing research, collaborations, acquisitions, and even share repurchases.
Sporting a sustained high-single-digit/low-double-digit earnings growth rate and a reasonably low forward P/E ratio of 22, Vertex is ripe for the picking.
