If the past couple of years have taught investors anything, it's that Wall Street can be fickle. Investors have been taken on an emotional roller-coaster, with the major indexes launching to new highs in 2021, plummeting into a bear market in 2022, and roaring back through the first seven months and change of 2023.
But while the stock market remains something of an enigma over short periods, it's been a surefire wealth creator when examined over decades. With the exception of the 2022 bear market, every notable correction throughout history was eventually cleared away by a bull market rally. Given that the major indexes are still below their highs set in 2021, it means deals are still available to investors willing to seek them out.
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Best of all, the vast majority of online brokerages have done away with commission fees and minimum deposit requirements for everyday investors. It means any amount of money -- even $200 -- can be the perfect amount to put to work on Wall Street right now.
If you have $200 that's ready to invest, and you're certain this cash won't be needed to cover an emergency or pay bills, the following three stocks stand out as no-brainer buys right now.
Etsy
The first phenomenal stock that's begging to be bought with $200 is e-commerce company Etsy (ETSY 0.34%).
For retail-focused businesses like Etsy, the biggest concern is that the U.S. economy will fall into a recession. A growing assortment of economic indicators suggest the U.S. economy will weaken in the months that lie ahead. Since retail companies are almost always cyclical, a recession would be expected to weigh on Etsy's gross merchandise sales.
But this is a two-sided coin. While economic downturns may be normal, they don't last very long. All 12 recessions following World War II have run their course in just two to 18 months. By comparison, the U.S. economy frequently enjoys multiyear periods of expansion. In other words, consumer buying should expand steadily over the long run.
What makes Etsy so special is its merchant base. Whereas most online retailers are purely focused on volume, Etsy's merchant base is comprised of self-proprietors and small businesses that offer a human touch. Etsy's retailers are able to personalize and customize products and services in a way that no other online retailer can match at scale. It's why giants like Amazon aren't a genuine threat to what Etsy can offer consumers.
Although the COVID-19 pandemic whipsawed some of Etsy's key performance indicators, the figures that matter most are heading in the right direction over the past four years (since prior to the start of the pandemic). The number of habitual buyers -- those who've made at least six purchases that add up to $200 (or more) over the trailing 12 months -- has more than tripled since the second quarter of 2019. Meanwhile, new and reactivated buyers have consistently been above pre-COVID averages on a quarterly basis.
But the figure that should really excite investors is Etsy's take-rate -- what the company gets to keep from merchants as a percentage of total sales. Etsy's take-rate hit 21% in the latest quarter and has continued to climb. A higher take-rate, coupled with more active buyers, is an enticing combination for sustained profit growth.
Starbucks
The second no-brainer stock that investors can confidently buy with $200 right now is none other than coffee giant Starbucks (SBUX 0.47%).
The COVID-19 pandemic and historically high inflation have been Starbucks' biggest headwinds. Unpredictable store closures domestically and abroad, coupled with higher costs for coffee and labor, threatened to drag down the company's often robust operating margin. But with inflation pressures beginning to ease in the U.S. and the worst of the pandemic looking to be in the rearview mirror, Starbucks is, once again, looking like a top stock to own.
The most front-and-center competitive advantage that Starbucks brings to the table is its exceptionally loyal customer base. As of July 2, 2023, it had 31.4 million active Starbucks Rewards members in the United States. Rewards members are more likely to have bigger tickets than non-members, and they also tend to use mobile ordering more often, which is key to improving the operating performance of Starbucks' stores. More mobile ordering means shorter in-store lines and faster drive-thru service.
Something else that can't be overlooked with Starbucks is the company's incredible pricing power. Speaking as someone who's been regularly visiting their local Starbucks store for more than two decades, there pretty much isn't a price point that would entice me to go elsewhere. Being able to seamlessly pass along inflationary price hikes to customers has helped Starbucks navigate a challenging economic environment.
Furthermore, Starbucks is investing in myriad initiatives designed to spur sales and lift its operating margins. This includes the complete redesign of its drive-thru ordering boards during the pandemic's height, as well as its ongoing push to upgrade its food offerings. Food is a high-margin add-on sale that has the ability to draw users in during the breakfast and lunch hours.
Although Starbucks may not appear cheap at nearly 25 times forward-year earnings, the simple fact that it can sustain double-digit sales and earnings growth over the next five years makes it a better value than many investors realize.
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Johnson & Johnson
The third no-brainer stock to buy with $200 right now is healthcare conglomerate Johnson & Johnson (JNJ -0.46%), which is better-known as "J&J."
Litigation-based uncertainty is the biggest reason J&J has struggled in 2023 while the broader market has rallied. Though the company has denied allegations that its now-discontinued talcum-based powder caused cancer in users of the product, it offered up to $8.9 billion, through its subsidiary LTL Management, to settle all lawsuits. In late July, this settlement attempt was dismissed in court. The financial uncertainty associated with this litigation clearly has some folks on Wall Street concerned.
However, there's really no need for investors to worry. Johnson & Johnson is one of only two publicly traded companies to sport a AAA credit rating from Standard & Poor's, a division of S&P Global. Over the trailing 12-month period, J&J generated $21.5 billion in levered free cash flow, and it has $28.5 billion in cash on its balance sheet to boot. It shouldn't have any trouble eventually putting its talcum-based lawsuits behind it and servicing its existing debt.
What's long made Johnson & Johnson such a phenomenal company is the predictability of its operating cash flow, its revenue mix, and its leadership.
With regard to the former, we don't have the luxury of deciding when we become ill or what ailment(s) we develop. Demand for prescription drugs and medical devices doesn't stop just because Wall Street has a bad day or the U.S. economy is struggling. This creates a consistency of cash flow for J&J in any economic environment.
In terms of revenue mix, J&J has strongly leaned toward pharmaceutical sales over the past decade. Brand-name drugs offer strong pricing power and superior margins, relative to medical technologies and J&J's recently spun-out consumer health products division, now known as Kenvue. To counter the potential of a future patent cliff, J&J has aggressively invested in novel drug research and forged a number of drug-development collaborations.
Lastly, Johnson & Johnson has had just eight CEOs since its founding in 1886. Consistency at key leadership positions means strategic initiatives are being seen through from start to finish.
At 15 times forward-year earnings, Johnson & Johnson stock is historically inexpensive and ripe for the picking.
