It's been a phenomenal year for optimists on Wall Street. As of the closing bell on Aug. 11, 2023, the ageless Dow Jones Industrial Average, broad-based S&P 500, and growth-dependent Nasdaq Composite, were respectively higher by 6%, 16%, and 30% on a year-to-date basis.
But in spite of these gains, all three major stock indexes remain well below their record-closing highs, which were set in mid-November 2021 for the Nasdaq Composite, and during the first week of January 2022 for the Dow and S&P 500. In other words, bargains can still be found.
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What makes investing on Wall Street so fruitful is that most online brokerages have removed barriers to entry for everyday investors. Minimum deposit requirements and commission fees are now gone for most brokers. This means any amount of money -- even $1,000 -- can be the ideal amount to put to work.
If you have $1,000 that's ready to invest, and you're certain you won't need this cash to pay your bills or cover the cost of an emergency, the following three stocks stand out as no-brainer buys right now.
Mastercard
The first stock that makes for a surefire buy if you have $1,000 that's ready to be put to work right now is payment processor Mastercard (MA 0.07%). Although a multitude of economic datapoints suggest a U.S. recession is likely later this year or perhaps in early 2024, Mastercard's laundry list of competitive advantages should have no trouble propelling shares to new heights for patient investors.
Like other financial stocks, Mastercard is cyclical. If U.S. or global gross domestic product shifts into reverse, consumer and enterprise spending would be expected to follow, which would be a net-negative for the company's sales and profits.
But this is a two-way street for Mastercard. Despite recessions being a normal part of the economic cycle, the 12 U.S. recessions after World War II have lasted just two to 18 months. Meanwhile, most economic expansions have lasted multiple years following World War II. A transaction-based payment processor like Mastercard is set to benefit from the long-term expansion of the U.S. and global economy.
In addition to a favorable long-term numbers game, Mastercard has a lengthy runway with which to expand its payment infrastructure into emerging markets. On top of being the clear-cut No. 2 payment processor in the U.S., multiple fast-growing international regions, such as Africa, the Middle East, and Southeastern Asia, remain largely underbanked. These are growth opportunities that should help Mastercard sustain a double-digit annual growth rate.
Another catalyst for Mastercard is its management team. Specifically, it's important to acknowledge that Mastercard has remained solely focused on payment facilitation and has shunned lending. This decision ensures that it won't have any direct impact from higher credit delinquencies or loan losses during a recession. Not having to set capital aside to cover potential loan losses is a tangible advantage that allows Mastercard to bounce back quickly from economic downturns.
Over the previous five years, Mastercard has traded at an average of 35 times forward-year earnings and nearly 39 times year-end cash flow. Investors have the opportunity to scoop up shares right now for 27 times next year's consensus earnings and 26 times cash flow. It's the cheapest Mastercard stock has been since 2018.
York Water
A second no-brainer stock that's begging to be bought right now with $1,000 is water utility company York Water (YORW). Despite its diminutive stature, York is a company that I've labeled as "Wall Street's Greatest Dividend Stock."
The top reason investors put their money to work in utilities is predictability. Most utilities operate as monopolies or duopolies in the areas they service. This means homeowners and renters have little, if any, choice as to which company provides their services. Since demand for water and wastewater services doesn't change much from one year to the next, York Water tends to generate highly predictable sales and operating cash flow from the 54 municipalities it serves in South-Central Pennsylvania.
To build on the above, York Water is a regulated water utility. In simple terms, it means that all rate-hike requests need to be approved by the Pennsylvania Public Utility Commission (PPUC). Though not being able to pass along rate hikes whenever it wants might sound like a nuisance, it's actually a big-time benefit. It ensures the company isn't exposed to wholesale pricing and further drives home the idea that the company's operating cash flow is exceptionally predictable.
In January, York Water received approval from the PPUC to increase rates on approximately 75,000 of its customers. This increase will help it recoup ongoing and future infrastructure spending totaling $176 million, and should boost annual revenue by $13.5 million, or around 22%, based on York's 2022 revenue.
As I alluded, York Water also has the steadiest dividend payout on the planet. It began doling out a dividend to its shareholders when James Madison was president in 1816 -- and it hasn't stopped since. That's more than 205 years of consecutive dividend payments.
York Water has consistently outperformed the benchmark S&P 500 since this century began, which makes it a smart buy if you have $1,000 ready to invest.
The 2024 Chevy Silverado EV represents one of 30 EV models GM plans to launch globally by the end of 2025. Image source: General Motors.
General Motors
The third no-brainer stock to buy with $1,000 right now is none other than Detroit-based automaker General Motors (GM 0.48%).
For years, legacy automakers like GM have been at a crossroads. While they've, generally, remained profitable, they've lacked a genuine long-term growth catalyst. However, the green-energy push we've witnessed industrywide has breathed new life into GM and its peers. The electrification of the automotive industry represents a multidecade growth opportunity for General Motors.
For its part, GM is sparing no expense on electric vehicle (EV) research, infrastructure, and battery needs. The company plans to spend $35 billion through mid-decade, with the goal of launching 30 new EV models globally by the end of 2025. Much of the company's early focus lies with EV truck production, which is a reflection of the substantially higher automotive gross margin found with trucks, relative to sedans. GM has a chance to achieve an annual production rate of 1 million EVs in North America by 2025.
Although GM's EV segment remains unprofitable for the time being, the company's internal combustion engine vehicles, which still account for the bulk of revenue, are crushing it. CEO Mary Barra recently noted that the company's mindful spending, coupled with strong consumer demand, is allowing the company to increase its automotive free cash flow guidance by $1.5 billion from its previous forecast ($7 billion-$9 billion, from $5.5 billion-$7.5 billion). This is quite the achievement considering that Tesla and other EV producers are seeing their automotive margins shrink due to price cuts.
Also, don't overlook General Motors' long-term opportunity in China, the world's No. 1 auto market. China's EV industry is nascent and market share is firmly up for grabs. Through its joint-venture partnerships in China, GM has an established presence and a relatively clear path to sustained long-term profits.
If you need a final reason to stomp the accelerator with General Motors, let it be the company's valuation. Even though single-digit price-to-earnings multiples are common in the cyclical auto industry, GM is still historically cheap by these standards. Based on Wall Street's consensus, investors can buy shares of General Motors for a little above 4 times forecast earnings per share in 2023. That's a screaming bargain!
