Following a down year that saw all three major stock indexes fall into a bear market, 2023 has put smiles back on most investors' faces.
But while the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have bounced meaningfully off of their 2022 bear market lows, they also remain well off of their record-closing highs, set between November 2021 and January 2022. While that might be disappointing to some people, it signals opportunity for investors with a long-term mindset who have cash at the ready.
Image source: Getty Images.
Arguably, the greatest thing about putting your money to work on Wall Street is that investment barriers have been torn down by online brokerages. More specifically, commission fees and minimum deposit requirements have largely been done away with. It means any amount of money -- even $200 -- can be the ideal amount to put to work right now.
If you have $200 that's ready to be invested and you're positive this cash won't be needed to cover bills or emergencies, the following three stocks stand out as no-brainer buys right now.
Walt Disney
The first phenomenal stock that looks like a surefire buy for long-term investors with $200 is media giant Walt Disney (DIS -0.04%).
There's no question that Walt Disney has had its fair share of issues over the past couple of years. The COVID-19 pandemic hit its operations hard. Many of its global theme parks were shuttered or saw significantly reduced attendance. Additionally, movie theaters were closed or reduced in capacity, which weighed on Disney's entertainment division. To cap things off, Walt Disney has also been dealing with the writers' strike, which began in early May.
But in spite of these numerous concerns, Walt Disney shares trading at a nine-year low is a holiday gift three months early.
The single biggest advantage Walt Disney brings to the table for investors is its irreplaceability as a media and entertainment company. While there are other theme parks consumers can visit and different movies to watch in theaters, no other company possesses the vastness of characters, storytelling, or sheer history that Disney can offer. I'd argue Walt Disney's brand is more valuable than any other media company, which makes its customer base exceptionally loyal.
The beauty of loyal customers is that it puts pricing power completely in Disney's court. For instance, the admission price to Disneyland in Southern California has increased by 10,300% since the park opened in 1955. This aggregate price increase outpaces the prevailing rate of inflation in the U.S. since 1955 by nearly a factor of 10.
Price hikes are also pivotal to getting streaming service Disney+ to recurring profitability. The company plans to increase its subscription prices across most streaming service tiers, which should meaningfully reduce segment operating losses. Getting Disney+ to recurring profitability by the end of fiscal 2024 might be a stretch, given the writers' strike, but recurring profits by fiscal 2025 is a distinct possibility.
Lastly, don't overlook the importance of having Bob Iger leading the company once again. Iger's previous tenures as CEO led to cornerstone acquisitions, including Pixar, Marvel, and Lucasfilm. Iger has a knack for improving Walt Disney's long-term growth outlook.
General Motors
A second no-brainer stock to confidently buy with $200 right now is automaker General Motors (GM 0.48%).
General Motors is facing a bit of a triple whammy at the moment. For one, interest rates have soared at their fastest pace in four decades, which has made buying a new vehicle (for those financing their purchase) costlier. Second, there's the possibility the U.S. economy will weaken in the coming quarters -- bad news for the highly cyclical auto industry. And third, a strike by the United Auto Workers threatens to dent GM's production in the weeks to come.
While these headwinds are less than ideal, they're not altering GM's long-term growth strategy or changing the outlook for one of Wall Street's cheapest stocks, based on the price-to-earnings (P/E) ratio.
Auto stock investors have been waiting decades for a true growth catalyst, and they finally have it with the electrification of vehicles. General Motors has set aside $35 billion to invest in electric vehicles (EVs), autonomous vehicles, and battery infrastructure/research, with the goal of launching an aggregate of 30 new EV models by the end of 2025. It'll probably take decades to replace internal combustion engine-powered vehicles on the roads today with cleaner options, which gives GM a tailwind of epic proportions.
General Motors CEO Mary Barra is being particularly strategic about her company's EV production ramp. Though GM is targeting production capacity of at least 1 million EVs annually in North America in 2025, it's primarily focused on trucks (e.g., the Chevy Silverado EV). In an instance where "bigger is better," bigger vehicles do sport better profit margins for automakers. This decision to focus on larger vehicles should give GM's EV segment a running start.
GM has global EV ambitions as well. The company's 10 joint ventures in China have General Motors positioned for success. With a well-known brand and existing infrastructure in place, it's reasonable to expect GM to become one of the key players in China's nascent but rapidly growing EV industry.
As I alluded to before, General Motors is also quite inexpensive. While it's normal for auto stocks to trade at a high-single-digit P/E ratio, GM can be purchased for a little over 4 times this year's forecast earnings. All bad news appears fully baked in.
Image source: Getty Images.
NextEra Energy
The third no-brainer stock to buy with $200 right now is the nation's largest electric utility by market cap, NextEra Energy (NEE -1.36%).
Perhaps the biggest issue for electric utilities, including NextEra, is the Federal Reserve's hawkish monetary policy. Utilities usually offer high yields and low volatility, which makes them attractive when U.S. Treasury yields are low. But with most short-term bills yielding 5% or above, utility stocks have seen an investor exodus, including NextEra Energy. Smart investors would be wise to use this temporary retracement in NextEra shares as an opportunity to snag an industry leader at an attractive price.
The first thing long-term investors will get with NextEra is predictability. If you own or rent a home, there's a good chance you need electricity to power your appliances and possibly your HVAC system. Demand for electricity isn't going to change much from one year to the next, which leads to highly predictable and transparent annual cash flow.
To add to this point, NextEra's regulated utility operations in Florida enhance the predictability of its cash flow. Regulated utilities aren't allowed to raise rates on their customers without good reason and approval from their state's public utility commission. Though this may sound like a nuisance, it ensures that NextEra doesn't have to deal with potentially volatile wholesale electricity pricing.
Investors are also getting a company that's on the leading edge of green-energy solutions in the United States. The company's 31-gigawatt (GW) clean energy portfolio is tops in the U.S., with its 23 GW from wind and 5 GW from solar being the highest of any utility in the world. These sizable investments in clean energy solutions have meaningfully reduced its electricity generation costs and increased its annual earnings growth rate to the high single digits. For comparison, most utility stocks grow by a low-single-digit rate.
Management intends to reward investors, too. The company has plans to increase its base annual payout by approximately 10% through 2024. This follows a compound annual dividend per share growth rate of 9.9%, dating back to 2007.
With shares of NextEra Energy recently hitting a three-year low, its forward P/E ratio has declined to below 20. That's the cheapest NextEra has been, relative to forward-year earnings, since 2016. It represents the perfect opportunity for long-term-minded investors to pounce.
