Over the long run, Wall Street is a playground that allows optimists to profit handsomely. But over shorter timelines, the stock market is an unpredictable battleground that pits bulls and bears in a seemingly unrelenting tug-of-war.
Since the start of 2020, the three major stock indexes have oscillated between bull and bear markets on a couple of occasions. Though this volatility can, at times, be unnerving for everyday investors, history shows that pullbacks represent an opportunity for long-term-minded investors to buy stakes in high-quality businesses at a discount.
Image source: Getty Images.
The added benefit for retail investors is that most online brokerages have done away with barriers to wealth-building. Minimum deposit requirements and commission fees for buy and sell transactions on major U.S. exchanges have been shelved, which means any amount of money -- even $500 -- can be the perfect amount to put to work on Wall Street.
If you have $500 that's ready to invest, and you're absolutely certain this isn't cash you'll need to pay bills or cover emergencies, the following three stocks stand out as no-brainer buys right now.
NextEra Energy
The first surefire stock to buy if you have $500 to invest right now is none other than the largest electric utility by market cap, NextEra Energy (NEE -1.36%).
NextEra is contending with two clear-cut headwinds that have lopped off more than a third of its market cap. The first is rapidly rising Treasury yields. Treasury bonds are usually viewed as a far safer source of income than equities. That makes the dividend-driven utility sector potentially less desirable for income investors as Treasury yields rise.
The other concern is a recent warning from NextEra Energy Partners (NEP -0.89%) that its dividend growth would slow over the next couple of years. With NextEra Energy Partners focused on growth from its internal renewable projects, there's the worry that NextEra Energy may not benefit as much from drop-down transactions to NextEra Energy Partners.
Though these headwinds shouldn't be ignored, neither problem is particularly worrisome. In fact, NextEra's management team expects to meet the high-end of earnings growth expectations of 6% to 8% annually in each of the next three years.
What makes NextEra Energy such a special investment is its renewable energy focus. Of the roughly 68 gigawatts (GW) it has in operation, nearly half of NextEra's capacity comes from renewables. No utility globally is generating more capacity from wind or solar power than NextEra. While these green-energy projects have been costly, they've demonstrably lowered the company's electricity generation costs and pumped up its earnings growth to the high single digits over the past 15 years.
Higher interest rates aren't slowing down NextEra's investments in renewables, either. From the start of 2023 through the end of 2026, it expects between 32.7 GW and 41.8 GW of renewable energy projects to come online. NextEra's competitive edge is only going to grow over time.
Shares of NextEra Energy are currently valued at 17 times forward-year earnings, which represents its cheapest valuation since 2015.
Bristol Myers Squibb
A second no-brainer stock that's begging to be bought with $500 right now is pharmaceutical company Bristol Myers Squibb (BMY 0.34%).
Shares of Bristol Myers are down 35% from their peak over the past year largely due to the loss of sales exclusivity on cancer drug Revlimid, which had been one of the top-selling drugs in the world. The introduction of generics for blockbusters Revlimid and Abraxane clearly have investors concerned. But at some point, it becomes difficult to overlook the incredible value proposition Bristol Myers Squibb brings to the table.
Before diving into portfolio specifics, keep in mind that healthcare stocks are exceptionally defensive. People don't have the ability to simply not become ill or stop taking their medicine just because the U.S. economy isn't firing on all cylinders. Demand for prescription drugs is virtually inelastic. For Bristol Myers Squibb, it means predictable operating cash flow in any economic climate.
While losing exclusivity on Revlimid is less than ideal, Bristol Myers' portfolio is more diverse than ever. Blood thinner Eliquis and cancer immunotherapy Opdivo have slid right in as steady blockbusters in place of Revlimid and Abraxane.
Meanwhile, the company's new product portfolio saw sales surge 67% on a constant-currency basis during the September-ended quarter. The needle could point even higher for this segment with Bristol Myers announcing its acquisition of Mirati Therapeutics (MRTX) for up to $5.8 billion last month.
Mirati's crown jewel is Krazati, a selective KRAS inhibitor for patients with advanced non-small cell lung cancer who've undergone at least one previous treatment. Label expansion opportunities and pricing power could pump Krazati's peak annual sales to well north of $1 billion.
The valuation is undeniably attractive, too. Even accounting for Revlimid's loss of exclusivity, Bristol Myers' stock can be purchased for less than 7 times forward-year earnings and a little over 2 times full-year sales in 2024. That's a bargain for pharmaceutical giant with a drug portfolio as vast as Bristol Myers Squibb.
Image source: Getty Images.
Altria Group
The third no-brainer stock to buy with $500 right now is tobacco behemoth Altria Group (MO -0.37%). Altria is the company behind the popular premium cigarette brand Marlboro in the United States.
Tobacco stocks have come under sizable pressure as the public has become increasingly aware of the dangers of long-term tobacco use. Between 1965 and 2021, adult smoking rates in the U.S. have declined from around 42% to just 11.5%. This persistent volume decline is why investors have been hesitant to place a double-digit price-to-earnings multiple on shares of Altria.
While adult tobacco-smoking rates are unlikely to reverse course anytime soon, Altria does have a couple of catalysts at its disposal to move the needle in shareholders' favor.
At the top of the list for Altria Group is its exceptional pricing power. Tobacco contains nicotine, which is an addictive chemical. Since quitting tobacco products can be difficult, Altria is usually able to offset cigarette shipment declines with higher price points -- especially for its U.S.-leading premium brand, Marlboro.
However, the company isn't just relying on price hikes to drive its sales and profit growth. In June, it completed a $2.75 billion acquisition of electronic-vapor device and products company NJOY Holdings. A half-dozen of NJOY's products have received marketing granted orders (MGOs) from the U.S. Food and Drug Administration. In other words, there's no concern about these products being pulled from store shelves, while non-MGO e-vapor products could be removed.
Altria also took an equity stake in Canadian licensed cannabis producer Cronos Group in 2019. Though this stake hasn't exactly panned out well from an investment standpoint, Altria stands to benefit if the U.S. federal government reschedules marijuana. Altria would almost certainly assist Cronos with product development and marketing throughout North America, should a change in scheduling occur.
Lastly, Altria Group is historically cheap. On top of shares trading at just 8 times forward-year earnings, Altria's dividend yield is nearing 10%. Tobacco stocks may not be the growth story they were decades ago, but Altria can still get the job done for patient investors.
