You don't need a lot of money to get going in the market these days. The growing popularity of zero-commission trading means that even $20 is more than enough to buy a piece of a potentially lucrative investment. The ability to grab fractional shares means you don't necessarily have to worry about price tags, but let's play clean here.
AT&T (T +0.02%), Toast (TOST +1.76%), and Nintendo (NTDOY +1.32%) are three of my favorite stocks trading for less than $20 a share. They could be some of the smartest stocks for buy-and-hold investors. Let's take a closer look.
NYSE: T
Key Data Points
1. AT&T
If AT&T walked in for a job interview, you would probably laugh at its resume. The telco giant has spent the last few years paying the price for lousy big-ticket purchases and yawn-worthy organic growth. Even after dispensing with the last of its mistakes last year, the shares have yet to pay off in 2023. The stock is trading lower this year, even adjusted for its generous quarterly payouts.
Still, after three years of annual revenue declines, AT&T has rattled off four consecutive quarters of 1% top-line growth. This is what stability looks like, even if right now it seems as if the only people bullish on AT&T are income investors drawn to the wireless giant's 6.9% yield.
Image source: Getty Images.
Things should get better. AT&T posted better-than-expected third-quarter results on both ends of the income statement, and it boosted its guidance. The balance sheet remains problematically leveraged, but it just boosted its guidance calling for $16.5 billion in free cash flow this year.
AT&T is trading for a mere seven times earnings, but that multiple more than doubles when we stack it up against its debt-saddled enterprise value. The good news is the growing consensus that interest rates are topping out. AT&T's yield will become more attractive as rates slip, and its ability to deploy its improving free cash flow to lighten its leverage will be applauded.
AT&T is growing its wireless customer base with churn near a historic low. This stock is a smart call with an unheralded turnaround story.
NYSE: TOST
Key Data Points
2. Toast
AT&T moved higher after reporting this earnings season, but Toast turned out to be the equivalent of an inedible plate that gets sent back to to the kitchen. The provider of payments processing and other enterprise solutions for independent eateries stumbled after its latest report. The stock tumbled 14% the day after the release of third-quarter results.
Revenue and annual recurring revenue rose a respectable 37% and 40% in the report. Gross payment volume proved problematic, climbing just 34% to match the growth of locations using Toast, but the company had expected this metric to decline in the current quarter. On the downside, the company also sees a sequential dip in its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the fourth quarter.
Concerns that folks are spending less on dining out will weigh on Toast until the trend improves, but Toast's profitability metrics are making the most of the platform's scalability.
OTC: NTDOY
Key Data Points
3. Nintendo
The iconic video-game pioneer may not seem like much of a growth opportunity these days. It's coming off back-to-back fiscal years of declining revenue and net income. However, there are more catalysts than you might think to look forward to with Nintendo.
Let's start with its strong history of breakthrough new video game consoles. It had the Wii in 2006, Wii U in 2012, and the Switch in 2017. That's a new bar-raising system every five or six years. And now we're six years removed from the arrival of the Switch. Putting out a new console is important for Nintendo, because sales historically peak in the third or fourth year of a new launch. It's not a surprise that revenue peaked in fiscal 2009 -- and again in fiscal 2021.
Among the continuing good news is that the Super Mario Bros. movie collected nearly $1.4 billion in ticket sales worldwide this year. That was a figure beaten only by Barbie, and it cemented the multigenerational appeal of Nintendo's most popular franchise. Super Nintendo World has also opened within Comcast's (CMCSA +0.60%) Universal Studios theme parks in Japan and California. The largest addition opens in Florida in 2025.
Nintendo also pays semiannual dividends, giving this compelling growth story some income to share along the way. The stock, meanwhile, trades at a reasonable 17 times trailing earnings, and that's with a quarter of its market cap backed by its strong net cash position.
The path for growth is clear for the next few years. Nintendo is playing to win.
