Over the span of a few months or a couple of years, Wall Street is highly unpredictable. Since this decade began, the ageless Dow Jones Industrial Average, broad-based S&P 500, and growth-fueled Nasdaq Composite have traded off bull and bear markets on a few occasions.
However, panning out drastically changes this perspective. Over multidecade periods, the stock market is a leading creator of wealth, with annualized returns that outpace the bond market, gold, oil, and housing. It means that any significant downturn in the major stock indexes represents a surefire buying opportunity for long-term investors -- and (hint, hint!) all three major stock indexes are currently below their all-time highs set roughly two years ago.
Image source: Getty Images.
What's particularly advantageous for retail investors is that most barriers to investment have been dismantled in recent years. A majority of online brokerages no longer charge commission fees for transactions on major U.S. exchanges, and they've also done away with minimum deposit requirements. When coupled with the ability to access fractional-share purchases, any amount of money -- even the $10 you have sitting in your wallet -- can be the ideal figure to put to work.
If you have $10 ready to invest, and this isn't cash you'll need to cover bills or other obligations, the following three stocks stand out as no-brainer buys right now.
Sirius XM Holdings
The first phenomenal stock you can add to your portfolio with just $10 is none other than satellite-radio operator Sirius XM Holdings (SIRI +0.00%).
Most radio operators generate a lot of their revenue from advertising. Though ad-driven operating models work great most of the time, they can struggle mightily when advertisers pare back their spending during inevitable contractions or recessions. With some key money-based metrics and predictive indicators calling for a possible U.S. recession in 2024, it's not surprising to see Sirius XM's stock weighed down.
NASDAQ: SIRI
Key Data Points
However, lumping Sirius XM in with terrestrial and online radio operators would be a big mistake for a couple of reasons.
For one, Sirius XM's revenue channels are quite different from traditional radio operators. Through the first nine months of 2023, Sirius XM generated only 19% of its net sales from advertising (primarily via Pandora Media, which it acquired in 2019). By comparison, approximately 78% of net sales can be traced to subscriptions. Whereas advertisers are quick to pull the plug during economic contractions and recessions, subscribers are far less likely to cancel their service. This leads to predictable cash flow for Sirius XM in virtually any economic climate.
To build on the point above, Sirius XM's operating cash flow is buoyed by the predictability of some of its expenses. Although certain costs, such as royalties and programming/content, are going to deviate from quarter to quarter, transmission and equipment expenses are relatively fixed. As the company grows its subscriber count over time, operating margins should expand.
Don't overlook the obvious, either. Sirius XM is the only legally authorized satellite-radio operator. When push comes to shove, it's had no trouble passing along higher prices to its subscribers to offset the effects of inflation.
A forward price-to-earnings ratio of 15 represents the cheapest forward-year valuation for Sirius XM since it became a public company.
NASDAQ: RDFN
Key Data Points
Redfin
A second no-brainer stock to buy with $10 right now is technology-driven real estate company Redfin (RDFN +0.00%).
There's no denying that the housing market is facing major challenges. According to Redfin's own data, the U.S. housing market, in 2023, was the least affordable it's ever been. A median-earning person would have had to spend 41.4% of their earnings on monthly housing costs. With mortgage rates soaring and most current homeowners locked in at a historically low rate, there's not much incentive for people to move at the moment.
While the housing market isn't going to turn on a dime, Redfin does have well-defined competitive advantages in place that can allow it to outperform over the long run.
The most front-and-center catalyst for Redfin is the company's pricing strategy. Whereas traditional real estate companies charge a listing fee/commission that commonly ranges between 2.5% and 3%, Redfin charges homebuyers and sellers either 1% (if they've previously done business with the company) or 1.5%. With the median-priced U.S. home clocking in at $408,806 in 2023, a difference of up to 2% on listing fees could save someone more than $8,000 compared to traditional real estate companies. This big difference is liable to net Redfin an increased share of existing home sales over time.
Something else to consider is that Redfin closed down its iBuying segment, RedfinNow, due to the recent unpredictability of home prices. With Redfin offloading properties in its portfolio, it'll have far more financial flexibility amid an uncertain economic climate.
But perhaps the top differentiating factor for Redfin is the company's technology-driven focus. Virtual home tours in 3D, as well as its Concierge services, which help sellers maximize the selling price of their home, are some examples of how Redfin is personalizing the homebuying and selling process.
Once again, don't expect Redfin's stock to turn on a dime. But with sustained competitive advantages in tow, the future is looking bright for this small-cap residential real estate stock.
The Nio ET7 sedan hit showrooms in March 2022. Image source: Nio.
Nio
The third no-brainer stock to buy with $10 right now is China-based electric vehicle (EV) maker Nio (NIO +7.08%).
Like the other companies on this list, Nio is contending with some speed bumps at the moment. It's attempting to grow itself from the ground up to mass production, which means it's losing quite a bit of money as it invests for the future. To add, there's been some global softening in EV demand, which has adversely impacted the entire EV industry.
Despite these headwinds, Nio offers a number of sustained catalysts that make it a magnificent stock to buy for patient investors.
To begin with, macrofactors favor Nio's success. Developed countries are eager to reduce their carbon footprint, and moving to clean-energy vehicles is a logical step. This natural shift in consumer and enterprise fleets, coupled with China reopening its economy following roughly three years of stringent COVID-19 lockdowns, creates a path for Nio to shine.
NYSE: NIO
Key Data Points
The end of China's zero-COVID mitigation strategy has been especially noticeable in Nio's monthly production figures. After averaging around 10,000 EVs delivered each month in 2022, Nio delivered an average of nearly 18,500 EVs each month during the third quarter. With supply chain issues melting away, it's possible Nio could reach an annual run rate of 600,000 units (50,000 EVs per month) within a year or two, depending on market conditions.
Innovation represents another reason long-term investors can confidently buy Nio stock. Nio recently switched its EVs to a second-generation platform (NT 2.0), which provides improved advanced driver-assistance systems. Since introducing models with NT 2.0, deliveries and demand have rapidly grown.
Lastly, Nio is absolutely swimming in cash. It closed out the September quarter with approximately $6.2 billion in cash, cash equivalents, and various short- and long-term investments. This hearty cash pile will provide a healthy buffer as Nio ramps up its production.
