One of the few guarantees Wall Street offers investors is short-term volatility. Since this decade began, the widely followed Dow Jones Industrial Average, broad-based S&P 500, and growth stock-powered Nasdaq Composite have traded off bear and bull markets in successive years.
However, patience has a way of paying off on Wall Street. Since every correction and bear market throughout history has eventually given way to a resounding bull market, it's always an opportune time to put your money to work on Wall Street if you have a long-term investing mindset.
Image source: Getty Images.
Something else beneficial is that most online brokers have done away with barriers that had previously kept retail investors on the sidelines. In particular, many online brokers have tossed minimum deposit requirements aside and are no longer charging for common stock trades completed on major U.S. exchanges. That 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 put to work, and you're absolutely positive 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.
AT&T
The first exceptional stock that makes all the sense in the world for opportunistic investors to scoop up with $200 right now is telecom titan AT&T (T 1.02%).
The poor performance AT&T's stock has endured over the past couple of years is a reflection of three factors:
- Rapidly rising interest rates are typically unwelcome news for telecom companies carrying a lot of debt. It means future deals and/or debt refinancing could be costlier.
- AT&T is a mature business with a modest growth rate, which has made it far less attractive than many high-growth tech stocks.
- In July, The Wall Street Journal alleged legacy telecom companies may face sizable replacement/cleanup costs associated with lead-sheathed cables still in use.
While these are all tangible concerns, many of these headwinds are likely overblown.
For example, any financial liability associated with lead-clad cables would undoubtedly be determined in the notoriously slow U.S. court system. Though AT&T has noted no dangerous levels of lead associated with these legacy cables, any potential liability (if there is any) remains years away.
Furthermore, rising interest rates aren't as big of an issue as you might think. Since AT&T divested content arm WarnerMedia in April 2022, which was subsequently merged with Discovery to create new media entity Warner Bros. Discovery, it's been able to reduce its net debt by roughly $40 billion to $128.9 billion, as of Dec. 31, 2023. While there's more work to do, AT&T's financial flexibility has dramatically improved over the past two years.
AT&T is also enjoying a healthy uptick in organic growth rates thanks to the 5G revolution. Upgrading its network to support faster download speeds is encouraging more high-margin data consumption by wireless users. Further, AT&T has added at least 1 million net broadband customers for six consecutive years, with 5G speeds being the latest lure to gain users and encourage service bundling.
A forward price-to-earnings (P/E) ratio of 7.5, coupled with a 6.5% dividend yield, provides a tantalizing risk-versus-reward scenario for patient investors.
York Water
A second no-brainer stock that's begging to be bought with $200 right now is Pennsylvania water utility York Water (YORW).
Shares of York have tumbled by more than 30% over roughly three years as the Federal Reserve's hawkish monetary policy has made other income sources more attractive. Soaring Treasury bond yields have given income investors a potentially safer avenue to put their money to work than utility stocks. But don't expect this dynamic to sustain for much longer.
Earlier this year, Fed chairperson Jerome Powell stood behind the consensus expectation that the nation's central bank would cut rates three times in 2024. When interest rates decline, it tends to put downward pressure on Treasury yields. As a result, utility stocks with hearty dividends look more attractive.
York Water offers what could easily be described as the most rock-solid dividend of any publicly traded company. Though it doesn't offer the highest yield, it's been paying a consecutive dividend since its founding in 1816. This 208-year streak of continuous dividend payments is about six decades longer than any other public company in the U.S. and demonstrates how steady York's operating cash flow has been year after year.
One of the biggest reasons York is an operating success is because it's a regulated utility. By "regulated," I mean it requires permission from the Pennsylvania Public Utility Commission (PPUC) before it can raise rates on its users. Being regulated ensures that York doesn't deal with unpredictable wholesale pricing. A rate hike granted by the PPUC in January 2023 helped increase total revenue to north of $71 million last year, which was up from $60 million in 2022.
There's an enticing value proposition, as well, with York valued at less than 21 times Wall Street's consensus earnings forecast for 2025. For context, this represents a 35% discount to the forward P/E multiple York Water has traded at over the trailing-five-year period.
Image source: Starbucks.
Starbucks
The third no-brainer stock you can confidently buy with $200 right now is none other than coffee colossus Starbucks (SBUX 0.47%).
Shares of Starbucks have lost about a quarter of their value since peaking nearly three years ago. In addition to labor- and input-related inflationary concerns, China has been a sore spot. Growth for the world's No. 2 economy hasn't picked up as expected since the country lifted its controversial COVID-19 mitigation strategy in December 2022. Starbucks has 6,975 of its close to 38,600 stores located in China.
On the flipside, there's reason to believe that China's economy can find its stride, once again. The further China moves away from its stringent and unpredictable lockdowns, the more likely it is that supply chain issues will ease.
Additionally, Starbucks hasn't had to worry about inflation thanks to the exceptional loyalty of its core customers and the power of its brand. Passing along higher prices to consumers has consistently offset higher labor expenses and product inflation.
The not-so-subtle secret to Starbucks' operating success has been its ability to increase its aggregate number of Rewards Members. As of Dec. 31, the company had 34.3 million active Rewards Members, which was up a healthy 13% from the prior-year period. Not only do Rewards Members tend to purchase more than non-Members, but they're likelier to load their credit card data on their mobile device and/or use mobile ordering, which can lessen drive-thru and in-store wait times. In exchange for a free drink or food item every now and then, Rewards Members are improving the operating efficiency of Starbucks' stores.
Management also deserves credit for a complete overhaul of the company's drive-thru experience and menu during the pandemic. Introducing video on the drive-thru ordering board to personalize the experience, as well as promoting high-margin food and drink pairings, has provided a lift.
Investors have the opportunity to scoop up shares of Starbucks right now for 19 times Wall Street's consensus earnings for the upcoming year. Not only is this a 32% discount to its average forward-year earnings multiple over the trailing-five-year period, but it's the lowest forward P/E for Starbucks in at least a decade.
