Last week served as a necessary reminder that volatility is inescapable on Wall Street. Over the past three weeks, the ageless Dow Jones Industrial Average, broad-based S&P 500, and growth-fueled Nasdaq Composite have all retraced at least 5% from their respective record-closing highs.
Although red arrows can be unnerving, especially for newer investors, notable downdrafts in the major stock indexes have historically served as buying opportunities for patient investors. While we'll never know ahead of time when downturns will begin or how long they'll last, history teaches that every decline is eventually wiped away by a bull market rally. Buying high-quality stocks and holding them over an extended period tends to be a winning formula.
Image source: Getty Images.
What's especially great about putting your money to work on Wall Street is that most online brokers have shelved barriers that had kept retail investors from participating. In recent years, online brokerages have done away with commission fees for common stock trades on major U.S. exchanges, as well as minimum deposit requirements. This means any amount of money -- even $300 -- can be the perfect amount to invest.
If you have $300 that's ready to be put to work on Wall Street, and you're absolutely certain this isn't cash you'll need to pay bills or cover emergency expenses, the following three stocks stand out as no-brainer buys right now.
Bank of America
The first sensational buy for long-term investors with $300 is none other than domestic banking giant Bank of America (BAC 2.87%), which is commonly known as "BofA."
The biggest knock with money-center banks is that they're cyclical. In other words, they ebb-and-flow with the health of the U.S. economy. With a few predictive indicators -- e.g., the ongoing decline in M2 money supply -- suggesting a U.S. recession may be around the corner, there's reason to believe credit charge-offs and loan losses could rise for big banks.
NYSE: BAC
Key Data Points
But there's another side to this coin. Even though recessions are both normal and inevitable, they're short-lived. Not a single economic downturn has surpassed 18 months since the end of World War II, and only three out of 12 official recessions reached the one-year mark. Since most periods of growth stick around for multiple years, money-center banks like BofA are able to grow their loan portfolios and take advantage.
The single biggest catalyst working in Bank of America's favor right now is its interest rate sensitivity. Since March 2022, the Federal Reserve has undertaken its most-aggressive rate-hiking cycle since the early 1980s. In turn, BofA has benefited more than any other big bank. It's seen its net-interest income soar by billons of dollars each quarter.
Recently, we've witnessed a reacceleration in the prevailing rate of inflation. The spot price of crude oil is climbing due to geopolitical tensions and global supply remaining tight. Meanwhile, shelter inflation remains stubbornly high. In other words, the nation's central bank isn't in a position to begin meaningfully reducing lending rates. That's excellent news for BofA's interest income-earning potential.
Bank of America's investments in technology are paying off, too. As of the end of March, 76% of its consumer households were banking digitally, and half of its loan sales were completed online or via mobile app. Digital transactions are markedly cheaper for Bank of America than in-person interactions, and over time will help improve its operating efficiency.
BofA stock still looks like a steal at less than 11 times Wall Street's consensus earnings per share (EPS) in 2025.
NASDAQ: JAZZ
Key Data Points
Jazz Pharmaceuticals
A second no-brainer stock you can confidently purchase shares of with $300 right now is specialty drug-developer Jazz Pharmaceuticals (JAZZ 2.75%).
Like all healthcare companies that develop drugs, the biggest concern is the loss of patent exclusivity and/or new competitors entering a core area of focus. For Jazz, this includes the commercial launch of Avadel Pharmaceuticals' Lumryz as a treatment for cataplexy or excessive daytime sleepiness in adults with narcolepsy. Jazz's lead drug is focused on sleep disorders.
The good news for Jazz is that label expansion opportunities for existing products, strong pricing power, and its blockbuster oxybate franchise (Xyrem and Xywav), which competes in some indications with Avadel, gives it a sustainable runway to grow both its sales and profits.
The heavy lifting, from a sales standpoint, has historically been done by Jazz's oxybate franchise. The smartest move made by management was the development of Xywav, a next-generation sleep-disorder treatment that contains 92% less sodium than its predecessor, Xyrem. This makes Xywav a safer therapeutic for persons with cardiovascular issues. Jazz is steadily shifting patients to this next-gen therapy, and in the process insulating its cash flow from potential competitors to Xyrem.
Cannabidiol-based therapy Epidiolex has been another big winner for Jazz. Label expansion opportunities should allow Epidiolex to make a run at $1 billion in annual sales, which will go a long way to helping offset any potential sales weakness associated with its oxybate franchise as Avadel ramps up production of Lumryz.
Don't overlook Jazz's burgeoning cancer-drug portfolio, either. Last year marked the first time Jazz surpassed $1 billion in annual sales from its oncology segment. Blood-cancer drug Rylaze took on the role of superstar by delivering 40% sales growth to $394.2 million. The company anticipates a couple of oncology trial readouts this year, including possible top-line data from Zepzelca in combination with Roche's Tecentriq as a first-line treatment for small-cell lung cancer.
You'd struggle to find a sustainably profitable healthcare stock with a forward price-to-earnings multiple of just 5 – but that's exactly what you're getting with Jazz Pharmaceuticals.
Image source: Getty Images.
Warner Bros. Discovery
The third no-brainer stock you can buy with $300 right now is legacy media juggernaut Warner Bros. Discovery (WBD 1.33%).
Legacy media stocks have been throttled over the past year, with a weaker advertising environment taking the brunt of the blame. Concerns about a possible U.S. recession caused businesses to pare back their ad spending, which is problematic given that legacy media companies still rely on advertising as a core source of revenue.
Additionally, Warner Bros. Discovery and its peers have shifted their focus to building out their streaming services and content libraries. Doing so isn't cheap, and the losses associated with the company's direct-to-consumer (DTC) segment have weighed on its shares.
On the bright side, Warner Bros. Discovery is cyclical and benefits from extended periods of economic expansion. It's not uncommon for media giants to enjoy strong ad-pricing power and higher film entertainment revenue during multiyear periods of economic growth.
Furthermore, there should be a notable boost from political ad spending this year. Estimates from GroupM imply ad spend will grow 31% to $15.9 billion in 2024, compared to the 2020 election cycle.
NASDAQ: WBD
Key Data Points
Despite its DTC losses, Warner Bros. Discovery is beginning to make notable headway with its streaming division. In particular, global average revenue per user is climbing, which is an indication that the company has successfully raised subscription prices. Inclusive of acquisitions, total DTC subscribers actually rose by 0.8 million to 97.7 million from the prior-year period, as of Dec. 31, 2023. Even excluding acquisitions, the company's streaming segment lost few organic subscribers despite raising its prices. Mindful spending and continued price hikes should help push its DTC segment toward profitability.
Warner Bros. Discovery is also a cash-flow machine. Last year, the company generated $7.48 billion in cash from its operating activities and $6.16 billion in free cash flow. Though its adjusted EPS has been unsightly, the company is making tangible progress on reducing its outstanding debt.
With catalysts beginning to take shape and management getting serious about keeping costs in check, Warner Bros. Discovery looks like a bounce-back candidate in 2024 (and beyond).
