One of Wall Street's few guarantees investors can always count on is volatility. Over the prior four years, the historic Dow Jones Industrial Average, widely followed S&P 500, and growth stock-energized Nasdaq Composite traded off bear and bull markets in successive years. If anything, this seesaw action drives home just how unpredictable the stock market can be over short timelines.
But at the same time, it's important to recognize just how much of a wealth-building machine Wall Street has been over long periods. Even though we'll never know ahead of time when stock market corrections will begin, how long they'll last, or where the bottom will be, history shows that every downturn in the major stock indexes is eventually wiped away by a bull market rally. This means any time can be an opportune moment to put your money to work on Wall Street.
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To add, most online brokers have removed divisions that had kept retail investors on the sidelines. In recent years, they've done away with minimum deposit requirements and commission fees on common stock trades. For everyday investors, it means any amount of money -- even the $20 you have sitting in your wallet -- can be the ideal amount to invest in the stock market.
If you have $20 that's ready to be put to work, and you're certain this isn't cash you'll need to cover bills or basic necessities, the following three stocks stand out as no-brainer buys right now.
Sirius XM Holdings
The first amazing stock that makes for a no-brainer buy with $20 right now is none other than satellite-radio operator Sirius XM Holdings (SIRI +0.00%).
Sirius XM's March operating results speak to the challenges radio operators are contending with at the moment. Most radio operators are dealing with an uncertain ad climate, which is being fueled by select economic signals that suggest a recession may be around the corner.
Additionally, Wall Street was less than enthused with Sirius XM's modest decline in subscribers (a net loss of 359,000) to roughly 33 million in the March quarter. The company relies on promotional listeners that purchase new/used vehicles to become self-pay subscribers. With interest rates having risen significantly over the past two years, auto sales are slowing.
NASDAQ: SIRI
Key Data Points
In spite of these challenges, there are a couple of reasons to believe Sirius XM can deliver triple-digit returns to patient shareholders from here.
To begin with, Sirius XM is the only licensed satellite-radio operator in the U.S. Though it still faces competition for listeners with terrestrial and online radio companies, being a monopoly in the satellite-radio space has its perks. Specifically, Sirius XM has excellent subscription pricing power, which it's regularly used to grow its average revenue per user over time.
Another reason Sirius XM makes for a no-brainer buy is how it generates its revenue. Whereas most terrestrial and online radio operators rely heavily on advertising for their sales, less than 19% of Sirius XM's first-quarter sales were traced back to ads. Nearly 78% of its revenue comes subscriptions.
When economic downturns arise, advertisers are quick to pare back their spending. On the other hand, subscribers to satellite radio are far less likely to cancel their service during recessions. This means more predictable operating cash flow for Sirius XM no matter what's happening with the U.S. economy.
Lastly, Wall Street has never seen Sirius XM at a cheaper valuation to its forward-year earnings. At a multiple of roughly 10 times consensus earnings per share (EPS) for 2025, Sirius XM is an undeniable bargain.
AGNC Dividend Yield data by YCharts.
AGNC Investment
A second no-brainer stock that can confidently be bought with $20 right now -- this one's for you, income seekers -- is mortgage real estate investment trust (REIT) AGNC Investment (AGNC 0.51%). AGNC pays a monthly dividend and is currently sporting a 15.1% yield. Yes... I said 15.1% yield!
Mortgage REITs are companies that want to borrow money at low, short-term lending rates, and use this capital to purchase higher-yielding long-term assets, such as mortgage-backed securities (MBS). This is how the "mortgage REIT" industry got its name.
The key point here is that mortgage REITs like AGNC are highly sensitive to rising interest rates, as well as rapid changes in the Treasury yield curve. The Fed's hawkish actions to fight a historically high inflation rate sent short-term borrowing costs soaring and have weighed on the value of AGNC's underlying assets -- i.e., its book value has declined. This is noteworthy given that most REITs tend to trade near their respective book value.
NASDAQ: AGNC
Key Data Points
Though it's been an incredibly challenging environment for AGNC Investment, history has shown that buying mortgage REITs when the outlook for the industry appears grimmest is a smart move.
To offer an example, we're in the midst of one of the longest yield-curve inversions in history. In other words, short-term Treasury bills are sporting higher yields than bonds slated to mature 10 years from now. Historically, the yield curve spends most of its time sloped up and to the right, with longer-dated Treasury bonds having higher yields than T-bills. Patient investors can buy AGNC stock and simply wait for history to run its course, yet again, and expand AGNC's net-interest margin and book value.
Another catalyst for mortgage REITs is the current wait-and-see approach the nation's central bank has adopted with interest rates. While mortgage REITs perform best in a declining-rate environment, they can also operate efficiently when the Fed makes slow, well-telegraphed moves. If the Fed continues to slow-step its monetary actions, companies like AGNC can surprise to the upside.
The final selling point on AGNC is that all but $1.1 billion of its $63.3 billion investment portfolio, as of the end of March, was comprised of agency assets. "Agency" securities are backed by the federal government in the event of default. This premier protection allows AGNC to prudently deploy leverage to its advantage.
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AT&T
The third no-brainer stock that patient investors can pile into with $20 right now is beaten-down telecom company AT&T (T 2.11%).
To keep with the theme, higher interest rates have been a net-negative for legacy telecom companies. AT&T closed out the March quarter with nearly $133 billion in total debt. Any future refinancing activity or dealmaking is bound to be costlier for AT&T.
The other reason its shares have been weighed down relates to a July report from The Wall Street Journal that alleges legacy telecom companies may face steep health-related liability and cleanup costs tied to their use of lead-sheathed cables. The prospect of a big bill is worrisome for telecom companies that are already lugging around a lot of debt on their balance sheets.
But a deeper dive shows that AT&T's biggest headwinds aren't as concerning as they first appear. For instance, AT&T has refuted the safety claims made about lead-clad cables by the WSJ. Further, any potential health-related liabilities would undoubtedly be determined by the U.S. court system. Typically, these are drawn-out cases that take years to materialize. In short, lead-clad cables aren't an immediate concern for the company or its shareholders.
NYSE: T
Key Data Points
AT&T's debt isn't as much of a worry, either. Over the past two years, AT&T's net debt has shrunk by more than $40 billion to $128.7 billion. Healthy free cash flow generation should allow the company to chip away at its outstanding debt over time, all while sustaining a hearty 6.5% dividend yield.
Meanwhile, many of AT&T's key performance indicators are moving in the right direction. Wireless service revenue is expected to grow by 3% this year, with investments in the company's 5G network translating into increased data consumption.
The March-ended quarter also saw the company pick up a net of 252,000 AT&T Fiber customers. This marks the 17th straight quarter of at least 200,000 net adds, and puts AT&T on track for perhaps a seventh consecutive year of 1 million (or more) net broadband adds.
The cherry on top for AT&T is its historically cheap valuation. Shares can be purchased right now for close to 7 times forward-year EPS, which is a reasonably safe floor given that wireless service and internet access have evolved into basic necessities.
