3 no-brainer stocks to buy with $100 during the market sell-off
This year has reminded new and established investors that stocks can go down just as easily as they can go up. Just last week, the iconic Dow Jones Industrial Average and widely followed S&P500 were both in correction territory (down at least 10% from their respective closing highs), while growth-oriented companies Nasdaq Compound was in a bear market.
While the speed of downward moves in the market can be frightening at times, history has conclusively shown that corrections are the perfect time to put your money in stocks to work. While we never know in advance how long a correction will last or how deep the decline will be, we do know that every previous market decline has eventually been erased by a bullish rally.
Best of all, you don’t need a mountain of cash to start building wealth on Wall Street. With most online brokers waiving commission fees and minimum deposit requirements, any amount of money – even $100 – can be the ideal amount to invest.
If you have $100 on hand, which won’t be needed for bills or emergencies, the following three actions would make for hassle-free buying during the ongoing market sell-off.
Bank of America
Typically, bank stocks are not a great place to take refuge in a downturn in the broader market. But things are really different this time around, which is why the money center giant Bank of America (BAC -0.05% ) made such a purchase without the fuss.
Virtually all financial stocks are cyclical. This means they perform well during periods of economic expansion and struggle under the weight of higher loan losses when contractions and recessions occur. What makes the current situation so unique for bank stocks is that the Federal Reserve is turning to tighter monetary policy while the stock market corrects lower. As the country’s central bank seeks to raise its benchmark lending rate by up to seven times in 2022, bank stocks with floating rate loans outstanding are expected to generate a windfall of additional net interest income.
While virtually all banks, large and small, stand to benefit to some degree from a rising rate environment, no central bank is better positioned than Bank of America. Among the major banks, it is the most sensitive to interest rates. Following the release of its fourth quarter operating results, BofA noted that a parallel shift of 100 basis points in the yield curve would generate approximately $6.5 billion in additional net interest income in over the next 12 months. With the Fed forecasting up to 175 basis points in hikes (if not more), BofA is poised to see an increase in net income.
Another point to consider with BofA is that when profits increase, CEO Brian Moynihan seeks to reward shareholders. Although monetary central bank capital return plans require Fed approval, Moynihan is no stranger to increasing Bank of America’s dividend or buying back a significant number of shares (when he is authorized to do so).
Finally, extend credit where credit is due on the digital banking front. While BofA isn’t exactly the first banking stock that probably comes to mind when you think of digital banking, the company ended 2021 with 41 million digital active customers and saw 49% of all sales made digitally. in the fourth quarter, compared to 31% previously. the comparable quarter of three years ago. Online and mobile transactions are considerably cheaper than face-to-face and telephone interactions, which has allowed Bank of America to cut costs by consolidating some of its branches.
A second small cap cannabis company is a second small cap cannabis company that can buy with confidence with $100 during the market sell-off. Jushi Holdings (JUSHF 1.59% ).
Over the past 13 months, marijuana stocks have caused a stir. Canadian pot stocks have been hampered by COVID-19 restrictions, and US multistate operators (MSOs) like Jushi have been battered by a lack of federal cannabis reforms. But when it comes to the latter, it’s important to recognize that roughly three-quarters of all US states have legalized cannabis in some way. As long as the Federal Department of Justice maintains a hands-off policy, MSOs like Jushi have many paths to success.
One of the things that makes Jushi so intriguing is its focus on a handful of limited license markets, such as Pennsylvania, Illinois, Massachusetts, and Virginia. Regulators of limited license markets deliberately limit the number of retail licenses they issue in total and/or to individual businesses. This promotes competition, while allowing smaller MSOs like Jushi time to grow their brand(s) and gain traction without fear of being overtaken by a bigger competitor with deeper pockets.
Despite its relatively small size, Jushi has also cautiously deployed some of its capital to enter lucrative markets. Last year, it acquired two dispensaries in California, the nation’s largest weed market by annual sales. And just last week, it completed the acquisition of a dispensary in Las Vegas, Nevada, which increased its licensed U.S. business footprint to 39 locations.
As a shareholder of Jushi, I have come to appreciate insiders who also have skin in the game. About $45 million of the first $250 million in capital raised by the company came from executives and insiders . When the financial fortunes of insiders align with that of investors, good things happen more often than not.
With Wall Street expecting the company to double its sales over the next two years and achieve recurring profitability this year, that looks like a gaudy bargain.
The third and final obvious stock to buy with $100 on this selloff is the Detroit Auto Pivot General Motors (GM 1.30% ).
The big issue for auto stocks right now is their supply chains. Semiconductor chips and other key parts for next-generation vehicles are in short supply due to a combination of COVID-19 disrupting production in various parts of the world and the Russian-Ukrainian war reducing the availability of certain materials .
But what is important to note is that this short-term weakness is not related to demand. Supply issues will eventually be resolved, and when they are, the auto industry will benefit from a decades-long vehicle replacement cycle as consumer vehicles and corporate fleets go green. .
For General Motors, the electrification of next-generation vehicles is the boost to organic growth that Wall Street has apparently been waiting for two decades. Last year, GM increased its allocated spending for electric vehicles (EVs), autonomous vehicles and EV batteries to $35 billion. The goal is to have two battery production facilities operational by 2023, with North American EV production exceeding 1 million per year by the end of 2025. Ultimately, 30 new EVs are to be launched worldwide by the middle of the decade.
Although there is a lot of talk about the growth potential of electric vehicles, we are starting to see tangible results. GM CEO Mary Barra noted in her year-end letter to shareholders that more than 110,000 $100 deposits had been made in a few weeks for the Chevy Silverado EV. This is in addition to nearly 59,000 reservations for the 2022 GMC Hummer EV.
General Motors is also in great shape to benefit from the push for electric vehicles in China. In each of the past two years, GM has delivered 2.9 million vehicles (mostly combustion engine vehicles) to China, giving it the brand awareness that will be needed to gobble up the share of electric vehicles on the largest automotive market in the world.
Even though General Motors’ 2022 earnings forecast dips a bit due to supply chain challenges, the stock is still valued at a historically inexpensive earnings multiple of around seven. Given the huge catalyst at the door of business, now is the time to buy.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.