Bear markets can be a double-edged sword for investors.
On one hand, heightened volatility and unrealized red ink can weigh on investors' emotions and encourage poor decision-making. On the other hand, every bear market throughout history has eventually been cleared away by a bull market rally. This means sizable declines in the major indexes represent a buying opportunity for long-term investors.
The best thing about these buying opportunities is that you don't need a mountain of cash to begin building wealth on Wall Street. Since most online brokerages have done away with commission fees and minimum deposit requirements, any amount of money -- even $300 -- can be the perfect amount to put to work during a bear market.
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If you have $300 ready to invest -- money that won't be needed to cover bills or emergencies -- the following three stocks stand out as no-brainer buys right now.
PayPal Holdings
The first no-brainer buy that opportunistic investors can snatch up with $300 is fintech stock PayPal Holdings (PYPL 2.32%).
PayPal has been contending with two clear-cut headwinds. To begin with, historically high inflation is reducing the discretionary spending power of the lowest decile of earners. With less money to spend, it means potentially fewer transactions on its digital payment networks (PayPal and Venmo).
The other issue for PayPal is the growing likelihood that the U.S. will enter a recession at some point this year. Companies like PayPal that had premium valuations were taken to the woodshed as investors turned their attention to traditional fundamental metrics. But following a huge pullback, PayPal looks ripe for the picking.
On a macro basis, fintech is a massive opportunity that's still in its infancy. According to a report from Adroit Market Research, the global fintech market is expected to grow by an annualized average of 20.5% by 2030. PayPal has a real shot to be the No. 1 player in this nearly $700 billion global opportunity.
What's been most impressive about the company's expansion is that not even a weaker U.S. and global economy seems to slow down digital payments. Excluding currency movements, PayPal's digital networks saw double-digit growth in total payment volume through the first nine months of 2022.
Equally important is the fact that active customer engagement continues to climb. When 2020 came to a close, the average active PayPal user was completing 40.1 transactions over the trailing-12-month (TTM) period. As of the end of September 2022, active accounts averaged 50.1 transactions over the trailing 12 months. This is a usage-based operating model, which means more transactions should yield higher gross profit for the company.
Despite attractive long-term growth prospects, management is also looking at ways to mitigate near-term economic weakness. CEO Dan Schulman aims to reduce the company's operating expenses by at least $1.3 billion this year. Furthermore, PayPal announced an up to $15 billion buyback program. Reducing the company's outstanding share count can boost earnings per share and make PayPal that much more fundamentally attractive in a bear market.
Green Thumb Industries
The second stock that makes for a no-brainer buy with $300 right now is U.S. marijuana stock Green Thumb Industries (GTBIF 7.32%).
For the past two years, pot stocks have performed miserably. A combination of increasing competition and lawmakers failing to pass any meaningful reforms at the federal level has made the industry a buzzkill. However, Green Thumb Industries has been able to rise to the occasion while so many other multi-state operators (MSOs) have struggled.
As of early December, Green Thumb had 77 operating dispensaries and a presence in 15 states. Keep in mind that while the federal government hasn't legalized cannabis, roughly three-quarters of all states have given medical marijuana the green light. Even though federal legalization would improve the operating efficiency of MSOs, larger players like Green Thumb have ample opportunity to succeed in legalized states.
Although it has a footprint in many of the top-dollar markets, such as California, Colorado, and Florida, Green Thumb has directed a lot of its attention to penetrating limited-license states, such as Illinois, Pennsylvania, Virginia, and Ohio. Markets where retail licenses are purposefully capped ensure that newer entrants are given a fair chance to build out their brand(s) and garner a following.
But if there's one thing that's really helped Green Thumb thrive above all other initiatives, it's the company's revenue mix. More than half of its revenue comes from derivatives, such as edibles, dabs, beverages, vapes, pre-rolls, and health and beauty products. Not only are derivative sales consistently growing by a double-digit percentage, but they sport substantially higher margins than dried cannabis flower. This derivative-heavy revenue mix has resulted in nine consecutive quarters of profitability based on generally accepted accounting principles (GAAP). For context, most MSOs don't even have one quarter of GAAP profits, let alone nine in a row.
A final point for investors to consider is that cannabis is often treated as a nondiscretionary good. No matter how poorly the U.S. economy is performing or how high inflation flies, consumers keep buying pot products. If a recession takes shape in 2023, Green Thumb should be just fine.
Image source: Getty Images.
Baidu
The third no-brainer stock to buy with $300 during the bear market is China-based internet search giant Baidu (BIDU -2.74%).
Similar to pot stocks, China stocks have performed poorly for years. Though concerns about the accounting practices of certain China-based companies have been an on-and-off headwind for some time, the COVID-19 pandemic has been the unquestioned trouble spot for China stocks since early 2020. China's COVID-19 mitigation strategy, which involved unpredictable lockdowns, hurt supply chains and economic activity throughout the country.
One reason to be excited about Baidu (and arguably other China stocks) is the reopening of China's economy. With the country effectively abandoning its rolling lockdown strategy, persistent supply chain disruptions should, hopefully, become a thing of the past within the next couple of quarters.
Baidu's foundational operating segment is its internet search engine. Over the trailing four-year period between December 2018 and December 2022, GlobalStats data shows that Baidu's search engine accounted for 60% to 87% of total search share. In other words, Baidu is the clear go-to for advertising companies in China, and its dominant lead in internet search should afford it strong pricing power as the Chinese economy finds its footing.
Investors will also appreciate where Baidu is putting some of its abundant cash flow to work. Despite challenging economic conditions in China, the company's non-online marketing revenue jumped 25% during the third quarter. This is a segment led by artificial intelligence (AI)-driven cloud solutions, as well as autonomous vehicle company Apollo Go. These aggressive investments in AI are likely to lift Baidu's organic growth rate for the foreseeable future.
Even factoring in the added risks that come with investing in China-based stocks, Baidu is cheap. This is a company capable of sustained low-double-digit sales growth that can be purchased for about 14 times Wall Street's consensus earnings estimate for 2023. It wouldn't be surprising in the least if Baidu's full-year earnings increased by 50% (or more) over the next three years.
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January 31, 2023 at 05:21PM
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3 No-Brainer Stocks to Buy With $300 Right Now - The Motley Fool
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