In case you haven't noticed, the bulls are running wild on Wall Street. Since the green flag waved at the start of 2023, the mature stock-driven Dow Jones Industrial Average, broad-based S&P 500, and technology-focused Nasdaq Composite have respectively rocketed higher by 22%, 45%, and 72%, as of the closing bell on July 22.
Although the bull market is firmly intact, corrections along the way have provided entry points for opportunistic long-term investors. At the time of this writing, the Dow and S&P 500 are both nearly 2% below their all-time highs, while the Nasdaq Composite has retraced by more than 3.4%. With the understanding that the major indexes rise in value over long periods, now is as good a time as any to put your money to work on Wall Street.
Image source: Getty Images.
Making things even sweeter, most online brokers have cast aside barriers that had previously kept retail investors on the sidelines. Since minimum deposit requirements and commission fees on common stock trades are a thing of the past, any amount of money -- even the $20 bill you have sitting in your wallet -- can be the perfect amount to invest.
If you have $20 that's ready to be put to work, and you're certain you won't need this cash to cover basic necessities or assist in paying bills, the following three stocks stand out as no-brainer buys right now.
Sirius XM Holdings
The first amazing business you can buy into right now with the change you have in your wallet is satellite-radio operator Sirius XM Holdings(NASDAQ: SIRI).
There's no beating around the bush that Sirius XM has had a rough year -- shares are down 36% amid a rip-roaring bull market. Concerns about the health of the advertising industry and the U.S. economy, coupled with a modest decline in subscriptions for Sirius XM during the first quarter, have investors on edge. Thankfully, this is a company that brings an assortment of competitive advantages to the table for its shareholders.
The most obvious of these advantages is that it's the only licensed satellite-radio operator in the country. While this doesn't mean Sirius XM isn't fighting for listeners with online and terrestrial radio providers, being the sole licensed satellite-radio operator does afford it exceptional subscription pricing power. With Spotifyincreasing its subscription prices this month, it's likely only a matter of time before Sirius XM follows suit.
What's arguably even more attractive than being a legal monopoly is how Sirius XM generates its revenue. Unlike online and terrestrial radio operators, which are almost wholly reliant on advertising revenue, Sirius XM collects the bulk of its net sales (nearly 78% in the March-ended quarter) from subscription services.
Subscribers are less likely to cancel their service than businesses are to cut back on their ad spending during periods of economic turbulence. On paper, Sirius XM's operating cash flow should be more predictable and transparent than traditional radio operators.
It's also worth pointing out that Sirius XM enjoys a level of cost predictability that simply won't be found with terrestrial radio companies. No matter how many subscribers Sirius XM attracts, its transmission and equipment costs are more or less fixed.
To tie everything in a nice bow, Sirius XM is historically cheap. Shares can be grabbed by opportunistic investors for less than 11 times forward-year earnings, which represents a whopping 40% discount to its average forward price-to-earnings (P/E) multiple over the trailing-five-year period.
Image source: Getty Images.
Fastly
A second phenomenal stock that makes for a no-brainer buy with $20 right now is edge computing companyFastly(NYSE: FSLY).
If you think Sirius XM has grossly underperformed in the current bull market, Fastly's 57% year-to-date loss takes the cake. Shares plummeted in early May after the company issued a forecast calling for weaker sales growth and a larger adjusted loss than was previously expected.
While there are tangible reasons why Fastly's stock is down, there are also plenty of reasons why investors would be wrong to count it out.
To start with, macro factors continue to work in Fastly's favor. Businesses are transferring data online and into the cloud at an accelerated pace following the COVID-19 pandemic, and the artificial intelligence (AI) revolution is increasing data needs for companies across the board. In other words, demand for content delivery and security solutions are only going to increase moving forward.
On a more company-specific basis, many of Fastly's key performance indicators are heading in the right direction. While a slight sequential quarterly decline in enterprise customers was unexpected for the March quarter, total customer count has continued to climb.
More importantly, Fastly's last-12-month net retention rate has consistently come in between 113% and 119% over the prior eight quarters. What this figure shows is that Fastly's existing clients are spending, on average, 13% to 19% more on a year-over-year basis. Since the company's content delivery network is usage driven, this steady double-digit growth suggests its investments in added network capacity are paying off.
A strong argument can also be made that Fastly's valuation at just two times sales is incredibly attractive. Although the company is losing money on an adjusted basis, it is generating positive operating cash flow. Further, CEO Todd Nightingale understands what levers can be pulled to lower costs and push his company toward the recurring profit column.
While it's unlikely Fastly's operations are going to turn on a dime, the puzzle pieces are in place for long-term shareholders to be handsomely rewarded.
AT&T
The third no-brainer stock that can confidently be purchased with $20 right now is none other than telecom colossusAT&T (NYSE: T). Take note that AT&T is lifting the proverbial hood on its second-quarter operating results on July 24, and this write-up is occurring prior to the release of this report.
While AT&T stock has performed markedly better than Sirius XM or Fastly in the current bull market, it's still trailing the benchmark S&P 500 by a significant amount. One reason is because higher interest rates threaten to make future refinancing or deal-making activity costlier for AT&T and its peers.
AT&T is also contending with allegations from The Wall Street Journal in July 2023 that it and other large telecom companies could face hefty cleanup and health-related liability costs tied to the legacy use of lead-sheathed cables. While these are tangible concerns that current and prospective investors should acknowledge, they're far from being dealbreakers.
For its part, AT&T has refuted the WSJ's findings. Moreover, even if the company were to face some sort of financial liability, it would be decided by the notoriously slow U.S. court system. Suffice it to say, any major expenses tied to AT&T's lead-clad cables (should there be any) are, at minimum, years away.
What's far more impressive is the progress AT&T has made with its balance sheet. In April 2022, it divested content arm WarnerMedia, which subsequently merged with Discovery to create Warner Bros. Discovery. When this new media entity was created, it assumed certain lots of debt that were previously held by AT&T. Including cash payments, AT&T received a little over $40 billion in compensation. Not surprisingly, its net debt has fallen from $169 billion in March 2022 to $128.7 billion by March 31, 2024. There's no doubt that AT&T's 6% dividend yield is safe.
We've also seen clear signs that the 5G revolution is benefiting AT&T's business. Mobility services revenue jumped more than 3% in the first quarter, with postpaid phone churn hitting a record low of 0.72%. Wireless services are viewed as a basic necessity, and faster networks have encouraged consumers to increase high-margin data consumption.
The company also added 252,000 net AT&T Fiber subscribers during the March quarter. Broadband subscribers are high-margin service-bundling targets for AT&T.
The final piece of the puzzle is that AT&T's valuation makes sense in a very pricey market. A forward P/E ratio of 8 and a dividend yield of 6% is an enticing combination for income and value seekers.
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Sean Williams has positions in AT&T, Fastly, Sirius XM, and Warner Bros. Discovery. The Motley Fool has positions in and recommends Fastly, Spotify Technology, and Warner Bros. Discovery. The Motley Fool has a disclosure policy.
