Investing on Wall Street can sometimes be a roller coaster of emotions. The COVID-19 crash in February-March 2020 was the quickest bear market decline in history. Meanwhile, the rallies growth-stock investors have enjoyed in 2021 and 2023 have been jaw-dropping.
Despite these notable gains, some of Wall Street's most followed indexes (e.g., the Nasdaq Composite) remain below their all-time closing highs. Put another way, high-quality stocks can still be purchased at a discount if you're willing to put in the work and look for bargains.
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What's particularly noteworthy about putting your money to work on Wall Street is that prior barriers to investment have been all but torn down. Most online brokerages have completely done away with minimum-deposit requirements and commission fees for common stock trades executed on major U.S. exchanges. In other words, any amount of money -- even $500 -- can be the ideal amount to put to work.
If you have $500 that's ready to invest, and this isn't cash that'll be needed to pay bills or cover an emergency, the following three stocks stand out as no-brainer buys right now.
Visa
The first genius stock you can confidently add to your portfolio with $500 is world-leading payment processor Visa(NYSE: V). Even though Visa shares are near an all-time high, the company sports a laundry list of competitive advantages that should continue to lift its valuation for years, if not decades, to come.
The interesting thing about Visa is that its biggest headwind is also its greatest opportunity. Like most financial stocks, Visa is cyclical. This is to say that its operating performance tends to ebb and flow with the health of the U.S. and global economy. If a recession takes place, consumer and enterprise spending would be expected to decline, leading to weaker fee collection for Visa.
However, the "ebbs" don't last nearly as long as the "flows." Only three of the 12 U.S. recessions since World War II have lasted at least one year. By comparison, most periods of expansion last multiple years, with two expansions lasting a full decade. Visa is perfectly positioned to take advantage of these extended periods of growth.
To add to the above point, Visa's growth runway during these long-winded expansions is enormous. As of 2021, it held a nearly 53% share of credit card network-purchase volume in the United States. Meanwhile, faster-growing emerging-market regions, including the Middle East, Africa, and Southeastern Asia, remain largely underbanked and therefore ripe for disruption by financial-services providers like Visa.
Something else that's been critical to Visa's long-term success is its avoidance of lending. Visa is a well-known and trusted brand, and it would likely succeed as a lender. But doing so would also expose the company to credit delinquencies and loan losses during inevitable economic slowdowns. Completely avoiding the lending arena means not having to set aside capital for potential losses. It's one of the key reasons Visa bounces back from recessions so quickly.
Lastly, Visa is a cash cow with a profit margin north of 50%. Although its forward price-to-earnings (P/E) ratio of 23 is higher than the benchmark S&P 500, Visa's expected annualized earnings-growth rate of 14% over the next five years makes its stock a bargain.
Jazz Pharmaceuticals
A second no-brainer stock with an exceptionally favorable risk-versus-reward profile for patient investors is specialty healthcare companyJazz Pharmaceuticals(NASDAQ: JAZZ).
The enemy of pretty much every drug developer is time. Novel therapies have finite periods of sales exclusivity. Once those periods of exclusivity end, it's not uncommon for generic drugs and/or biosimilar competition to enter the space and either siphon away sales or reduce the average selling price for a product. Jazz generates about half of its revenue from its oxybate franchise (Xywav and Xyrem), which help patients with various sleep disorders. A high concentration of sales in one franchise/area of focus can be worrisome.
However, Jazz Pharmaceuticals has its bases covered. The company developed a next-generation version of its narcolepsy blockbuster Xyrem. This new version, known as Xywav, contains 92% less sodium than its predecessor. Not only does this make Jazz's drug safer to take for patients with higher cardiovascular risk factors, but it'll help preserve the company's cash flow and sales exclusivity for many years to come.
Jazz's oncology portfolio is also gaining momentum. Cancer-drug sales look to be on track to reach $1 billion in 2023, with acute lymphoblastic leukemia therapy Rylaze doing a lot of the heavy lifting with sales up 46% year to date to $292.5 million.
Cannabidiol-based drug Epidiolex is holding its own as well. Since Jazz acquired GW Pharmaceuticals in May 2021 to get its hands on Epidiolex, sales have continued to grow. Additional worldwide approvals, along with label-expansion opportunities, have the ability to eventually push Epidiolex's annual sales past $1 billion.
Don't overlook Jazz's pipeline, either. The company anticipates as many as five late-stage trial readouts before the end of 2024, with many of these advanced studies focused on experimental cancer drugs.
While Jazz Pharmaceuticals is no longer the growth juggernaut it once was, a forward P/E ratio of 6 doesn't do justice to this highly profitable biotech stock.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Berkshire Hathaway
The third no-brainer stock to buy with $500 right now, conglomerate Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B), may not be a household name, but its billionaire CEO, Warren Buffett, certainly is. Take note, I'm specifically talking about Berkshire's Class B shares (BRK.B), since a single Class A share will set an investor back more than $544,000!
Since the Oracle of Omaha became CEO in 1965, he's overseen a 19.8% annualized return in his company's Class A shares (BRK.A). The Class B shares weren't issued until 1996, which is why I'm referring to returns of the Class A shares in this instance. Even if Berkshire fails to return close to 20% on an annualized basis moving forward, Buffett and his team have clearly demonstrated their ability to outpace the broader market over long periods.
One of the factors that makes Berkshire Hathaway such a special investment, other than Warren Buffett, is its focus on cyclical businesses.
Buffett and the late Charlie Munger, who served as Berkshire's vice chairman for 45 years, realized a long time ago that betting on the U.S. economy to grow over time is a smart idea. Instead of trying to guess when recessions would occur, Buffett and Munger packed Berkshire's investment portfolio and owned assets with time-tested, profitable, cyclical businesses. Thanks to extended periods of economic expansion, these long-term holdings have delivered big gains for Berkshire and its shareholders.
Another unsung hero for Berkshire Hathaway is the myriad of dividend stocks that sit in its investment portfolio. Over the course of the next year, Buffett and his investing aides will oversee the collection of around $6 billion in dividend income. On top of being recurringly profitable, dividend stocks have historically run circles around publicly traded companies that don't offer a payout.
Furthermore, the culture that Charlie Munger instilled at Berkshire Hathaway is going to live on for decades to come. While every investor would love to see Warren Buffett live to be 120, the truth is that he and Munger built Berkshire Hathaway to succeed long after they're gone. If the American economy is growing over time, there's a good chance Berkshire's wholly owned subsidiaries, which include insurer GEICO and railroad BNSF, as well as the company's $374 billion investment portfolio, are going to benefit.
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Sean Williams has positions in Visa. The Motley Fool has positions in and recommends Berkshire Hathaway and Visa. The Motley Fool has a disclosure policy.
