Over the span of a few months or a couple of years, directional moves in the benchmark indexes are no more certain than a coin flip.
Despite these uncertainties, Wall Street has consistently provided a path for patient investors to grow their wealth. Since 2024 began, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have all hit fresh record-closing highs. Yet even with the bulls running wild on Wall Street, amazing deals can still be found for opportunistic, long-term-minded investors willing to seek them out.
Image source: Getty Images.
What makes putting your money to work on Wall Street even better is that most online brokers have tossed aside barriers that had previously kept retail investors on the sidelines. Gone are the days of minimum deposit requirements and commission fees for most common-stock trades. This means any amount of money -- even $600 -- can be the ideal amount to put to work.
If you have $600 that's ready to invest, and you're certain this isn't cash you're going to need to pay bills or cover emergency expenses as they arise, the following three stocks stand out as no-brainer buys right now.
Realty Income
The first phenomenal company that would make for a surefire buy with $600 is retail real estate investment trust (REIT) Realty Income(NYSE: O). That's right income investors, I'm giving you a shout-out, as well as alerting you to an amazing company that's raised its payout for 106 consecutive quarters!
The reason Realty Income's stock chart looks like something of a horror show over the past year has to do with the Federal Reserve's hawkish monetary policy. Aggressive interest rate hikes designed to quell a historically high inflation rate in 2022 sent short-term Treasury yields soaring past 5%. Investors opted to put their money to work in less-volatile T-bills instead of REITs.
However, the Fed's rate-hiking cycle looks to be over. While it's anyone's guess when the nation's central bank will begin easing rates, Treasury yields have already begun retracing. When coupled Realty Income's falling share price, the company's 5.8% yield is now more attractive.
What makes Realty Income "tick" is its superior commercial real estate (CRE) portfolio. Following the completion of its Spirit Realty Capital acquisition in January, Realty Income has in excess of 15,450 CRE properties. The company estimates that 89% of its total rent is resilient to downturns in the U.S. economy.
A significant percentage of its annualized contractual rent (~40%) is tied up in grocery stores, convenience stores, dollar stores, drug stores, and home improvement stores. These are stores that consumers are visiting regardless of whether the U.S. economy is expanding or contracting, which leads to steady rental revenue for Realty Income.
Best of all, Realty Income has demonstrated its intent to diversify its revenue stream beyond just the retail industry. For instance, the aforementioned buyout of Spirit Realty Capital opens new lease streams. Further, the company closed two major deals in the gaming industry over the past two years.
Shares of Realty Income can be picked up at present for a multiple of 11.7 times forecast cash flow in 2025, which represents a 34% discount to its trailing-five-year multiple to cash flow.
Teva Pharmaceutical Industries
A second no-brainer stock that's begging to be bought with $600 right now is brand-name and generic-drug developer Teva Pharmaceutical Industries(NYSE: TEVA).
The previous seven years have not been easy for Teva or its shareholders. The company buried itself in debt by overpaying for generic-drug maker Actavis, dealt with the loss of exclusivity on blockbuster multiple sclerosis drug Copaxone, and has worked its way through a litany of litigation concerning its role in the opioid crisis. Suffice it to say, there have been viable reasons why Teva stock has been clobbered.
The good news for current and prospective investors is that many of these gray clouds have cleared. In particular, the company forged a $4.25 billion opioid settlement with 48 U.S. states last year. Teva will pay this sum over 13 years, with up to $1.2 billion of this total coming from the delivery of overdose-reversal drug Narcan.
One of the keys to Teva's multiyear turnaround efforts has been its ability to cut its expenses and de-lever its balance sheet. Under prior CEO Kare Schultz, the company disposed of noncore assets and shed north of $3 billion in annual operating expenses.
Current CEO Richard Francis is continuing this trend. Teva's intended divestiture of its active pharmaceutical ingredient (API) segment will free up capital, hone its operating focus, and allow it to further reduce its net debt. Since closing the Actavis deal in August 2016, Teva's net debt has declined from around $35 billion to a more manageable $16.6 billion, as of Dec. 31, 2023.
The other key to Teva's success is its operating transformation that devotes more of its research and capital to novel therapeutics. Although brand-name drugs have finite periods of sales exclusivity, the growth rates and margins associated with them are considerably higher than generic drugs. Novel therapies like tardive dyskinesia drug Austedo, which is on pace for $1.5 billion in sales this year after recording $1.23 billion in sales in 2023, should help fuel Teva's growth.
Considering that Teva's sales are expected to expand in 2025 and beyond, a forward price-to-earnings (P/E) ratio of 5 is nothing short of a bargain.
Image source: Block.
Block
The third no-brainer stock you can confidently buy with $600 right now is none other than fintech innovatorBlock(NYSE: SQ).
As you'll note from its stock chart, Block has taken shareholders on quite the ride. It was pumped up during the COVID-19 pandemic by the prospect of consumers and businesses shifting to digital payments. But over the past two years, it's been beaten down by growing competition in the digital payment arena. Though this competition is still growing, competitive advantages should aid the sustained double-digit expansion of Block's bottom line.
Block's foundation for more than a decade has been its Square ecosystem. This is the segment that provides point-of-sale payment and funding solutions to merchants. In 2023, gross payment volume (GPV) traversing its network reached nearly $210 billion, which represents 13% currency-neutral growth from the previous year.
But the real story here is that Square's payment solutions are becoming more popular with larger businesses. During the December-ended quarter, 40% of Square's GPV can be traced back to businesses generating at least $500,000 in annualized GPV. What this shows is that Square is "growing up" as a payment facilitation tool and landing bigger fish. Since Square is predominantly a transaction-driven platform, higher utility from bigger businesses should translate into steady gross profit growth.
The other segment that's expected to drive Block's cash flow and profits substantially higher throughout the remainder of the decade (and beyond) is Cash App. As of the end of 2023, Cash App had 56 million active customers (that's up from 7 million just six years prior), along with 23 million monthly active Cash App Card users. Cash App Card directly links to a users' Cash App account. The cost to acquire new Cash App users has historically been dwarfed by the gross margin Block generates from its Cash App collective.
The prospect for a decline in interest rates may also provide a further lift to Block's Buy Now, Pay Later (BNPL) platform. Block enjoyed a 25% surge in BNPL GPV during the fourth quarter to $8.6 billion.
The final piece of the puzzle is Block's attractive valuation. Shares can be purchased right now for 19 times forward-year earnings despite the expectation that adjusted earnings per share (EPS) will nearly double between 2024 and 2027.
Should you invest $1,000 in Realty Income right now?
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Sean Williams has positions in Block and Teva Pharmaceutical Industries. The Motley Fool has positions in and recommends Block and Realty Income. The Motley Fool has a disclosure policy.
