Over the long run, the stock market has proven time and again that it’s a surefire moneymaker. Despite undergoing 38 double-digit percentage declines since the beginning of 1950, the benchmark S&P 500 has eventually erased each and every one of these declines. What’s more, the index has averaged an 11% annual total return (that’s including dividends paid) since 1980. No other traditional asset has delivered better long-term returns.
But arguably the best thing about putting your money to work in the stock market is that you don’t need a lot of cash to begin or further your trek to financial freedom. Since most brokerages have abandoned minimum deposit requirements and trading commissions, no amount is too small to make your money work for you — even $50.
With that being said, here are three of the smartest stocks you can buy right now with $50.
Bank of America
One of the best ways to take advantage of what should be a long-winded economic recovery is to put your money to work in bank stocks. Topping the list of potential bargains is money-center giant Bank of America (NYSE:BAC).
To begin with the obvious, the banking industry is cyclical. When inevitable recessions strike, banks often see loan delinquencies and charge-offs rise. Conversely, when the economy is running on all cylinders, lending and net interest income both tend to rise. The thing to understand is that periods of economic expansion last considerably longer than the average recession. This means banks take their lumps for a few quarters, but generally enjoy a multiyear period of deposit, loan, and interest income expansion.
What makes Bank of America so interesting is its interest rate sensitivity, relative to other big banks. As the U.S. economy heats up, the nation’s central bank will inevitably begin walking up interest rates. According to BofA, as of its June-ended quarter, a 100-basis-point parallel shift in the interest rate yield curve would net it $8 billion in added net interest income. Since this income is based on existing variable-rate loans, it would virtually all go straight to the company’s bottom line.
Bank of America is also doing a good job of shedding its image as a banking dinosaur. As of June, 40.5 million people were banking digitally with BofA. Furthermore, 44% of all sales were completed digitally in second-quarter 2021, up 15 percentage points from the comparable period three years ago. This online and mobile banking push is allowing the company to consolidate some of its branches and reduce its noninterest expenses.
The icing on the cake is Bank of America’s hearty capital return plan. It’s currently paying out a 2.2% yield, and CEO Brian Moynihan has demonstrated a willingness to repurchase a lot of the company’s common stock, when allowed by the nation’s central bank. As the U.S. economy finds its legs, Bank of America’s stock will find its stride.
Kirkland Lake Gold
Another extremely smart buy investors can scoop up with $50 is gold stock Kirkland Lake Gold (NYSE:KL). Even though gold stocks aren’t usually high on investors’ buy lists, there are macro and company-specific catalysts that make Kirkland Lake an insane bargain at its current valuation.
No discussion of Kirkland Lake can begin without noting the multiple tailwinds for physical gold. Historically low lending rates make gold a fairly attractive investment opportunity, compared to bonds and bank CDs. Meanwhile, as inflation picks up, gold becomes an intriguing store of value years down the line. It also doesn’t hurt that a rebounding U.S. economy should lead to higher demand for physical gold. Suffice it to say, a strong case can be made for gold at $2,000 an ounce, or higher.
But recognizing a higher realized gold price is just one reason to like Kirkland Lake Gold. A second reason to (pardon the pun) dig this mining stock is its exemplary production and cost track record. Kirkland Lake produced almost 379,200 ounces of gold in the second quarter (a new Q2 record), with two of its three producing assets seeing a double-digit percentage increase in output. It’s also guided for an all-in sustaining cost of $790/oz. to $810/oz. in full-year 2021. At the midpoint, we’re talking about $1,000 per gold ounce in operating margin.
Like BofA, Kirkland Lake Gold’s management team is also big on giving back. It recently completed a 20-million-share repurchase program and introduced a new 5 million share buyback program in June. The company’s dividend was tripled last year, as well, with the company’s yield nearing 2%.
Yet, the biggest standout for Kirkland Lake Gold might just be its pristine balance sheet. The company ended June with $855 million in cash and no debt, giving it what’s arguably the best balance sheet of all gold stocks. This is a mining company that’ll bring the luster to your portfolio.
A third smart stock to buy with $50 is cybersecurity company Ping Identity (NYSE:PING). As you may have guessed by the name, Ping specializes in identity verification solutions.
Cybersecurity is one of the more no-brainer investment opportunities of the decade. Protecting consumer and enterprise data as businesses have shifted online and into the cloud isn’t optional. It’s a basic need in today’s world, especially considering that hackers and robots aren’t going to take time off just because Wall Street may be having a bad day. This opportunity to protect enterprise and consumer data is increasingly falling into the laps of third-party cloud-based security solutions providers like Ping Identity.
The Ping Intelligent Identity Platform aims to integrate legacy protection with its own cloud-based platform that relies on artificial intelligence (AI). AI is used by cybersecurity companies to allow their software to become more efficient at identifying and responding to potential threats over time. Instead of just handling the basics, Ping’s cloud-based services are constantly monitoring users and authorizing their access to protected data.
Ping Identity is also in the midst of a multiyear shift that’s seeing it emphasize software-as-a-service subscriptions. Though this transformation will take time, we’re witnessing a pretty steady percentage increase in annual recurring revenue (ARR) of around 15%. Since subscription revenue is recognized over the life of the subscription, it’ll be a few years before the sales growth rate catches up with ARR growth. That’s an opportunity for investors to snag a bargain before other investors catch wind of this value.
Ping is already profitable on a recurring basis, and it can be gobbled up for a very reasonable multiple of seven times expected sales in 2021.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning 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 richer.
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