One of the best aspects of putting your money to work on Wall Street is that most online brokers have eliminated barriers that had previously kept retail investors on the sideline. Minimum deposit requirements and commission fees for common stock trades on major U.S. exchanges are predominantly a thing of the past.
For everyday investors, it means virtually any amount of money -- even $300 -- can be the perfect amount to put to work in the stock market.
Image source: Getty Images.
While it might sound tempting to invest $300 in the hottest stock on Wall Street, artificial intelligence (AI) kingpin Nvidia(NASDAQ: NVDA), there are three unstoppable stocks that make for much smarter buys right now.
Four reasons investors can safely pass on Nvidia
Despite Nvidia's AI-graphics processing units (GPUs) absolutely dominating in high-compute data centers, there are a number of reasons to believe the company's stock has peaked and will underperform in the years to come.
For example, there hasn't been a next-big-thing innovation for at least three decades that's avoided an early innings bubble-bursting event. Without fail, investors consistently overestimate the adoption and utility of new technologies and innovations, which eventually leads to real-world results falling short of otherworldly expectations. If artificial intelligence follows this path, no company is going to be hurt more than Nvidia.
Another expected headwind for Nvidia is an increase in competition. While it's well-documented that other chipmakers are ramping up production and/or debuting AI-GPUs for AI-accelerated data centers, investors are likely overlooking the prospect of internal competition. All four of Nvidia's top customers by net sales are developing AI-GPUs of their own, which will undoubtedly limit future orders for the company's hardware.
Insiders aren't giving investors a reason to buy, either. Nvidia's recently unveiled $50 billion buyback program, or as I refer to it, the "smoke-and-mirrors campaign," doesn't hide the fact that it's been 45 months since a single share was purchased by an insider on the open market.
Lastly, Nvidia's valuation isn't nearly as enticing as it might appear. Shares of the company are valued at an unsightly 30 times trailing-12-month (TTM) sales, and briefly topped a TTM price-to-sales ratio of 40 in June.
Forget about Nvidia and consider putting $300 to work right now in the following three unstoppable stocks.
Visa
The first sensational stock that can be bought with $300 right now, and has all the tools needed to deliver superior returns to Nvidia in the coming years, is leading payment processor Visa(NYSE: V).
Despite recessionary red flags cropping up, Visa benefits immensely from the non-linearity of the economic cycle. While recessions are both normal and inevitable, they're historically short-lived. Just three of the 12 U.S. recessions since the end of World War II endured for a full year.
By comparison, most periods of growth stick around for many years, if not a decade. Visa enjoys the spoils of lengthy growth periods and the long-term expansion of consumer and enterprise spending.
At the same time, Visa is well-protected from downturns thanks to its purposeful avoidance of lending. Although some of its peers act as lenders and payment processors, Visa solely focuses on payment facilitation. Since it doesn't lend, it's not required to set aside capital for those inevitable periods where the U.S. economy weakens. This gives Visa more financial flexibility than its peers and helps it bounce back from recessions very quickly.
Visa has an incredible opportunity in overseas markets, too. Cross-border payment volume grew 14% on a constant-currency basis in Visa's latest quarter, which follows a consistent theme of sustained double-digit growth in cross-border payment volume. Many of the world's fastest-growing emerging markets are chronically underbanked, which provides Visa with a no-brainer opportunity to sustain double-digit annual earnings growth through the remainder of this decade, if not well beyond.
Image source: Walt Disney.
Walt Disney
A second unstoppable stock that can outpace Nvidia in the return column and makes for a stellar buy right now with $300 is media goliath Walt Disney(NYSE: DIS).
Few companies were clobbered more directly by the COVID-19 pandemic than Disney. The closing of theme parks, coupled with limited studio output and select movie theater closures, severely hampered its bottom line. But with China's economy reopened and studio output ramping up, Disney is shining, once more.
Perhaps the best aspect of Disney's operating model is that it can't be duplicated. Even though there are no shortage of movies and shows to watch and theme parks to visit, no other company offers the history, depth of engagement, characters, or storytelling capacity that Disney brings to the table. This alone ensures that Walt Disney will continue to generate predictable cash flow from its multiple operating segments.
Something else for investors to be excited about is Disney's progress with its direct-to-consumer (DTC) segment. After years of sizable losses, Disney delivered its first operating profit from its DTC segment. Being an irreplaceable media company has allowed it to increase subscription prices for all of its tiers and move its DTC segment to profitability a full quarter ahead of schedule.
The "House of Mouse" is also historically inexpensive. Its forward price-to-earnings ratio of 18 marks a 31% discount to its average forward-year earnings multiple over the prior half-decade. Further, Disney should be able to deliver sustained double-digit earnings growth as its DTC segment and studio begin to stretch their proverbial legs.
PubMatic
The third unstoppable stock that makes for a smarter buy than Nvidia with $300 right now is small-cap adtech company PubMatic(NASDAQ: PUBM).
PubMatic finds itself perfectly positioned to take advantage of the rise of digital advertising. Even though advertising is highly cyclical, and businesses aren't shy about paring back their marketing budget at the first sign(s) of trouble, the aforementioned non-linearity of economic cycles works in favor of ad-driven businesses. Investors with a long-term mindset should benefit from owning stakes in companies that see ad spending climb over time.
One of the key reasons PubMatic is set for success is the decision by its management team to design and develop its own cloud-based programmatic ad platform. While it would have been easy for PubMatic to rely on a third-party provider, the decision to build its own cloud-based infrastructure should result in a decisively higher operating margin as it scales its revenue.
As noted, PubMatic has honed in on the fastest-growing aspects of the advertising arena. Specifically, it's a sell-side platform aiming to sell digital display space for advertisers in mobile, video, and connected TV (CTV). All three of these segments can sustain double-digit annual ad spending growth for the foreseeable future, with CTV ad spend growing the fastest.
Lastly, PubMatic is sitting on a cash-rich balance sheet that gives it ample financial flexibility. The company ended June with $165.6 million in cash and cash equivalents, and no debt, and has repurchased roughly $100 million worth of its common stock. Additionally, it's working on its 10th consecutive year of generating positive operating cash flow.
Should you invest $1,000 in Visa right now?
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Sean Williams has positions in PubMatic and Visa. The Motley Fool has positions in and recommends Nvidia, PubMatic, Visa, and Walt Disney. The Motley Fool has a disclosure policy.