As the financial currents have surged and waned in recent years, the S&P 500 and the Nasdaq Composite have seen their share of challenges and triumphs. A noteworthy fact is that although the S&P 500 and the Nasdaq Composite witnessed respective gains of 24% and 43% in 2023, they still hover below their previous record-closing highs dating back over two years.
For short-term traders, this dearth of substantial progress might be disheartening. However, for investors with a long-term outlook, any significant dip in the major indexes offers an undeniable opportunity to buy. Every stock market correction, bear market, and crash throughout history (excluding the 2022 bear market) has ultimately been recouped by a bull market rally.
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Wall Street presents an intriguing opportunity as it no longer necessitates a king’s ransom to make a meaningful impact. With many online brokerages eliminating minimum deposit requirements and commission fees for common stock trades on major U.S. exchanges, even $100 can kick-start the investment process.
If you have $100 ready to invest and it’s certain this won’t be needed for immediate expenses, the three stocks detailed below present themselves as clear choices for investment.
Bright Spots: Bank of America
The first exceptional stock investors can confidently buy with $100 right now is the financial titan Bank of America (NYSE: BAC).
A potential drawback of bank stocks is their cyclical nature, with their performance tied to the health of the U.S. economy. With certain monetary metrics indicating a possibility of a recession in 2024, there exists a potential for increased loan losses and credit delinquencies.
Nevertheless, a broader perspective can provide investors with insights. If the investment horizon extends beyond a few months, history demonstrates that bank stocks have been rewarding. While the 12 recessions post-World War II have been brief, with nine of them lasting only months, economic expansions typically span multiple years. This indicates that Bank of America is poised to benefit from the gradual expansion of its loan portfolio over time.
Another factor that enhances Bank of America’s appeal is its responsiveness to changes in interest rates compared to other major U.S. banks. With the Federal Reserve initiating a steep rate-hiking cycle, cumulative rate hikes have delivered substantial gains in net interest income each quarter for BofA.
Bank of America’s prudent investments in technology deserve recognition. Currently, three-quarters of the company’s customer base banks digitally, with approximately half of all loan sales completed online or via mobile app. Digital transactions are significantly more cost-effective for the company than in-person interactions. Bank of America’s continued investments in digitization initiatives are expected to further enhance its operational efficiency.
What’s more, BofA stock is attractively priced, trading at approximately 10 times forward-year earnings and hovering around its book value ($33.34/share). Historically, purchasing high-quality bank stocks at or below their book value has been a savvy move.
Media Marvel: Paramount Global
A second no-brainer stock available for purchase with $100 is the media company Paramount Global (NASDAQ: PARA).
Legacy media companies like Paramount are grappling with two pivotal challenges. Firstly, they are navigating the volatile advertising landscape. Reduced ad spending in 2023 weighed on Paramount’s TV Media segment. The second issue encompasses the substantial operating losses associated with Paramount’s burgeoning streaming services. Legacy media companies are compelled to adapt due to ongoing viewer cord-cutting, albeit at the expense of their bottom line.
Though these are tangible reasons behind Paramount’s stock decline, there are compelling reasons for value investors to contemplate acquiring shares at their current devalued prices.
Paramount Global and Alibaba Group – A Financial Perspective
Paramount Global is undertaking measures to enhance profits by raising subscription prices and curbing expenses. In a bid to offset potential losses incurred during a U.S. recession, the company owns the ad-supported, free streaming service Pluto TV, which boasted 80 million monthly active users as of March 2023.
Paramount Global’s Financial Imperative
Paramount Global is embarking on a mission to bolster its financial standing by boosting its subscription rates while reining in operating costs.
In addition, the company possesses Pluto TV, the leading ad-supported, free streaming platform, which could serve as a lucrative option should the U.S. fall into an economic downturn, with 80 million monthly active users as of March 2023.
The Pros and Cons of Paramount Global’s Strategy
While Paramount Global’s strategic moves reflect its determination to achieve financial stability, investors should weigh the potential risk of alienating price-sensitive consumers against the promise of increased revenue.
Alibaba’s Ups and Downs
China’s preeminent e-commerce company, Alibaba Group (NYSE: BABA), looks to be a compelling investment, despite potential regulatory hazards and leadership changes.
Alibaba’s global clout in e-commerce has the potential to attract investors, notwithstanding regulatory uncertainties and the departure of its former CEO, Daniel Zhang.
Alibaba Group’s Investment Case
Alibaba’s widespread dominance in China’s e-commerce markets and burgeoning cloud services segment, combined with its historically low valuation, present substantial opportunities for growth and value-seeking investors.
However, potential investors should be mindful of the regulatory and geopolitical risks that Alibaba faces.
Conclusion
Both Paramount Global and Alibaba Group present intriguing prospects from a financial perspective. Paramount’s moves to boost profitability reflect its diligence, while Alibaba’s market dominance and potential for growth make it an attractive investment option, albeit with associated risks.