Smartest Stocks to Buy With $20 in a Nasdaq Bear Market
Your eyes aren’t deceiving you: It’s been a rough year for investors across sectors.
Since the beginning of the year, prestigious Dow Jones Industrial Average and benchmark S&P 500 Both have entered correctional territory with a decline of over 10%. Meanwhile, the development-stock-driven . decline from peak to trough in Nasdaq Composite A total of 31% since November’s high. This places the Nasdaq as a whole in a bear market.
Although bear market downturns can challenge investors’ resolve and pique their emotions, history is clear that massive drawdowns are a great opportunity to put your money to work and buy high-quality companies at a discount. . After all, every correction and bear market throughout history has been eventually wiped out by a bull rally.
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The best part is that you don’t need a mountain of cash to take advantage of market volatility. With most online brokerage minimum-deposit requirements and commission fees, any amount – even $20 – can be the right amount to invest.
The Three Smartest Stocks You Can Buy Right Now With $20 During the Nasdaq Bear Market.
Palantir Technologies
To get started, buying shares of an artificial intelligence-powered data-mining company Palantir Technologies (PLTR 0.55%) Sounds like a great way to put $20 to work.
To say that Palantir has been closed since reaching an all-time high of $45 in January 2021 would be an understatement. Again, with the company’s shares up for sale last year with a value several times higher, a reversal made sense. After a more than 80% retracement in Palantir shares, the price is now right for patient investors.
The beauty of Palantir’s operating model is that it cannot be easily replicated on a large scale. In other words, it is a company that is liable to secure contracts and hang onto them for a long period of time. Its Gotham platform caters to federal governments and helps with mission planning and data gathering. Meanwhile, Foundry is Palantir’s enterprise-focused platform that helps businesses streamline their operations by making sense of vast amounts of data.
For years, government contracts have been the fuel behind Palantir’s blazing-hot sales growth. But there is a tangible limitation to Gotham, given that management will not allow certain government entities to use its solutions. This leaves the foundry as the golden ticket to Palantir’s wealth. To date, we’ve seen only a small sample of what Foundry can do for corporate America.
With Palantir profitable on a recurring basis and fully capable of sustained sales growth of around 30%, it looks like a smart buy.
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AGNC Investments
During bear market downturns, value stocks can also make for exceptionally smart purchases. A perfect example is mortgage real estate investment trusts (REITs). AGNC Investments (AGNC -1.40%).
Without being overly complicated, mortgage REITs are companies that aim to borrow money at low short-term lending rates and use this capital to purchase high-yielding long-term assets, such as mortgage-backed securities (MBS). Do it for The wider the difference between the average yield on a property (known as the net interest margin) minus the average lending rate they have, often the more profitable mortgage REITs.
At the moment, AGNC is climbing. A flattening Treasury yield curve has tightened the company’s net interest margin, while changes in the Federal Reserve’s monetary policy weighed down its book value. But history has shown these adversities to be tentative. The US economy spends far longer in expansion than in contraction, and this typically produces a steeper yield curve. In short, the AGNC’s net interest margin should climb over time as the company recognizes higher returns from the MBS it is buying.
In addition, of AGNC’s $68.6 billion investment portfolio as of March 31, $66.9 billion is of the agency’s asset type. In the event of default, an agency’s assets are backed by the federal government. Buying these assets protects the AGNC’s portfolio and, more importantly, allows the company to deploy leverage to increase its profits.
The AGNC investment is valued at close to a 10% discount from its actual net book value and has a 12% return. In fact, the company has averaged double-digit yields in 12 of the past 13 years.
The deliveries of the Nio ET7 electric sedan began in late March. Image source: Neo.
NIO
China-based electric vehicle (EV) maker is the third smart stock to buy during the Nasdaq bear market with $20 NIO (NIO 3.71%).
Similar to Palantir, Nio was sporting an astronomical price-to-sales valuation in early 2021, which has since crashed back to Earth. However, with the Nio maturing and innovating, it’s not hard to imagine the company becoming a standout in China’s EV industry. As a reminder, China is the top auto market in the world.
One of the most impressive aspects of this company has been its production ramp-up. In less than two years, the Nio went from producing less than 4,000 EVs per quarter to north of 25,000. If not for the COVID-19 supply chain disruption and semiconductor chip shortage, it would probably be on track for a 150,000 annual EV run-rate.
But it is the innovation of the company that makes it a superstar. For example, Nio recently introduced its flagship electric sedans, the ET7 and ET5. With the top available battery upgrades, these electric vehicles can go up to 621 miles on a single charge. It has a much better range than TeslaFlagship Model 3 and Model S sedans.
Nio’s innovation can also be seen in its Battery-as-a-Service (BaaS) subscription, which was introduced in the summer of 2020. With enrollment in BaaS, buyers get a discount on the purchase price of their vehicle and can charge, swap. , and upgrade their battery. Meanwhile, BaaS delivers Nio’s high-margin monthly revenue, and it secures the loyalty of early buyers.
With NIO potentially impacting recurring profitability next year, now is an ideal time to pounce for opportunistic investors.
