Last year, Wall Street apparently couldn’t be stopped. The wide base S&P500 hit nearly six dozen closing records en route to a 27% gain.
But no matter how high the stock market goes, value can always be found, especially if your investment period is measured in years or decades.
Even better, with most online brokers eliminating minimum deposit requirements and commissions, any amount of money – even $100 – can be the ideal amount to invest and grow your wealth. If you have $100 ready to invest, here are some of the smartest stocks you can buy right now for 2022.
1. Bank of America
If you are an investor who appreciates brand name companies and solid value stocks, Bank of America (NYSE: BAC) is one of the smartest stocks you can buy with $100 right now.
The first thing to understand about BofA (and banking stocks as a whole) is its cyclical nature. It’s just a fancy way of saying that Bank of America tends to increase its outstanding loans and deposits when the US and global economy is growing, and it’s struggling under the weight of rising delinquencies. on lending when recessions hit. Although recessions are an inevitable part of the business cycle, history has shown that they do not last very long (usually a few quarters). By comparison, periods of economic expansion can last for years or even more than a decade. Buying a bank stock like BofA simply means enjoying a numbers game that undeniably works in favor of long-term investors.
Bank of America is in an ideal position to thrive during the early years of an economic recovery, where we are now. Not only should it benefit from increased lending activity and improved credit quality, but it is the most sensitive to monetary central bank interest rates. That is, as interest rates rise, it will see more increase in net interest income than any other major bank. During the third quarter, BofA noted that a parallel shift of 100 basis points in the yield curve would bring about $7.2 billion in additional net interest income. With inflation hitting a 39-year high in November, rising interest rates seem like a foregone conclusion at this point.
Investors will also be impressed with Bank of America’s digitization efforts. To be clear, BofA is not a high-growth fintech stock. However, it had nearly 41 million customers doing digital banking (online or through a mobile app) by the end of September. In addition, 43% of all sales were made digitally in the third quarter, which represents an increase of 16 percentage points compared to the comparable quarter of 2018. Investing in digitalization helps BofA reach a younger generation of customers, while allowing the company to consolidate. some of its physical branches to reduce costs.
With significant earnings growth on the horizon, Bank of America offers solid upside potential.
For investors who gravitate towards growth stocks, mobile gaming platform Skill (NYSE: SKLZ) looks like the perfect place to put $100 to work right now.
Like most growth stocks, Skillz has been completely wiped out over the past 11 months. Some of that weakness has to do with Wall Street fears that fast-moving companies will post weaker growth in coming years as the country’s central bank raises interest rates to combat rising rapid inflation. But more specifically for Skillz, investors seem to be worried about the higher short-term costs associated with marketing and increased headcount.
While there’s no sugar coating that operating losses have increased, three factors firmly make Skillz an intriguing buy.
For starters, the operating model is designed to generate a consistently high operating margin. While mobile game development is expensive and highly competitive, the cost of maintaining and operating a gaming platform as a middleman is not that expensive. In the first nine months of 2021, Skillz made $275.2 million in sales with a cost of revenue totaling just $16.3 million. That’s a gross margin of a delicious 94%!
Second, and arguably more importantly, Skillz has an industry-leading pay-to-play conversion rate. During the first quarter of 2021, the company reported that 17% of its monthly active players were paying on its platform. By comparison, the industry average pay-to-play conversion rate at the time was closer to 2%. If Skillz can maintain this conversion rate, positive cash flow won’t be too far away.
A third reason to be excited about Skillz is the company’s multi-year deal signed with the National Football League (NFL) last February. The NFL-themed games are expected to debut on the platform this year. With football being by far the most popular sport in the United States, it’s a good bet to attract new users to the platform.
3. NextEra Energy
Finally, conservative investors who are not a fan of volatility and who favor consistency should consider electric utilities NextEra Energy (NYSE:NEE) as one of the smartest stocks they can buy in 2022 with $100. After all, NextEra has generated a positive annual total return, including dividends, for 19 of the past 20 years.
The clear and obvious advantage of buying utility stocks is the predictability of cash flow that comes with the sector. For example, since virtually all landlords and tenants need electricity, demand does not fluctuate much from year to year. This demand transparency is what helps utilities undertake infrastructure projects and acquisitions without compromising their profitability or dividend.
But what makes NextEra so special is that it’s unlike most electric utilities. Its differentiating factor is that no utility in the country comes close to its wind and solar power generation capacity. The company expects to spend a total of $50 billion to $55 billion on new infrastructure projects between 2020 and 2022. Although nominally expensive, these projects are financed at historically low interest rates and have significantly reduced costs power generation from NextEra. While most electric utilities are growing in low single digits, NextEra Energy has been growing at a high single digit compound annual growth rate for over a decade.
The beauty here is that the company also benefits from its traditional regulated utility operations (i.e. those not powered by renewable energy). While it may seem cumbersome for the company to have to approve rate increases with state utility commissions, it protects NextEra from exposure to potentially volatile wholesale power prices.
Given NextEra Energy’s rich history of outperformance, this looks like a genius stock to buy with $100 right now.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging 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 wealthier.