Making money on Wall Street has proven to be exceptionally difficult in 2022. Since each of the major US stock indices hit their respective all-time highs between the middle of November 2021 and the first week of January 2022, they have all plunged in a bear market. . The Nasdaq Compound saw the worst, with a decline of up to 38%.
Over short periods of time, bear markets can be confusing. The speed of bearish moves, coupled with unrealized losses, can cause even lifelong investors to question their thesis. Yet history has proven time and time again that buying high-quality stocks during double-digit percentage declines in the broader market is a smart move.
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Even better, since most online brokers have eliminated commissions and minimum deposit requirements, any amount of money – even $200 – can be the right amount to put to work during this downturn.
If you have $200 ready to invest that won’t be needed to cover emergencies or pay bills, adding it to these four stocks would be a stroke of genius right now.
Bank of America
The first phenomenal stock that would make a smart addition with $200 is the money center giant Bank of America (BAC 0.88%). Even though banking stocks are cyclical and recession fears are mounting in the US, BofA has two important trends working in its favour.
For starters, no monetary central bank is more interest rate sensitive than Bank of America. Normally, this would be a bad thing during a bear market, as the Federal Reserve would be expected to step in with a variety of monetary easing measures. But that’s not the case this time around.
With inflation higher than at any time in the past four decades, the country’s central bank has no choice but to aggressively raise interest rates. For BofA, that means billions of dollars in additional net interest income from its outstanding floating rate loans. And he doesn’t have to do any extra work to generate that extra income.
Another oft-overlooked catalyst for Bank of America is its growing digital engagement. Investing heavily in digitization helped boost its number of monthly active digital users to 43 million at the end of September. More importantly, 48% of total sales are made online or through a mobile app, which represents an increase of 19 percentage points compared to the comparable quarter of 2019. Since digital interactions cost a fraction of the cost of interactions in person or over the phone, BofA is able to save money by consolidating some of its physical branches. This makes an already cheap stock all the more attractive.
Enterprise Product Partners
Another great stock to buy with $200 is a midstream oil and gas company. Enterprise Product Partners (EPD 0.52%). While some investors might be wary of energy stocks given the rat race they’ve been caught in during the early stages of the pandemic, Enterprise can easily ease those concerns.
The important thing for investors to understand about Enterprise Products Partners is that they are an intermediary operator. As such, it’s a middleman that operates more than 50,000 miles of transmission pipelines and can store up to 14 billion cubic feet of natural gas. Companies that transport, store and process oil and natural gas, such as enterprise product partners, work on long-term fixed-price or volume-based contracts that produce highly predictable operating cash flows . Thus, large fluctuations in the spot price of oil and natural gas have virtually no impact on the company’s cash flow.
Another key enabler for enterprise product partners is the globally broken energy supply chain. For more than two years, the pandemic has discouraged major energy companies from putting cash to work due to economic uncertainty. And Russia’s invasion of Ukraine has thrown into doubt the transmission of oil and natural gas to parts of Europe. Without the means to rapidly increase global oil and gas supply, energy commodity prices are expected to remain high. This will likely encourage drilling projects in the United States and will only further increase the demand for energy infrastructure.
And if that’s still not enough, Enterprise Products Partners returns 7.6% and has increased its base annual distribution in each of the past 24 years.
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Assets received
A third stock just begging to be bought with $200 is a cloud-based lending platform Assets received (UPST -0.46%). While you’d be right to suspect a lending platform would struggle with rising interest rates, Upstart offers competitive advantages that make it a smart buy, even in a tough environment.
What separates Upstart from its competitors is the company’s artificial intelligence (AI)-based platform that eschews traditional credit score metrics in favor of machine learning. In total, nearly three-quarters of Upstart loan applications are fully automated and approved. This saves time and money for credit institutions.
Additionally, as I’ve pointed out before, Upstart’s AI-powered platform has led to a wider pool of applicants being approved for loans. On average, loans approved by Upstart have a lower credit score than traditionally approved loans. But compared to each other, the delinquency rates were similar for both types of loans. The takeaway is that the company can increase the pool of customers for banks and credit unions without hurting their credit risk.
Another thing to consider is that Upstart is still very at the start of its expansion. Throughout its young history, it has focused on verifying personal loans. But he is now engaged in origination of auto loans and small business loans. Together, auto loans and small business loans are 10 times the market value of loans of personal loans alone. Upstart has industry disruptive potential written all over it.
CrowdStrike Holdings
Finally, cybersecurity company CrowdStrike Holdings (CRWD -0.21%) would be a genius stock to buy with $200 right now. Although growth stocks with premium valuations have done poorly in 2022, there are very good reasons CrowdStrike can maintain its premium multiple as it grows.
On the one hand, cybersecurity has become a basic necessity. It doesn’t matter how the US economy performs, good or bad; hackers and robots don’t take a day off. This need for businesses to protect sensitive data provides a relatively safe demand floor under most cybersecurity companies.
More specific to CrowdStrike, it has the cloud-native Falcon security platform in its corner. Falcon relies on AI to become smarter in identifying and responding to potential end-user threats over time. Even though CrowdStrike’s cybersecurity services are more expensive than those of some of its competitors, the company’s raw retention rate has increased slightly over the past five years. This is an indication that its customers trust the product(s).
But what makes CrowdStrike such a surefire investment for growth seekers is its ability to get existing customers to spend more. While its acquisition of new customers has been impressive, the growth in the percentage of customers who have purchased four or more cloud module subscriptions from less than 10% to more than 70% in five years is staggering. If add-on purchases continue at this pace, the company will have no trouble eventually exceeding an adjusted subscription gross margin of 80%.