My son became an investor this year, taking a job that pays more than his simple, frugal lifestyle consumes. He asked me what stocks he could buy with just $100. It was a difficult question. Finding the best stocks for $100 presents many unique challenges.
The easy answer is, if a broker allows it, buy fractional shares of top companies. To buy Amazon (NASDAQ:AMZN). Take some Microsoft (NASDAQ:MSFT). Buy them while they’re cheap and let time work its magic.
But for InvestorPlace, I decided to make things more difficult for me. Where are five stocks, each costing less than $100 per share, that should generate gains down the road?
They are ranked here from safe to speculative. If you’re building a long-term portfolio, you want both. I avoided stocks that I own and some of which rank high, like Reached (NASDAQ:UPST) and Fubo TV (NYSE:FUBO), because I don’t want to make fun of things that made me lose money.
I’ve also avoided ETFs, although if you can get a fractional share of something like the iShares Biotechnology Fund ETF (NASDAQ:IBB) you are on top of the biggest trend of your generation. Companies like Modern (NASDAQ:mRNA) and CRISPR therapeutics (NASDAQ:CRSP) make the threads of life easier to handle, but as with PC stocks from the 1970s, most will fail.
Instead, I thought back to the first desk I flew on in 1978, the Houston Business Journal. I was newly married, full of piss and vinegar, but I didn’t want to lose a dime either. Not all of these companies existed in 1978, but you get the general idea.
Here is what I found.
For 100 years, Coca Cola (NYSE:KO) has been a leader in water treatment, to ensure the consistency of its products. This also describes its financial performance. The company has paid consistent and growing dividends for more than 50 years.
On July 5, that meant a quarterly payout of 44 cents/share, or 2.73%. Five years ago, the payment was 37 cents. Ten years ago it was 25.5 cents. This is the magic of dividends. If you had bought this stock 10 years ago when its price was $39, you would now earn a 4.5% return on this investment, plus a capital gain.
You can be as certain of the return on investment of your Coke as you are that your next Coke won’t make you sick. Under James Quincey, CEO since 2017, Coca-Cola decided to serve its sugary drinks in smaller cans, bought Englishman Costa Coffeehalved its product line and sought partnerships with social media stars like a music producer Marshmallow and actress Kate Moss.
It’s not sexy. it’s not plugged in. it does not generate rapid growth. But it is safe and profitable. If you’re going to hold a stock for decades, that’s what you want.
AT&T (NYSE:J) has learned a hard lesson over the past decade. Stick to what you know.
Assuming he remembers this lesson, what he knows should produce a consistently profitable business. AT&T sells Internet bits, primarily through mobile networks. It is a profitable business. The company cut its dividend by almost half when it spun off Discovery of the Warner Brothers (NASDAQ:WBD) and saw its stock price fall. But what remains has less debt, a 5% return and a clear path to growth.
It’s not complicated. The problem is that former CEO Randall Stephenson thought it was, believing that the company needed to own the content of its elements to maximize its profits. Under his successor, John Stankey, AT&T returned to running mobile and wireline broadband networks, which offer 10% net margins.
Thanks to the 2022 bear market, $100 buys you nearly 5 AT&T stocks. It’s hard to see a safer investment in the future, unless Stankey gets ambitious.
PayPal funds (PYPL)
PayPal (NASDAQ:PYPL) have become the “Kings of Fintech” during the pandemic, as early investor Elon Musk became the richest man in the world at You’re here (NASDAQ:TSLA). (Tesla is down 29% in 2022.)
It’s not always good to be the king. PayPal lost 61% of its value in the first half of 2022, more than double the loss of the Nasdaq. Investors soured on financial technology or fintech stocks. Fintechs use equity for growth, while banks use deposits. When interest rates rise, a fintech’s capital costs rise faster than those of a bank, which only pays interest on customer deposits.
PayPal’s core business is payment, linking buyer and seller accounts, and transferring money cheaply. This activity should pick up with global growth. His flirtation with cryptocurrency hurt him too. But his problems are short-term problems. Seeing such issues resolved and growth returning is something a young investor can speculate on.
Analysts are puzzled and continue to recommend PayPal stocks. The company posted a third less profit on 8% more revenue in March compared to a year earlier. But its franchise remains strong and its price-earnings ratio is now 24.
Roku (NASDAQ:ROKU), which sells streaming hardware and runs its own ad-based streaming network, was hit almost as hard as PayPal in 2022, down 59%. The stock would have cost you almost $500 last July. It’s on sale now for around $94.
At that price, the market cap of $12.8 billion represents less than a fifth of its advertising revenue over the past 12 months. But that reliance on advertising resulted in a loss of $26 million for the first quarter.profits accounted for nearly 9% of revenue in 2021. A partnership with walmart (NYSE:WMT) is bringing “buyable” ads to its Roku streaming channelmatching something that Amazon is also experimenting with.
The partnership illustrates the promise and peril of Roku stocks. It is in direct competition with Amazon, as well as Alphabet (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL), in streaming hardware. On the other hand, it is the only independent company in its field, and any other company that wants to make a name for itself in this world should watch it. This includes retailers like Walmart, entertainment giants like disney (NYSE:SAY) and even hardware companies.
This puts a floor under Roku’s share price. Founder and CEO Anthony Wood controls Roku’s voting stock and recently dismissed rumors he could sell to netflix (NASDAQ:NFLX). But every time he changes his mind, the resulting battle for control will earn you money.
There are many ways for a long-term investor to make money. You can buy security, like with Coca-Cola and AT&T. You can buy stocks when they are low, like PayPal and Roku. Or you can speculate on the future, taking big risks in hopes of a big reward.
AppHarvest (NASDAQ:APP), which has seen its price below $4 at times recently, is such speculation. The market capitalization is only $470 million. Last year, revenue was just $9 million. But it’s a bet to change the world.
AppHarvest operates indoor farms. They are closed-loop systems that can be located inside cities, use 90% less water than open-air farms, and have sensors to precisely control plants that produce 30 times more food than in traditional farms.
The Morehead, Kentucky-based company posted first-quarter sales of $5.2 million and estimates between $24 million and $32 million for the year. He is building three new farms in addition to his Morehead facility, shifting from tomatoes to berries and salad greens. He lost $26 million in the first quarter, but ended it with $98 million in cash, $58 million in credit and an untapped line of credit with $100 million more.
Once AppHarvest posts a profit in Kentucky, it will be able to replicate that success in cities across the country and around the world.
As of the date of publication, Dana Blankenhorn held long positions at GOOGL, AMZN, UPST, FUBO, AAPL and MRNA. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.