Wednesday, February 28, 2024

Don’t miss out: These 3 Surefire Stocks to Buy now under $200

HomeWARDon’t miss out: These 3 Surefire Stocks to Buy now under $200

Ready to grow your money in 2023 but don’t have much to invest? You can still put your dollars to work wisely. Discover the no-brainer stocks perfect for starting small.

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Even with a limited budget, you can become a successful investor. The key is choosing the right stocks.

 This article reveals three smart stocks to buy now with $200 or less. Backed by strong fundamentals and growth potential, these companies make ideal investments for beginners on a budget.

Let’s dive in and start investing intelligently!

Table of Contents

  • Introduction
  • Why Etsy is a No-Brainer Buy
  • Growing Market Share
  • Increasing Profit Margins
  • What Makes Starbucks a Smart Pick
  • Brand Loyalty
  • Pricing Power
  • Johnson & Johnson: Reliable Returns
  • Recession-Resilient Business
  • Strong Leadership
  • Attractive Valuation
  • Investing Successfully on a Small Budget
  • FAQ

Introduction

Building wealth through stock investing doesn’t require thousands of dollars. With the right strategy, you can grow your money over time even starting with just $200.

The key is choosing stocks with solid long-term prospects, sustained competitive advantages, and catalysts for growth. Industry leaders that have stood the test of time and can weather inevitable market volatility make ideal picks.

This article profiles three such companies perfect for investors ready to put $200 to work intelligently right now:

  • Etsy — The leading online marketplace for unique, creative goods
  • Starbucks — The world’s dominant specialty coffee brand
  • Johnson & Johnson — A diversified healthcare giant with recession-resistant revenues

These stocks make savvy investments today for three key reasons:

  1. They possess distinct competitive edges and market positions that drive reliable growth.
  2. They have upside potential from expansion initiatives, new products, and other catalysts.
  3. They trade at reasonable valuations compared to future earnings growth.

Best of all, you can scoop up shares of all three with a $200 budget.

Below we’ll explore why each stock is a smart bet and how they can help grow your wealth over time. Let’s get started!

Why Etsy is a No-Brainer Buy

Etsy operates the world’s largest online marketplace for unique goods. On Etsy, independent artists and small business owners sell handmade items, vintage pieces, custom creations, and crafting supplies.

As Investor’s Business Daily notes, Etsy dominates its niche. The platform had over 7.5 million active sellers and 96 million active buyers as of Q2 2022. Etsy also enjoys high customer loyalty and repeat purchase rates.

These qualities make Etsy a savvy investment, even if consumer spending declines in a potential recession. Here are two key advantages.

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Growing Market Share

Etsy is rapidly gaining market share in the fragmented e-commerce industry.

From 2018 to 2021, Etsy’s gross merchandise sales grew at a 22% CAGR as the company attracted more sellers and buyers. Over the same period, the overall e-commerce market expanded around 15% annually.

This outpaced growth demonstrates Etsy’s competitive strength. The company retains sellers and buyers through superior tools and services like payment processing, shipping labels, targeted marketing, and customer support.

As Etsy expands these offerings, it can sustain robust growth for years to come. The global market for homemade and custom items is worth over $100 billion annually — giving Etsy plenty of room to extend its reach.

Increasing Profit Margins

Etsy also possesses significant pricing power. The company has consistently increased its take rate, or the percentage of transaction value it captures from its marketplace.

Over the past four years, Etsy’s take rate has risen from 14.1% to 21.1% as of Q2 2022. This trend will likely continue as Etsy creates more value for its sellers through initiatives like Etsy Ads and Pattern by Etsy, its new manufacturing service.

Higher take rates plus Etsy’s fixed-cost model generate exceptional profitability. In Q2 2022, Etsy’s net income margin hit 29%, compared to just 1% in 2017.

With rock-solid fundamentals and a large addressable market, Etsy offers investors growth and stability. The stock trades at a reasonable forward P/E of 24.5, presenting a buying opportunity.

What Makes Starbucks a Smart Pick

Coffee titan Starbucks belongs in every investor’s portfolio. The company operates over 35,000 stores globally and holds over 40% market share in the US coffee shop market.

Starbucks’ distinct competitive edge stems from its loyal customer base. In Q3 2022, Starbucks Rewards membership surpassed 30 million in the US alone.

Rewards members visit stores more often and spend more per transaction compared to non-members. As Goldman Sachs notes, Starbucks Rewards has fueled consistent growth by “driving higher visit frequency.”

Beyond loyalty, Starbucks holds tremendous pricing power — the ability to raise prices without harming demand. In 2022, Starbucks increased prices several times to counter inflation, yet still achieved record Q3 revenue.

Let’s analyze two key strengths that make Starbucks a smart long-term investment.

Brand Loyalty

Starbucks built its reputation through consistent quality and service. Customers trust Starbucks to deliver a high-value experience with each store visit.

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This loyalty allows Starbucks to thrive even in recessions when consumers cut back on discretionary spending. While customers may reduce Starbucks trips, they don’t abandon the brand altogether.

By continually enhancing the customer experience through initiatives like mobile ordering and loyalty rewards, Starbucks retains its recessionary resilience. The company can weather economic cycles and deliver steady, long-term growth.

Pricing Power

In addition to loyalty, Starbucks holds unmatched pricing power. The company increased prices by 6% in FY2022 yet still achieved record revenue and earnings.

Demand remains strong because Starbucks offers an affordable luxury. For most customers, a few extra dollars per drink is inconsequential to the value of the experience Starbucks provides.

Pricing power is a rare and valuable asset. It allows companies to protect profit margins amid cost inflation. This dynamic enables Starbucks to consistently expand operating margins over time.

With leadership in a growing market and recession-resistant demand, Starbucks makes a smart investment today. The stock trades at a reasonable forward P/E of 26.

Johnson & Johnson: Reliable Returns

With a market cap exceeding $450 billion, Johnson & Johnson is a diversified healthcare giant operating in over 60 countries. J&J produces pharmaceuticals, medical devices, and consumer health products.

J&J’s size and diversification give it an enviable competitive position. But three specific qualities make J&J a savvy long-term investment:

Recession-Resilient Business

As a healthcare company, J&J enjoys steady demand unrelated to economic cycles. Consumers cannot control when they get sick or what medical treatments they need.

This makes J&J’s revenues consistent even during recessions when discretionary spending drops. For example, through the Great Recession, J&J’s pharmaceutical division maintained stable annual growth between 4–7%.

Recession resilience allows J&J to reliably increase earnings and dividends over decades. J&J has paid a dividend for 60 consecutive years and increased it for 60 straight years, making it a Dividend King.

Strong Leadership

In addition to diversification, J&J maintains exceptional leadership continuity. The company has had just eight CEOs in 136 years.

Such consistency allows J&J to successfully execute long-term strategic plans rather than frequently shifting direction.

As Forbes notes, former CEO Alex Gorsky oversaw key initiatives like expanding J&J’s pharmaceuticals segment that fueled consistent growth during his tenure. Expect new CEO Joaquin Duato to continue balancing prudence and innovation.

Attractive Valuation

Despite its strengths, litigation over J&J’s past talc products has weighed on shares. This offers investors an opportunity to buy an high-quality business at a bargain valuation.

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J&J stock trades at a forward P/E of just 15.9 compared to its 5-year average of 17.6. The stock offers growth at a reasonable price (GARP) — plus a 2.7% dividend yield.

For investors seeking stability, J&J is a healthcare leader suitable for any market environment.

Investing Successfully on a Small Budget

The examples above demonstrate how investors can put $200 to work intelligently — even in turbulent markets.

Here are five tips for investing successfully on a small budget:

  • Focus on quality. Choose financially sound companies with enduring competitive advantages rather than unproven businesses. Industry leaders tend to deliver long-term returns.
  • Tune out short-term noise. Ignore daily stock price swings and news headlines. Focus on a company’s long-term growth drivers.
  • Reinvest dividends. Automatically reinvest your dividends from stocks like J&J to accumulate more shares and compound gains over decades.
  • Think long-term. Hold stocks for 5+ years and add consistently to build wealth slowly over time. Avoid market timing.
  • Diversify intelligently. Construct a diversified portfolio with as few as 3–5 stocks across different sectors. Diversification manages risk.

Follow these tips, and you can grow your wealth steadily even if starting small. Patience and discipline are key.

FAQ

Should beginners invest with only $200?

Yes, investing even small amounts regularly is wise. Dollar cost averaging into the market lets you take advantage of volatility. Over long periods, stocks appreciate substantially. Starting early helps compound gains.

How many stocks should I buy with $200?

With just $200, buy shares of one company to minimize costs and build a position. Invest additional funds to purchase other stocks when possible. Owning 3–5 stocks helps diversify your portfolio.

What return can I expect from a $200 investment?

Historical average annual returns for stocks are 7–10%. But past performance doesn’t guarantee future results. Maintain realistic long-term return expectations around 8% annually from stocks held for 5–10+ years.

How often should I invest $200?

Ideally, try to invest consistently, such as $200 monthly. This dollar cost averaging helps build positions in great companies over decades. Time in the market is more important than timing the market.

Investing successfully doesn’t require thousands upfront. With the right discipline, $200 can be put to work intelligently. The stocks above make savvy selections for beginners ready to start growing their wealth.

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Mezhar Alee
Mezhar Alee
Mezhar Alee is a prolific author who provides commentary and analysis on business, finance, politics, sports, and current events on his website Opportuneist. With over a decade of experience in journalism and blogging, Mezhar aims to deliver well-researched insights and thought-provoking perspectives on important local and global issues in society.

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