The past year has demonstrated the power of optimism in the face of market fluctuations. Despite corrections, bear markets, and crashes being part and parcel of the investing cycle, the three major stock indexes continue to trend upwards over the long term.
However, not all indexes have reached new highs. While the Dow Jones Industrial Average has surpassed its previous closing high, the S&P 500 and the Nasdaq Composite have yet to do so in 2023. This presents an opportunity for investors with cash on hand and a long-term perspective to find bargains.
The elimination of commission fees on stock trades and minimum deposit requirements by most online brokerages has removed investment barriers. This means that even $1,000 can be an ideal investment amount.
If you have $1,000 ready to invest, and you’re certain this isn’t cash you’ll need for bills or emergencies, there are three stocks that stand out as smart buys for the new year.
Firstly, leading payments processor Visa (V) is a wise choice. Despite being a cyclical business that can be affected by recessions, Visa benefits from optimism and patience. Recessions are historically short-lived, while economic expansions are multiyear events. This allows Visa’s fee collection to grow alongside the U.S. and global economy over time.
Visa’s growth potential is vast, with a nearly 53% share of credit card network purchase volume in 2021. The company also has opportunities to expand its payment infrastructure into under-banked regions globally. Visa’s operating model, which avoids lending and focuses on payment facilitation, gives it a competitive edge that allows it to recover from economic downturns faster than its peers.
Secondly, healthcare conglomerate Johnson & Johnson (JNJ) is a solid investment. Despite facing approximately 100,000 lawsuits over its now-discontinued talcum-based baby powder, J&J is operationally stable and operates in a defensive sector with predictable cash flow. The company holds a coveted AAA-credit rating from Standard & Poor’s and has generated over $20 billion in operating cash flow over the past year. J&J’s leadership continuity and focus on developing pharmaceuticals also contribute to its success.
Lastly, leading fintech company PayPal Holdings (PYPL) is a smart buy. Despite shares tumbling roughly 80% since mid-2021 due to rising competition and inflation, PayPal has successfully navigated this challenging environment. The company’s total payment volume continues to grow by a double-digit percentage, and digital payment adoption is still in its early stages.
PayPal’s user engagement statistics are impressive, and the recent hire of Alex Chriss as CEO is expected to enhance the company’s small business ambitions and improve margins. PayPal’s board has also been proactive in implementing share buybacks, which, coupled with cost reductions, is a formula for higher earnings per share.
Let us know what you think, please share your thoughts in the comments below.
