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My son became an investor this year, taking a job that pays more than his single lifestyle consumes. He asked me what stocks to buy with just $100. It was a difficult question. Finding the best stocks for $100 presents a lot of unique challenges.
The easy answer is to — if a broker allows it — buy fractional stocks of the best companies. Buy some Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT). Get them while they’re cheap and let time work its magic.
For InvestorPlace, however, I decided to make things tougher on myself. Which five stocks, each costing less than $100 per share, will deliver gains down the road?
They’re ranked here from safe to speculative. And if you’re building a long-term portfolio, you’ll want both. For this list, I avoided stocks I own that some rank highly because I don’t want to shill for things that have lost me money. I also avoided ETFs, though if you can get a fractional share of something like the iShares Biotechnology Fund ETF (NASDAQ:IBB), you’re on top of one of the biggest trends. Companies like Moderna (NASDAQ:MRNA) and CRISPR Therapeutics (NASDAQ:CRSP) may look attractive but, as with PC stocks from the 1970s, most will fail.
Without further ado, here’s what I found for some of the best stocks to buy if you have $100 to spend:
Stocks to Buy: Coca-Cola (KO)
For a century, Coca-Cola (NYSE:KO) has been a leader in water treatment, to assure consistency in its products. That also describes its financial performance. The company has been paying consistent, rising dividends for more than 50 years.
This year, Coca-Cola has been issuing a quarterly payout of 44 cents per share, yielding nearly 3%, Five years ago the payout was 37 cents. Ten years ago, just over 25 cents. That’s the magic of dividends. If you had bought KO stock 10 years ago when it cost under $40 per share, you would now be getting a hefty return on that investment plus a capital gain.
You can be as certain of returns on your KO stock investment. Under CEO James Quincey since 2017, the company has moved to serve its drinks in smaller cans, bought Costa Coffee, cut its product line and sought partnerships with stars like Kate Moss and music producer Marshmello.
It’s not sexy, it’s not hip and it doesn’t generate fast growth. But KO stock is safe and profitable. If you’re going to hang onto a stock for decades, this is what you want.
AT&T (NYSE:T) learned a hard lesson over the last decade: Stick to what you know.
Assuming the company doesn’t forget that lesson, what it knows should yield a consistently profitable business. AT&T sells internet bits, mostly through mobile networks. This is a profitable business. The company significantly cut its dividend in the spinoff of Warner Bros. Discovery (NASDAQ:WBD) and saw T stock fall. But what is left has less debt, a more than 6% yield and a clear path to growth.
It’s not complicated. The problem is that former CEO Randall Stephenson thought it was, believing the company needed to own the content of its bits to maximize profits. Under successor John Stankey, AT&T is back to running mobile and wired broadband networks. The company currently has a net margin of more than 10%.
Thanks to 2022’s bear market, $100 buys you six shares of T stock. It’s hard to see a safer investment going forward, unless Stankey gets ambitious.
Stocks to Buy: PayPal (PYPL)
It’s not always good to be the king, however. PYPL stock has lost 50% of its value year-to-date (YTD), roughly double the loss of the Nasdaq Composite. Investors have generally soured on fintech stocks; fintech names use equity for growth while banks use deposits. When interest rates rise, a fintech company’s capital costs increase faster than those of a bank, which is only paying interest on customer deposits.
The main PayPal business is payments, linking buyer and seller accounts and moving money cheaply. That business should pick up with global growth. The company’s flirtation with crypto also hurts it. But these are short-term problems. Young investors can speculate on them being solved and growth returning long term.
Analysts continue continue to recommend PYPL stock as well. Its franchise remains sound — and its forward price-earnings (P/E) ratio is now 19.7 times.
Roku (NASDAQ:ROKU), which sells streaming hardware and runs an ad-based streaming network of its own, has been hit nearly as hard as PayPal this year. The stock would have cost you nearly $500 last July. Now, ROKU stock is on sale significantly.
At today’s prices, Roku has a $9 billion market capitalization. The company’s dependence on advertising has resulted in a first-quarter net loss and a loss in Q2. However, a partnership with Walmart (NYSE:WMT) is bringing “shoppable ads” to streaming, matching something Amazon is experimenting with as well.
This partnership illustrates both the promise and peril of ROKU stock. It’s competing directly with Amazon, as well as Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) and Apple (NASDAQ:AAPL) in streaming hardware. But on the other hand, it’s the only independent in its business. So, any other company that wants a place in that world should be eyeing it, including retailers like Walmart, entertainment giants like Disney (NYSE:DIS) and even computer hardware companies.
This puts a floor under the stock price. Founder and CEO Anthony Wood dismissed rumors in June that he might sell to Netflix (NASDAQ:NFLX). But if Wood changes his mind, the resulting takeover battle will make investors money.
Stocks to Buy: AppHarvest (APPH)
There are many ways for a long-term investor to make money. You can buy safety. You can buy stocks when they’re low. But you can also speculate on the future, taking big risks in hope of big reward.
AppHarvest (NASDAQ:APPH) is one such a speculation. As a penny stock, its market cap is currently over $200 million. In 2021, revenue came to just $9 million. But APPH stock is a bet on changing the world.
AppHarvest runs indoor farms. These are closed-loop systems that can be located in urban areas, use 90% less water than outdoor farms and have sensors to precisely control plants that yield 30 times more food per acre than traditional farms.
The company reported revenue of $4.4 million in Q2 2022 and estimates full-year sales to come in between $20 million and $25 million. It’s also expanding, building new farms and moving into more produce categories. APPH lost nearly $29 million in Q2 but ended the period with $50.9 million in cash “with over $40 million in total availability on credit facilities.”
Once AppHarvest shows a profit in its original Kentucky operations, it will be in a position to replicate that success around the country and even the world.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
On the date of publication, Dana Blankenhorn held long positions in GOOGL, AMZN, AAPL and MRNA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.