The smartest stocks to buy with $100 during the market sell-off

2022 has been a difficult year for much of the investment community. Both the iconic Dow Jones Industrial Average and the very followed S&P500 entered official correction territory in March (i.e. they fell at least 10% from their all-time closing highs). Meanwhile, growth, propelled by growth stock Nasdaq Compound is once again flirting with bear market territory.

While steep market declines can occur without warning, and the downward velocity associated with these moves can be frightening, corrections are historically a great time to put your money to work in high-quality stocks. Throughout history, every major fall in general indices has eventually been erased by a bullish rally.

Even better, with most online brokers eliminating minimum deposit requirements and commission fees, any amount of money (even $100) can be a perfect amount to put to work during corrections and markets. bearish.

Image source: Getty Images.

If you have $100 ready to invest that won’t be needed for bills or to cover emergencies, here are some of the smartest stocks you can buy during the market sell-off.

Starbucks

One of the smartest stocks investors can buy during the market downturn is the coffee giant Starbucks (SBUX -1.29% ). Shares of the company have fallen 37% since hitting their highest level nine months ago.

Starbucks is grappling with a host of issues that concern Wall Street. A handful of its stores have voted to unionize at a time when the labor market is tight and workers have more bargaining power than at any time in recent memory. We are also seeing historic domestic inflation (the highest in 40 years), which could reduce spending by low-income consumers and squeeze Starbucks margins. Finally, the pandemic threatens to temporarily close some international sites.

Despite all of these concerns, Starbucks continues to perform well on just about every front. The company has such a loyal customer base and such a widely recognized brand that raising its prices to offset inflation has rarely been an issue. Even with rising coffee prices, I have no doubt that Starbucks can ride out inflationary pressures as it has many times before.

Equally important, Starbucks’ digitization and loyalty initiatives are paying off. The company ended its first fiscal quarter (January 2, 2022) with 26.4 million active Rewards members. This is an increase of 21% compared to the period of the previous year. It’s no secret that these Rewards members spend more than non-Rewards customers. They are also more likely to store their payment information on their smartphones to expedite checkout or ordering. By dangling digital rewards, Starbucks has boosted sales and found ways to make operations more efficient.

Other innovations also continue to emerge. For example, the redesigned steering wheel control panel allows drivers to video chat with Starbucks associates, and it suggests food and drink pairing options. This is in addition to the company’s ongoing efforts to provide healthier, higher-margin food options.

It has been a long time since investors have been able to buy Starbucks stock for less than 21 times Wall Street’s earnings forecast for the year. Now seems like the perfect time for opportunistic investors to pounce.

A gloved processor using scissors to trim a cannabis flower.

Image source: Getty Images.

Trulieve Cannabis

Another of the smartest stocks investors can buy with $100 during the market sell-off is the US marijuana stock. Trulieve Cannabis ( TCNNF -3.14% ).

US pot stocks have been driven to the stake for the past 13 months (and counting). When President Joe Biden took office, it was expected that a Democratic Congress would have no problem pushing through cannabis reforms at the federal level. However, with other issues taking precedence (ahem, COVID-19), the proposed marijuana reforms stalled in the Senate. Without a clear path to federal legalization or banking reforms, investors have avoided cannabis stocks.

However, I would say that is shortsighted. While federal legalization would certainly alleviate some operational challenges for multi-state operators (for example, being able to transport cannabis between states), high-quality multi-state operators need not thrive. Trulieve is proof of that.

One of the reasons Trulieve stands out is its unique expansion model. While most multistate operators planted their flags in as many legalized markets as possible, Trulieve focused almost exclusively on saturating Florida’s medical marijuana market until the middle of last year. Currently, about 115 of the company’s approximately 165 operating dispensaries are in the Sunshine State.

Why saturate Florida? For starters, it will likely be one of the top-selling weed markets by 2024. More importantly, integrating the Trulieve brand statewide has saved marketing costs. As a result, the company has gobbled up about half of the state’s market share in dried flowers and oils, and it has been consistently profitable for nearly four years.

Trulieve’s next chapter is to expand outside of Florida. During the fourth quarter of 2021, it completed the acquisition of multi-state operator Harvest Health & Recreation. While this deal gave Trulieve a presence in the mid-Atlantic region, the crown jewel of this acquisition was capturing the #1 market share in Arizona. This state legalized recreational cannabis in November 2020 and began sales for adult use two months later. It could soon reach $1 billion in annual weed sales.

Trulieve, the most profitable pot stock, ticks all the right boxes for investors looking for growth.

Two people looking at several computer screens filled with data.

Image source: Getty Images.

Palantir Technologies

A third smart stock that is ideal to buy with $100 during the market sell-off is the mining company. Palantir Technologies (PLTR -0.93% ).

Palantir finds itself in the same boat as many previously high-flying tech stocks (i.e. they have been crushed). Since hitting a pandemic high of $45 in late January 2021, stocks have lost more than 70% of their value. Everything from the company’s high price-to-sales ratio to the prospect of higher interest rates stifling economic growth has weighed on the company’s stock price in recent months.

But there are still plenty of reasons to be optimistic, especially if your investment period is measured in years. For example, one of the greatest aspects of Palantir is the uniqueness of its operating model. There isn’t a single company that’s a direct comparator, which probably explains why it’s had no trouble securing major multi-year contracts from the federal government. The company’s Gotham platform targets government entities, with much of its recent sales growth attributed to large contracts.

In the long run, the company’s Foundry platform will likely become its greatest asset. While the customer cap for Gotham is limited (for example, we’ll never see Palantir’s data mining software used by China), Foundry’s potential to streamline company operations by breaking down big data is seemingly unlimited. Palantir is only scratching the surface with its business potential, but has seen the number of business customers triple to 147 in the past two years.

Perhaps most impressive is the spend Palantir squeezes out of its existing customers. While it’s great to see the company add new business customers, what really stands out is the 150% net dollar retention rate of US business customers and the 146% net dollar retention rate of all government customers during the fourth quarter.

Put simply, these numbers mean that US commercial and global government customers spent 50% and 46% more, respectively, in the fourth quarter of 2021 than in the prior year period. Existing customers spending more for a software-based model is a recipe for adjusted gross margin in the low to mid 80% range.

Palantir is expected to increase annual sales by around 30% by mid-decade, making its recent decline a savvy buying opportunity.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

Garland K. Long