Arguably the most important lesson investors learn when putting their money to work in the stock market is that patience pays off.
Last year, the coronavirus pandemic sent the widely tracked S&P 500 screaming lower by 34% in just 33 calendar days. Despite unprecedented volatility and uncertainty, those who believed in their long-term investment theses have been handsomely rewarded. The S&P 500 has bounced back 90% since hitting its bear-market bottom in March 2020.
The point is this: Anytime is a good time to put money to work in the stock market, as long as you have a long-term mindset.
Best of all, you don't need a boatload of cash to get started or to further your path to financial independence. If you have $500 that's ready to be invested, which won't be needed to pay bills or cover emergencies, the following trio of no-brainer stocks are begging to be bought right now.
For much of the past decade, Wall Street has shunned gold stocks. That's because miners were a bit too overzealous with taking on debt in the early 2010s following a more than decade-long run higher in physical gold prices. But after years of cost-cutting and favorable macroeconomic conditions, the gold-mining industry is overflowing with value stocks. That's why Barrick Gold (NYSE:GOLD) is a no-brainer stock you can buy right now.
From a macro perspective, things are nearly perfect for gold. The Federal Reserve has pledged to keep lending rates at or near historic lows, and its bond-buying program is designed to weigh down long-term yields. Between a rising money supply, low yields, and the prospect of higher inflation in the future, gold is checking all the boxes it needs to head well above $2,000 an ounce.
But there's more to like about Barrick Gold, beyond just realizing a higher price for what it produces and sells. In particular, we've watched the company's balance sheet bloom since the beginning of 2019. What was once a $3.6 billion net debt position is now a $500 million net cash position. Though higher realized selling prices have helped, Barrick's size and the high-yield ore grade of its mines have helped push its all-in sustaining costs (AISC) down to around $1,000 per gold ounce ($1,018/oz. in Q1 2021, and $967/oz. in full-year 2020). This provides well over $800 an ounce in operating margin.
Additionally, Barrick Gold aims to improve on its AISC. Investments being made in underground automation at Kibali, Luolo-Guonkoto, and Bulyanhulu, as well as the $300 million Third Shaft project at Turquoise Ridge in Nevada, should improve output and lower production costs.
After more than a decade of following gold-mining stocks, I've come to the conclusion that a multiple of 10 times operating cash flow is a fair valuation. With Barrick Gold currently valued at less than eight times Wall Street's cash flow projection for 2021, ample upside is still likely.
During the coronavirus pandemic, traditional workplaces were disrupted like never before. Though businesses were making the move online and into the cloud well before the coronavirus made its presence known, the pandemic kicked this trend into high-gear. In other words, as more data makes its way into the cloud, the onus of protecting this information from hackers and robots is increasingly falling to third-party providers. That's why putting your $500 to work in Ping Identity (NYSE:PING) is such a no-brainer.
As its name likely gives away, Ping Identity is focused on providing identity verification solutions for its enterprise clients. Ping's platform utilizes artificial intelligence to grow smarter at identifying and responding to threats over time, and its more advanced services offer a hybrid approach of cloud-native security as well as on-premises protection. Cloud-native applications are typically nimbler than on-premises solutions at identifying and responding to problems.
While there's no sugarcoating that Ping's 2020 was less-than-stellar -- a number of its clients opted for shorter-term agreements due to pandemic uncertainty -- a deeper dive into its recurring revenue shows plenty of promise. Annual recurring revenue (ARR) jumped 16% in the first quarter from the prior-year period. Since Ping is predominantly focused on growing the higher-margin software-as-a-service portion of its business, as opposed to its term-based license subscriptions, we're liable to see ARR growth remain in the mid-to-high teens, with revenue growth eventually catching up.
Although ARR growth in the mid-teens may not seem as impressive as what other cloud-based companies are delivering, I'd remind folks not to overlook the 85% subscription gross margin Ping Identity is bringing in. With such robust margins, even a modest double-digit growth rate can generate significant cash flow.
Considering that most cybersecurity stocks are valued at 10 to 20 times forward-year sales, Ping is a screaming bargain at a multiple of six times next year's forecasted revenue.
A third no-brainer stock to buy now with $500 is rapidly growing edge cloud company Fastly (NYSE:FSLY).
Fastly provides a number of services to clients, but might be best-known for its content delivery network. Specifically, it's responsible for expediting the delivery of content to end users in a secure manner. With businesses moving online at an extraordinary rate during the pandemic, traffic demand surged for Fastly. That's great news considering Fastly's operating model is usage-based.
Though Fastly is likely to be remembered for its meteoric rise and fall over the past 15 months, I believe the company's defining moment came during the third quarter of 2020. That's when the company announced that its top customer, ByteDance, the parent company of TikTok, was pulling most of its traffic off the network. For context, ByteDance was engaged in a stateside dispute with the Trump administration at the time. Instead of curling up in the fetal position, Fastly still managed to grow its sales by 42% in Q3, and another 35% in the recently ended first quarter. In other words, Fastly demonstrated the importance of its services to a wide array of fast-growing businesses.
While Fastly remains unprofitable as it boosts its headcount and takes on higher costs following the Signal Sciences acquisition, other metrics remain promising. Total customer count grew by 123 in Q1 to 2,027, adjusted gross margin remained robust at 60.1%, and the dollar-based net expansion rate (DBNER) hit 139%. This latter figure, DBNER, tells us that existing clients spent 39% more in Q1 2021 than they did in the prior-year period.
With content being increasingly funneled online over time, Fastly is in the driver's seat of a sustainable high-growth operating model.