Forget Nvidia: Putting $300 to Work in These 3 Unstoppable Stocks Right Now Would Be a Smarter Move

One of the best things about putting money to work on Wall Street is that most online brokers have removed the barriers that previously kept retail investors on the sidelines. Minimum deposit requirements and fees for common stock trades on the major US exchanges are mostly a thing of the past.

For average investors, it means that almost any amount of money — even $300 — can be the perfect amount to work on the stock market.

Image source: Getty Images.

While it might seem tempting to invest $300 in the best stocks on Wall Street, the pawn of artificial intelligence (AI) Nvidia (NVDA 3.96%)there are three unstoppable actions that are making purchases much smarter right now.

Four reasons investors can safely pass on Nvidia

Despite the fact that Nvidia’s AI graphics processing units (GPUs) absolutely dominate in compute-intensive data centers, there are a number of reasons to believe that the company’s stock has peaked and will underperform in the coming years.

For example, there hasn’t been a new innovation to avoid an early innings bubble-bursting event for at least three decades. Without fail, investors consistently overestimate the adoption and utility of new technologies and innovations, ultimately leading to real-world results that fall short of otherworldly expectations. If AI follows this path, no company will be hurt more than Nvidia.

Another expected headwind for Nvidia is increased competition. While it is well documented that other chipmakers are ramping up production and/or releasing AI-GPUs for AI-accelerated data centers, investors are likely overlooking the prospect of domestic competition. All four of Nvidia’s top customers by net sales are developing their own AI GPUs, which will undoubtedly limit future orders for the company’s hardware.

Insiders aren’t giving investors a reason to buy, either. Nvidia’s recently launched $50 billion buyback program, or as I refer to it, the “smoke and mirrors campaign,” doesn’t hide the fact that it’s been 45 months since a single share was bought by an insider on the free market.

Ultimately, Nvidia’s valuation isn’t as attractive as it might seem. The company’s stock is valued at an unsightly 30 times trailing 12-month sales (TTM) and briefly surpassed a TTM price-to-sales ratio of 40 in June.

Forget Nvidia and consider putting $300 to work right now in the following three unstoppable stocks.

Visa

The first sensational stock that can be bought for $300 right now and has all the tools to deliver superior returns to Nvidia for years to come, it is the leading payment processor. Visa (V -5.49%).

Despite recession red flags, Visa is benefiting enormously from the non-linearity of the economic cycle. Although recessions are both normal and inevitable, historically they are short-lived. Only three of the 12 US recessions since the end of World War II have lasted a full year.

By comparison, most growth periods last many years, if not a decade. Visa is enjoying the spoils of long periods of growth and the long-term expansion of consumer and business spending.

At the same time, Visa is well protected from recessions due to its intentional avoidance of lending. Although some of his colleagues act as creditors and payment processors, Visa focuses exclusively on facilitating payments. Because they don’t borrow, they don’t need to set aside capital for those inevitable times when the U.S. economy weakens. This gives Visa more financial flexibility than its peers and helps it bounce back very quickly from recessions.

Visa also has an incredible opportunity in overseas markets. Cross-border payment volume grew 14% on a constant currency basis in Visa’s latest quarter, which follows a consistent theme of sustained double-digit growth in cross-border payment volume. Many of the world’s fastest-growing emerging markets are chronically underbanked, giving Visa a simple opportunity to sustain double-digit annual earnings growth for the rest of this decade, if not well beyond.

Image source: Walt Disney.

Walt Disney

A second unstoppable stock that can beat Nvidia in the return column and make a stellar buy right now at $300 is the average Goliath Walt Disney (DIS 0.77%).

Few companies have been hit more directly by the COVID-19 pandemic than Disney. Theme park closings, along with limited studio production and the closing of select theaters, severely hampered its bottom line. But with China’s economy reopening and studio production ramping up, Disney is shining once again.

Perhaps the best aspect of Disney’s operating model is that it cannot be duplicated. While there’s no shortage of movies and shows to watch and theme parks to visit, no other company offers the history, depth of engagement, characters or storytelling that Disney brings to the table. This alone ensures that Walt Disney will continue to generate predictable cash flows from its multiple operating segments.

Another thing for investors to be excited about is Disney’s progress with its direct-to-consumer (DTC) segment. After years of heavy losses, Disney delivered the first operating profit in its DTC segment. Being an irreplaceable media company allowed it to increase subscription prices for all its tiers and move its DTC segment to profitability one quarter ahead of schedule.

“House of Mouse” is also historically cheap. Its forward price-to-earnings ratio of 18 marks a 31% discount from its average annual earnings multiple over the previous decade. Additionally, Disney should be able to deliver sustained double-digit earnings growth as its DTC segment and studio begin to stretch their proverbial legs.

PubMatic

The third unstoppable stock that makes a smarter buy than $300 Nvidia right now is a small-cap adtech company PubMatic (PUBM 0.91%).

PubMatic is perfectly positioned to take advantage of the growth of digital advertising. Even though advertising is highly cyclical and companies aren’t shy about cutting their marketing budget at the first sign(s) of trouble, the aforementioned non-linearity of business cycles works in favor of ad-based businesses. Investors with a long-term mindset should benefit from owning stakes in companies that see ad spending grow over time.

One of the key reasons PubMatic is poised for success is its management team’s decision to design and develop its own cloud-based programmatic ad platform. While it would have been easy for PubMatic to rely on a third-party vendor, the decision to build its own cloud-based infrastructure should result in a decidedly higher operating margin as it grows revenue.

As mentioned, PubMatic focused on the fastest growing aspects of the advertising arena. Specifically, it is a sales platform that aims to sell digital display space to advertisers in mobile, video and connected TV (CTV). All three of these segments can sustain double-digit annual growth in ad spend for the foreseeable future, with CTV ad spend growing the fastest.

Finally, PubMatic sits on a cash-rich balance sheet, which gives it ample financial flexibility. The company ended June with $165.6 million in cash and cash equivalents, no debt, and repurchased about $100 million worth of its common stock. Additionally, it is working on its 10th consecutive year of generating positive operating cash flows.