Gold as an investment

Stock Market Correction: The Smartest Stocks to Buy With $100

Investing during market crashes and corrections is historically a genius move.

Key Points

  • These growth, value, and income stocks are perfect buys following the recent sell-off.

Over the past month, the stock market has sent a stern reminder to the investing community that equities can go down just as easily as they can rise. The double-digit percentage declines in the benchmark SP 500 and growth-dependent Nasdaq Composite represent the biggest drawdowns for both indexes since March 2020.

However, all crashes and corrections in the major indexes have historically been an excellent opportunity to buy into great businesses at a discount. This is especially true if you're a long-term investor.

Best of all, with most online brokerages eliminating commission fees and minimum deposit requirements, any amount of money -- even $100 -- is the perfect amount to put to work during a correction.

Benjamin Franklin's portrait on a hundred dollar bill.

Image source: Getty Images.

If you've got $100 ready to invest, which won't be needed to cover bills or an emergency, these are some of the smartest stocks to buy in the wake of the correction.

Upstart Holdings

For growth stock investors with a strong stomach for volatility, cloud-based lending platform Upstart (NASDAQ:UPST), which quadrupled in price and then shed 80% of its value, all within six months, is ripe for the picking.

If you're curious about the catalyst that sent Upstart from a peak of $401 a share in intra-day trading to as low as $76 just a few months later, look no further than the Federal Reserve. With inflation hitting a 40-year high in December, the U.S.'s central bank appears ready to lift interest rates on three or more occasions in 2022. More hikes are expected in 2023 to help curb rising prices.

Although consumers appreciate when their dollars go further, higher interest rates often reduce the demand for loans. Since Upstart provides a service to banks and financial institutions, there's obvious concern that higher rates could lead to a growth slowdown.

While triple-digit sales growth isn't sustainable, Upstart does provide a competitive edge. You see, Upstart's platform leans on artificial intelligence (AI) and machine learning to quickly and accurately determine the creditworthiness of customers seeking loans. The expediency of approvals and denials with Upstart is helping to save financial institutions time and money.

This leads to the next point: Upstart's enormous opportunity. Given its early success in assisting banks with personal loans, Upstart is ready to tackle considerably larger markets. For example, it acquired Prodigy Software last year to fuel AI-based auto loans. The value of auto loan originations ($672 billion) is over eight times the size of personal loan originations. Assuming its AI-auto loan venture proves successful, Upstart's platform could become a mainstay in the $4.5 trillion mortgage market. 

Although unprofitable growth stocks have been hammered during the latest correction, Upstart is profitable on a recurring basis, and it's been consistently destroying Wall Street's expectations to the upside. Even if Upstart were to "disappoint" and simply match Wall Street's consensus profit estimate for 2022, it can be had for about 40 times earnings with expected sales growth of 50%. That's a smart buy for growth stock investors.

An up-close view of a gold bar.

Image source: Getty Images.

SSR Mining

Another extremely smart stock investors can buy with $100 is gold- and silver-mining company SSR Mining (NASDAQ:SSRM). Take note that SSR is my largest portfolio holding, so you can expect some positive bias.

Like most gold stocks, SSR has had a rough go since the Fed meeting last week. When interest rates rise, it means the yield on income assets like Treasury bonds rises, too. If the yields on safe, income-earning assets handily outpace the prevailing inflation rate, investors will often choose those assets over gold. Thus, a hawkish Fed is normally not a good thing for physical gold and mining stocks.

However, these aren't normal times. Even with multiple hikes throughout the year, the prevailing interest rate should remain well below historic norms. At the same time, the key U.S. inflationary measure hit 7% in December. This combination of historically low interest rates and sky-high inflation makes it unlikely that investors will find safe ways to generate inflation-topping income. This suggests physical gold can still head a lot higher as investors seek inflationary protection with the lustrous yellow metal.

Aside from gold prices likely heading higher, SSR Mining should continue to benefit following its merger-of-equals with Turkey's Alacer Gold last year. This combination nearly doubled the company's annual output, with management guiding for 700,000 gold equivalent ounces (GEO), or more, for each of the next five years. Alacer's key asset, Copler, is a low-cost mine with plenty of reserve-expansion potential.

What really allows SSR Mining to stand out from dozens of other precious-metal miners is its pristine balance sheet. The company ended September with nearly $863 million in cash and cash equivalents and a net cash position north of $500 million.  What's more, the company announced its intention to sell its Pitarrilla project in Mexico to Endeavour Silver last month. This sale will add another $35 million in cash to the company's cash-rich coffers. Having such a robust balance sheet has allowed SSR to initiate a dividend and buy back stock.

Having followed gold miners for more than a decade, I'm of the belief that a multiple of 10 times cash flow represents fair value. SSR Mining is currently trading at a little more than five times its cash flow, demonstrating what a bargain it is.

Two smiling kids lying on a rug watching TV, with two adults seated on couch.

Image source: Getty Images.

ATT

For you income investors, one of the smartest stocks you can buy right now with $100 is telecom behemoth ATT (NYSE:T).

Like the other stocks here, ATT hasn't been immune to the recent sell-off. In a market that's valued growth stocks at a premium, ATT's lack of growth and its high debt levels have weighed heavily on its share price. It also didn't help that ATT's outlook for 2022 implies a modest decline in earnings per share from 2021.

But these near-term hiccups are the perfect opportunity for smart investors to buy into an inexpensive moneymaker that has two very real catalysts on its doorstep.

The first organic boost that can lift ATT for the next couple of years is the ongoing rollout of 5G wireless infrastructure. On one hand, upgrading wireless infrastructure isn't cheap. On the other hand, consumers and businesses have been waiting a decade for a major upgrade to wireless download speeds. The introduction of 5G will encourage a sustained device replacement cycle that'll promote increased data consumption. Since data is what drives ATT's operating margins, 5G can provide a shot in the arm of organic growth for the company's legacy segment.

The other major catalyst for ATT is the expected spinoff of content arm WarnerMedia, which'll then be merged with Discovery (NASDAQ:DISCA) (NASDAQ:DISCK). This new entity will have a broader range of original content and sports programming, and should yield over $3 billion in annual cost reductions. Furthermore, WarnerMedia-Discovery will have a pro forma total of approximately 94 million streaming subscribers. 

Most importantly, this spinoff will allow ATT's remaining operations to focus on debt reduction. This includes cutting ATT's ultra-high-yield dividend back to around a 5% yield. Don't let this dividend cut scare you away! It still makes ATT an incredible source of market-topping income, and the company remains valued at an inexpensive eight times forecast earnings for 2022.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning 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 richer.

Sean Williams owns ATT and SSR Mining Inc. The Motley Fool owns and recommends Upstart Holdings, Inc. The Motley Fool recommends Discovery (C shares). The Motley Fool has a disclosure policy.


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