The saying “it takes money to make money” isn’t always correct when it comes to investing. Small amounts of money invested over time can add up to a lifetime of riches. Even if you only have $500 to invest you can still find stocks to buy.
The stock market’s history proves there are few better paths to building wealth than investing in American businesses. The long-term average return for the S&P 500 is about 11% a year. That’s through depressions and recessions, war, civil unrest and even a global pandemic or two.
One truth that shines through is that no matter how bad things get, they always get better. Every bear market is eventually followed by a bull market. And the beauty of stock investing is you don’t need a lot of money to participate in this amazing wealth-building machine. A small grubstake can turn into a comfortable retirement nest egg given time.
Parking that $500 in the stock index for 25 years and not adding another dollar will have it turn into $6,800 at average market returns. But there is a better way. The following trio of no-brainer stocks should help transform your small acorn into a mighty oak of a retirement portfolio.
NXP Semiconductors (NXPI)
Known for its leadership in near-field communication, NXP Semiconductors (NASDAQ:NXPI) chips are everywhere today. They allow cars to communicate with one another and the environment around them. They also exist in smart homes, appliances, entertainment systems, smartphones and wearables, banks and the government for identification documents.
Especially with the advent of smart electric cars, the need and demand for NXP’s chips in automotive applications has grown exponentially. The segment now accounts for 57% of the chipmaker’s quarterly revenue. Industrial and Internet of Things (IoT) applications are a distant second at less than 18% of revenue.
Although revenue in the auto segment fell slightly from last year, the total was up 6% to $3.3 billion. And that’s with the auto industry still in a slump. A senior economist at Cox Automotive said, “rising interest rates, and their impact on affordability, remain strong headwinds against a more robust vehicle market.”
The reason for the disconnect between NXP’s results and the broader market is that today’s cars are rolling computers. Car sales are down, but the density of computer chips in vehicles grows nonetheless.
And the auto industry is recovering. New car sales surged 15% higher in August compared to last year. That means NXP’s business will only continue to strengthen in time. At 15 times earnings estimates, NXP Semiconductor offers better values than other similarly situated chipmakers.
Intuitive Surgical (ISRG)
The market is giving investors a chance to get into Intuitive Surgical (NASDAQ:ISRG) at an opportune time. The stock got beat up over second-quarter earnings, and shares are down 17% from recent highs.
Wall Street, however, forecasts the robotic surgery leader to grow earnings three times faster over the next five years than it did over the previous five. It is far and away the leader in the industry, with an installed base of over 8,200 machines and around an 80% share of the global market for certain procedures. Intuitive Surgical’s da Vinci device is the de facto industry standard.
Yet the robotics giant faces several headwinds. Business was disrupted during the pandemic due to elective surgeries being placed on hold. More recently, the rise of weight-loss drugs may cut into the growth of Intuitive Surgical’s bariatric procedures. Still, procedures targeting gynecological issues, hernia, colorectal and others continue to generate high demand.
Bariatric surgery for obese patients has slowed down, but Intuitive Surgical thinks it is temporary. As people evaluate using drugs instead of surgery for weight loss, there will be a short-term hit. Long-term, however, the robotics company says the outlook is still positive. Once patients stop taking the drugs, they tend to gain the weight back. Robotic bariatric surgery could ultimately complement the weight-loss drugs.
With shares down and earnings growth expected to be strong, Intuitive Surgical should be a no-brainer stock for investors.
Sysco (SYY)
Not as exciting as smart car chips or robotic surgery, food distribution leader Sysco (NYSE:SYY) is also a dead-simple investment to make.
Getting food from farm to supermarket or institutional kitchen is one of those behind-the-scenes operations few really think about. It’s a highly fragmented industry, but Sysco is the industry leader with a 17% share. Second place U.S. Foods (NYSE:USFD) has an 11% share.
Sysco operates 333 distribution facilities globally and serves approximately 700,000 customer locations. Despite revenue jumping 11% in fiscal 2023 to $76 billion and operating profits surging 30%, Sysco stock is down 20% from its 52-week high.
The problem is that inflation and commodity costs are still ravaging the food industry. Consumers are also feeling pinched and have not returned to buying more expensive cuts of meat. It’s affecting dairy and seafood purchases also. The issue prevents Sysco from raising prices.
Supermarkets already operate on very thin margins, and persistently high costs for food are hurting business. Kroger (NYSE:KR), for example, is the largest pure-play supermarket chain in the country, and it just issued an earnings warning for just those reasons.
Still, Sysco stock is very cheap. It trades at 16 times estimates, less than twice its projected earnings growth rate, and just a fraction of sales. The food distributor is also a Dividend King, meaning SYY raised its dividend for 50 consecutive years or more. Currently, the payout yields 2.9%, making it an easy choice for investors.
On the date of publication, Rich Duprey held a long position in SYY stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
