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3 No-Brainer Stocks to Buy With $20 Right Now

Motley Fool - Sun Apr 7, 12:30PM CDT

If you're just getting started investing, you might not have a lot of cash you can put to work. Maybe you only have $20 to invest right now.

The good news is that most brokerages have done away with account minimums and commissions, which means you can get started with any amount of money, even $20. Some brokerages will let you purchase fractional shares, which means you can buy a piece of any company in the stock market regardless of share price.

But owning an entire share of a company is still possible with $20. Here are three stocks you can buy for that much that look like great opportunities today.

Close up of the front of a twenty-dollar bill.

Image source: Getty Images.

1. Carnival

Carnival(NYSE: CCL) got hit hard by the pandemic, but management appears to have weathered the rough waters and set a course toward recovery.

Demand for cruising has come back strong since ships started sailing again in the summer of 2021. Carnival reported all-time high booking volumes in the first quarter despite considerably higher prices.

And when you compare the price of a cruise with land-based alternatives, there's still room for prices to increase. CEO Josh Weinstein says there's still a big value gap between cruising and something like an all-inclusive resort.

As such, management saw prices climb higher for bookings throughout the year, with strong pricing for peak summer travel and prices remaining elevated for the fall.

The strong demand and pricing power have fueled promising financial results. And with room left to keep prices climbing and new ships entering the fleet, Carnival should be able to produce excellent earnings growth, recovering to its pre-pandemic levels.

Despite the positive outlook for the company, shares still trade at less than 15 times forward earnings. While there's certainly some risk with Carnival considering the increased debt load post-pandemic and cyclical nature of the company, investors might be overweighting those factors at this price.

2. Chewy

Chewy(NYSE: CHWY) experienced a boom in sales at the start of the pandemic, but when sales growth slowed, investors put the stock in the doghouse.

Chewy's sales climbed 10% last year, but management only expects net sales growth of 4% to 6% in 2024. That could be due to the impact of a declining customer base, which shrunk from 20.7 million at the end of 2021 to 20.1 million at the end of last year.

Long term, though, there are reasons to expect stronger sales growth. First, Chewy is positioned to take a growing share of the pet care market as more sales shift to e-commerce. That's thanks in part to the growing portion of its sales coming from its Autoship service, which has the added benefits of being predictable and lowering shipping costs, increasing profit margins for Chewy.

Second, Chewy is expanding its business to include veterinary care. Successfully leveraging its popular brand in this high-margin service space could provide a great source of revenue growth over the long run. And the company has a growing advertising business, which can also be a high-margin revenue contributor in the long term.

Shares currently trade at a price-to-sales ratio of just 0.6. That might signal that investors overweigh the short-term pressure the company is feeling and discount the potential for high-margin service revenue to fuel growth.

3. Sirius XM

Sirius XM Holdings(NASDAQ: SIRI) isn't a typical radio operator; it's playing a different tune.

Its satellite radio business doesn't rely on advertising like most other businesses in the industry. It counts 34 million paid subscribers as its main revenue source, which produces far more predictable revenue amid economic uncertainty.

And that subscriber base still has room to grow despite sitting at a standstill for the last few years. Subscriber churn remains low, touching 1.6% in the fourth quarter.

Meanwhile, the top of the funnel, which is fueled by free trials for new car purchasers, grew to 7.2 million, up from 6.8 million at the end of the year.

The biggest threat to Sirius XM is streaming. That's one reason it acquired Pandora in 2019, but that business remains a small part of its overall operations.

With the bulk of revenue coming from subscriptions to its satellite radio service, it benefits from better economics than streaming, thanks to lower revenue-share and royalty payments.

To combat the threat of streaming, Sirius XM continues to invest in exclusive content while improving its marketing and positioning. That includes working with car manufacturers to include its newest equipment in their cars, a move that has shown improved conversion rates into self-pay customers.

Despite steady operating results, Sirius XM trades at a forward price-to-earnings ratio of just 12.1. That's a valuation that's caught the eye of Warren Buffett, who put $145 million to work in the stock directly and nearly $3 billion into tracking stocks Liberty SiriusXM(NASDAQ: LSXMA)(NASDAQ: LSXMK). With the slow and steady growth of the business and its cost advantages, it's worth adding to your portfolio at its current price.

Should you invest $1,000 in Carnival Corp. right now?

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Adam Levy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.

Paid Post: Content produced by Motley Fool. The Globe and Mail was not involved, and material was not reviewed prior to publication.

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