Over the past 19 months, the U.S. stock market has experienced a bullish run, reaching multiple record highs driven by a growing economy, advancements in artificial intelligence (AI), and stock-split excitement. However, as history has shown, market corrections are an inevitable part of the investing cycle. Following recent peaks, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have experienced retracements of 1.6%, 3.6%, and 6.9%, respectively, as of July 29.
Despite the uncertainty surrounding the timing and extent of these downturns, long-term investors view market corrections as opportunities. The elimination of barriers by online brokers, such as minimum deposit requirements and commission fees, has made it possible for retail investors to participate in Wall Street with even small amounts of money, such as $500.
For investors looking to put $500 to work, three stocks stand out as attractive options.
Firstly, NextEra Energy, America’s largest electric utility, offers a compelling investment opportunity. The company’s focus on renewable energy sets it apart from its peers, with nearly half of its operating capacity dedicated to wind and solar power. NextEra Energy expects steady growth, projecting a 7% median adjusted annual earnings per share (EPS) growth through 2027 and 10% annualized dividend growth through 2026. Lower interest rates and strong cash flow generation further support the company’s transition to a greener future. Additionally, NextEra Energy’s forward price-to-earnings (P/E) ratio of 20 presents a 21% discount compared to its average forward earnings multiple over the past five years.
Secondly, Starbucks, the leading coffee chain, presents an enticing opportunity for investors. Despite recent stock performance challenges, Starbucks has a loyal customer base and a history of successfully navigating inflationary pressures. The company’s pricing power and brand loyalty contribute to long-term success. Starbucks’ innovative capacity, demonstrated through initiatives like video drive-thru ordering boards and new food products, helps drive traffic and encourage high-margin purchases. The company’s active U.S. Rewards Members, totaling 32.8 million, further enhance its efficiency and revenue potential. With shares trading at a 33% discount to its average forward-year EPS multiple from the past five years, Starbucks appears undervalued.
Lastly, Intel, a legacy semiconductor giant, offers an attractive investment opportunity. While Intel has faced challenges from competitors like Nvidia in the AI-accelerated data center space, it has unveiled its Gaudi 3 AI-accelerating chip to rival Nvidia’s offerings. Intel’s dominance in central processing units (CPUs) for personal computing and traditional data centers remains a core driver of cash flow. The company’s expansion into Foundry Services and its majority stake in Mobileye Global, a company specializing in advanced driver assistance systems and autonomous driving solutions, provide additional growth potential. Intel’s historically low valuation, trading at a 24% premium above book value, makes it an appealing investment option.