The stimulus checks are coming.
The $1.9 trillion bill was approved by the U.S. Senate last week. That means many Americans will receive checks of $1,400 starting this month.
If you’re one of them, you have a decision to make.
You can buy something like a fancy date or an 80-inch TV. Or you could make that money work for you in with the best stocks to buy now.
There are a few different ways to approach this scenario.
One investor might put it all into high-yield dividend stocks to secure a monthly or quarterly income. At the other extreme, you might see a high-risk, high-reward investment in biotech penny stocks. A third option would be growth stocks for a steady return over time.
When you have a handful of cash like this, you don’t have to choose. One thousand, four hundred dollars is enough to build a miniature, balanced portfolio.
We’re going to share a stock pick for each bucket…
Dividend investing provides a solid base with 50% of the total portfolio. Growth investing makes up 40%, and 10% is left to play around with stocks that could quickly double or triple your money.
This “pyramid” structure is how you get the best of all worlds while also minimizing losses. Let’s begin by building our foundation.
Best Dividend Stock Right Now
The majority of your “stimulus portfolio” should be a stock with a solid business model and predictable demand. For this, we look to our “dividend aristocrats.”
The dividend aristocrats are a group of 65 companies on the S&P 500 that have been increasing their dividend consistently for 25 or more years.
These stocks are usually in high demand, so they often trade at higher prices. The good news is that the market is also currently on a dip, creating an opportunity to buy one of these at a discount.
NextEra Energy Inc. (NYSE: NEE) is an energy company founded in 1984. It pays a 2.18% yield right now, or a dividend of $1.54 per share on a $72 share price.
Fifty percent of your portfolio would be nine shares of NextEra energy, which would be about $3.50 every quarter for doing nothing but holding the stock. After that, you can keep reinvesting gains into NextEra.
Scale this, and you get huge passive income potential through dividend investing. If you had more to invest and wanted 100 shares of NEE, that would be more than $150 extra money for the quarter.
Additionally, NextEra could double as a growth stock. It’s a leader in the clean energy development, which is an industry on the verge of soaring. According to the International Energy Agency, solar became the “cheapest electricity in history” in October 2020.
That’s drawing interest in renewables, which is right in NextEra’s wheelhouse.
NextEra is the largest renewable generator in the world, supplying over 10 million people with wind and sun power. It’s also the 167th-largest U.S. company.
This stock is a nice bargain right now, down 16% from January. You can buy it today for $72 and collect a solid dividend every quarter. There’s also a shot at 40% upside here with an analyst target of $101 in the next 12 months.
NextEra is a solid “base builder” to keep your portfolio steady. Now, let’s look at the stock that will drive its growth.
Best Growth Stock to Buy
Here’s a middle-of-the-road, no-nonsense grower for your portfolio. These are usually stocks you will always have your eye on, due to name recognition, and this is one.
Technology stocks like Facebook Inc. (NYSE: FB), Apple Inc. (NASDAQ: AAPL), Amazon.com Inc. (NASDAQ: AMZN), Netflix Inc. (NASDAQ: NFLX) and Google parent Alphabet Inc. (NASDAQ: GOOGL) are among these, known as the “FAANG” stocks.
Any one of these would be great to buy on the current dip with your stimulus. The best bang for your buck here, however, is Apple.
All of these other tech stocks trade upwards of $1,000. Then you’re only left comparing Facebook at $281 and Apple at $118, and there is really no contest.
While Facebook bounces in and out of court with tension over user privacy, Apple has always been a staunch proponent of keeping its customer data secure. Apple wouldn’t even help the FBI unlock an iPhone in an investigation.
That’s one reason why many prefer Apple’s philosophy to Facebook’s. But it’s also just a better growth stock overall.
This company continues to innovate on world-class products like iPhones, Apple Watches, Macbooks, and more. Further, its ability to combine these items into a single, smart ecosystem is getting more fluid every year.
The next big thing on Apple’s docket is healthcare, which CEO Tim Cook has said will be the company’s “greatest contribution to mankind.”
Not only does the company offer tools like heart rate monitors and step counters through the Apple Watch, but it is also entering the healthcare services industry with a health records management service.
Morgan Stanley predicts this will bring in $90 million in revenue annually by 2027. As Apple dabbles in augmented and virtual reality in the space as well, the sky’s the limit to where the company can go with is healthcare aspirations.
That is why the stock has an analyst target of $175 over the next 12 months, which is 48% growth from its current price. If you like Apple and have had your eye on it, the stock is a definite buy at $118.
If you’re using your stimulus check, 40% of $1,400, or $580, can buy you four whole shares of AAPL.
Now, for even more upside, top off your portfolio with this one…
Best Penny Stock to Buy Now
With the last 10% of your portfolio – in this case, $140 – you can buy a long shot you like. This stock might be cheap. It might be relatively unknown. But you’ve seen its product or its business model, and you like its chances.
It could really go either way. If it goes up, it goes up big. If it goes down… well, that’s why you only put in 10%.
For this “moon” stock, you want to make a good argument for the upside potential, and if you lose, you want to still be able to say it was worth it.
All things considered, the stock to buy is MindMed Inc. (NYSE: MMEDF). It’s a psychedelic medicine company that just began an FDA study and acquired a leading digital medicine company in the last month.
Medicinal psychedelics are on the rise, so like getting in on the ground floor marijuana industry.
Colorado, Oregon, and Washington, D.C., all legalized psychedelics in 2020 for medical research. Studies are finding psilocybin, LSD, MDMA, and DMT incredibly useful therapy for depression, anxiety, PTSD, and a host of other diagnoses.
MindMed has a hand in researching each of these substances, and a few others.
While this company still has a long way to go, successful completion of the FDA trials could send MindMed doubling, tripling, or more.
Canopy Growth Corp. (NYSE: CGC) traded for about $2.01 back in March 2016. That stock is up to $31.34 today, a 1,459% gain as marijuana has been further legalized in many states since then.
Now, you have a similar opportunity with psychedelics. MindMed trades for $2.60. If you apply Canopy’s five-year growth to MindMed’s, a 1,459% gain on $140 comes out to about $2,042.
Of course, there is always the chance it doesn’t pan. But worst-case scenario, you lose 10% and you still have a major growth stock and dividend payer as the bulk of your portfolio.
— Mike Stenger
Source: Money Morning