The smartest stocks to buy with $ 20 right now and hold forever

Twenty dollars might not seem like a lot to spend on a stock, but every portfolio has to start somewhere. And with free trade now available from many brokers and fractional shares being offered as an option, it is possible to buy a stock for just a few dollars. But where to start ?

I think building a strong equity base with growth potential is the right place to start with small investments. And now Apple (NASDAQ: AAPL), Global Coinbase (NASDAQ: COIN), and Spotify (NYSE: SPOT) are three great places to start putting a $ 20 investment to work.

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1. Apple: the mega-capitalization action to start

It might not sound exciting to start investing in a company as large and established as Apple. But the company is a great choice as a centerpiece of any wallet, and it’s a cash-generating machine as well. You can see below that free cash flow continues to grow despite the maturation of the smartphone market as Apple has added software services and adjacent products to the mix.

AAPL Free Cash Flow Chart

AAPL Free Cash Flow given by YCharts

There is no reason to believe that this growth trend will end. The iPhone is now widely regarded as a standard tool for businesses and consumers, and new technologies such as cryptocurrencies are being built on the iPhone, not replacing it. I think in the years to come we will see Apple products become more important and the cash flow will increase accordingly, which is why I like long-term inventory.

2. Coinbase Global: The crypto giant

Cryptocurrencies have received a lot of attention for their rapid increase in value over the past few years and the potentially disruptive nature of their technology. But at the center of the exposure of millions of people to cryptocurrency is Coinbase.

The company doesn’t really make money on the rise or fall of cryptocurrency, but rather on the number of transactions made on its network. And you can see below that the business has been good over the past year.

COIN Revenue Graph (TTM)

COIN Income (TTM) given by YCharts

On the horizon is an NFT marketplace that already has millions of early user registrations. I think this could be an incredibly profitable business in the cryptocurrency arena, and that’s just one of its values ​​for investors.

Remember, Coinbase is also one of the biggest venture capitalists in the crypto industry. He holds a position in over 200 cryptocurrency companies. If the crypto tide continues to rise, it could be one of the biggest companies in the world at times.

3. Spotify: Own the ear

Spotify’s business started with music, but today it’s more than that. The company has spent hundreds of millions of dollars to build a massive podcast network that includes subscription, exclusive, and ad-supported podcasts. While a handful of music labels still control the music industry, Spotify is building a powerful position in podcasts.

It’s Spotify’s advertising network that sets it apart in podcasts and other audio formats like audiobooks. As Spotify builds a network of creators (podcasts and audiobooks) and a network of advertisers, its job is to connect the two and reduce revenue. This is similar to how AlphabetGoogle connects users and advertisers.

In the third quarter, advertising activity was only $ 323 million, but it was 75% more than a year ago, and the gross margin was 10.5%, compared to 1.6% one year ago. If Spotify’s strategy is successful, we should see revenues continue to grow rapidly and margins increase. And once the flywheel kicks in, the business is expected to attract more content creators, who will be incentivized to stay with a network that delivers high-value ads that they would have a hard time creating on their own.

SPOT Revenue Graph (TTM)

SPOT Income (TTM) given by YCharts

Spotify’s business is not yet profitable, but I think it could be relatively early as ad revenue grows and margins grow. And if the company can continue to grow its suite of content, that will be great stock to own in the long run.

To start

Whether you invest $ 20 or $ 20,000, the important thing is to start investing. I think Apple, Coinbase, and Spotify are great places to start building a portfolio, with leading positions in their industries and improving finances.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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