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The Smartest Stocks to Buy With $100 in 2022

The Motley Fool
The Motley Fool
 2022-01-21

Last year, Wall Street seemingly couldn't be stopped. The broad-based S&P 500 hit nearly six dozen record-closing highs on its way to a 27% gain.

But no matter how high the stock market climbs, value can always be found -- especially if your investing time frame is measured in years or decades.

Best of all, with most online brokerages eliminating minimum deposit requirements and commissions, any amount of money -- even $100 -- can be the perfect amount to invest and grow your wealth. If you have $100 ready to invest, the following are some of the smartest stocks you can buy right now for 2022.

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1. Bank of America

If you're an investor who appreciates brand-name companies and solid value stocks , Bank of America (NYSE: BAC) is one of the smartest stocks you can buy with $100 right now.

The first thing to understand about BofA (and bank stocks as a whole) is its cyclical nature. This is just a fancy way of saying that Bank of America tends to grow its loans outstanding and deposits when the U.S. and global economy are growing, and it struggles under the weight of rising loan delinquencies when recessions strike. Although recessions are an inevitable part of the economic cycle, history has shown that they don't last very long (usually a couple of quarters). By comparison, periods of economic expansion can last years or even more than a decade. Buying a bank stock like BofA simply means taking advantage of a numbers game that's undeniably working in favor of long-term investors.

Bank of America is in a perfect position to thrive during the early years of an economic recovery, which is where we are now. Not only should it benefit from increased loan activity and improving credit quality, but it's the most interest-sensitive of the money-center banks . This is to say that as interest rates rise, it'll see more of a net interest income boost than any other big bank. During the third quarter, BofA noted that a 100-basis-point parallel shift in the interest rate yield curve would bring in an estimated $7.2 billion in added net interest income.  With inflation hitting a 39-year high in November, higher interest rates seem like a foregone conclusion at this point.

Investors will also be impressed with Bank of America's digitization efforts . To be clear, BofA isn't a high-growth fintech stock. However, it did have nearly 41 million customers banking digitally (online or via mobile app) as of the end of September. What's more, 43% of all sales were completed digitally in the third quarter, which was up 16 percentage points from the comparable quarter in 2018.  Investing in digitization is helping BofA reach a younger generation of customers, as well as allowing the company to consolidate some of its physical branches to reduce costs.

With significant earnings expansion on the horizon, Bank of America offers solid upside potential.

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Image source: Getty Images.

2. Skillz

For investors who gravitate to growth stocks , mobile gaming platform Skillz (NYSE: SKLZ) looks like the perfect place to put $100 to work right now.

Like most growth stocks, Skillz has been completely obliterated over the past 11 months. Some of this weakness has to do with Wall Street fearing that fast-paced companies will deliver weaker growth in subsequent years as the nation's central bank raises interest rates to combat rapidly rising inflation. But more specific to Skillz, investors seem to be concerned with higher short-term costs tied to marketing and increased headcount.

While there's no sugarcoating that operating losses have grown, three factors firmly make Skillz an intriguing buy.

To begin with, the operating model is designed to generate a consistently high operating margin . Whereas mobile game development is expensive and highly competitive, the cost to maintain and operate a gaming platform as a middleman isn't anywhere near as cost-intensive. Through the first nine months of 2021, Skillz brought in $275.2 million in sales with a cost of revenue totaling just $16.3 million. That's a gross margin of a delectable 94%!

Second, and arguably more important, Skillz has an industry-topping pay-to-play conversion rate. During the first quarter of 2021, the company reported that 17% of its monthly active gamers were paying on its platform. Comparatively, the industry average pay-to-play conversion rate at the time was closer to 2%. If Skillz can keep this conversion rate up, positive cash flow won't be too far off.

A third reason to be excited about Skillz is the company's multiyear agreement signed with the National Football League (NFL) last February. The expectation is for NFL-themed games to make their debut on the platform this year. With football being the most popular sport in the U.S. by a mile, it's a good bet to drive new users to the platform.

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Image source: Getty Images.

3. NextEra Energy

Finally, conservative investors who aren't fans of volatility and favor consistency should consider electric utility NextEra Energy (NYSE: NEE) as one of the smartest stocks they can buy in 2022 with $100. After all, NextEra has delivered a positive annual total return, including dividends, in 19 of the past 20 years .

The clear and obvious benefit of buying utility stocks is the predictability of cash flow that comes with the sector. For instance, since virtually every homeowner and renter needs electricity, demand doesn't fluctuate much from one year to the next. This demand transparency is what helps utilities undertake infrastructure projects and acquisitions without compromising their profitability or dividend.

But what makes NextEra so special is that it's not like most electric utilities. Its differentiating factor is that no utility in the country comes close to matching its generating capacity from wind and solar power. The company plans to spend an aggregate of $50 billion to $55 billion on new infrastructure projects between 2020 and 2022. Though nominally pricey, these projects are being financed at historically low interest rates, and they've significantly lowered NextEra's electric generation costs. While most electric utilities are growing by a low single-digit percentage, NextEra Energy has delivered a high single-digit compound annual growth rate for more than a decade.

The beauty here is that the company also benefits from its traditional regulated utility operations (i.e., those not powered by renewable energy). Though it might sound burdensome for the company to have to clear rate hikes with state public utility commissions, doing so keeps NextEra from being exposed to potentially volatile wholesale electricity pricing.

Considering NextEra Energy's rich history of outperformance, it looks like a genius stock to buy with $100 right now.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Sean Williams owns Bank of America and Skillz Inc. The Motley Fool owns and recommends Skillz Inc. The Motley Fool recommends NextEra Energy. The Motley Fool has a disclosure policy .

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