Twenty dollars may not seem like a lot to spend on stocks, but every portfolio has to start somewhere. With free trading now available from many brokers and partial shares offered as an option, it is possible to purchase a share for just a few dollars. But where should you start?
I think building a foundation of strong stocks with growth potential is the place to start with small investments. And now An apple (NASDAQ: AAPL)And Coinbase Global (NASDAQ: currency), And spotify (NYSE: SPOT) Three great places to start investing $20 in business.
1. Apple: Huge stocks for a start
It might not sound exciting to start investing with a big company like Apple. But the company is a great option as an essential part of any wallet, and it’s also a cash-generating machine. Below you can see that free cash flow continues to grow even as the smartphone market matures, because Apple has added software services and adjacent products to the mix.
There is no reason to believe that this growth trend will end. The iPhone is now largely seen as a standard tool for businesses and consumers, and new technologies like cryptocurrency are being built on top of the iPhone, not replacing it. I think we’ll see in the coming years that Apple products become more important and that cash flow will go up as a result, which is why I like the stock in the long run.
2. Coinbase Global: Crypto Giant
Cryptocurrencies have received a lot of attention due to the rapid rise in their value over the past few years and the potentially disruptive nature of their technology. But at the center of millions of people’s exposure to cryptocurrency is Coinbase.
The company does not really make money from the rise or fall of the cryptocurrency, but rather on the number of transactions that take place on its network. And you can see below that the business has been doing really well over the past year.
On the horizon is an NFT marketplace that already has millions of subscriptions from early adopters. I think this could be an incredibly profitable cryptocurrency business, and this is just one of its values for investors.
Don’t forget that Coinbase is also one of the largest investors in venture capital in the crypto industry. It has a website in more than 200 cryptocurrency companies. If the tide of cryptocurrency continues to rise, this could be one of the largest in the world in due course.
3. Spotify: own the ear
Spotify started with music, but today it is much more than that. The company has spent hundreds of millions of dollars building a large, subscription-exclusive, ad-supported broadcast network. While quite a few record labels still dominate the music industry, Spotify is building a strong podcasting position.
It’s Spotify’s ad network that stands out for 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 get a portion of the revenue. This is similar to how the alphabetGoogle connects users and advertisers.
In the third quarter, advertising activity was just $323 million, but that’s up 75% from a year ago, and gross margin was 10.5%, up from 1.6% a year ago. If Spotify’s strategy succeeds, we should see rapid revenue growth continuing and margins expanding. And once the flywheel gets going, the business should attract more content creators, who will have an incentive to stay with a network that provides high-value ads that they’ll have a hard time building themselves.
Spotify’s business isn’t profitable yet, but I think it could be relatively soon as ad revenue grows and margins expand. And if the company can continue to build their pool of content, that will be a great stock to own in the long run.
Whether you are investing $20 or $20,000, the important thing is that you start investing. I think Apple, Coinbase and Spotify are great places to start building a portfolio, with leadership positions in their respective industries and improving the financial situation.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.